All Forum Posts by: Sterling Hiebert

that is true, you are required to take occupancy within 60 days of acquiring the property, but after that occupancy requirements are a little foggier. the VA loan system was set up to get veterans and active duty (thanks for your service BTW) into homes, not to help invest in real estate. however, from what I have be able to learn, occupancy period (how long you have to live in the home after the 60 day deadline) is actually set by the lender, not the VA. I would check your mortgage agreement, odds are after 3 years you've already exceeded the bank's occupancy requirement and can now rent the property. If that is not the case, refinancing with the VA IRRRL loan (which only requires that you certify that you have been living in the home) allows you to rent the property and will have lower refinancing costs than many of your conventional alternatives, but requires that your refi saves a minimum 1% interest, can only be applied to refinance an existing VA loan, and can't be used to cash out equity so you are still stuck saving a down payment for your new home, but your costs on your existing property over the long run would be lower. 

another option if you qualify would be to refinance using a VA IRRRL loan which does allow you to rent the property but can't be used to free up equity. its primary purpose is to lower your interest rate and monthly payments. but again some of my previous questions should be considered first.

I am an investing noob, but I would be very leery of that. refinancing to free up the VA loan is a good idea so long as you plan to live in that new residence (VA loans cannot be used on rental properties). however, you also should take into account the fact that cash out refinancing will give you extra money in your pocket, but it will increase your income-to-debt ratio which could seriously harm your ability to get a loan on the new property in the first place. other things I would take into account would be:

1. what are the closing costs going to be on the new loan? are they going to exceed the cost of mortgage insurance if you just purchased the new home using a conventional? since the VA loan doesn't require a down payment anyway, cash out to make a down payment is like taking a loan from your wife to pay off her debt.

2. do you have enough to make the down payment on the conventional without having to pay mortgage insurance? otherwise, that cash-out option would likely be best spent rolled back into the loan to meet that 20% threshold where they cut off the MI. 

3. is the interest rate going to be the less than or equal to your current loan? otherwise you will be accepting a whole lot of extra risk by refinancing vs trying to just get a conventional loan with your current debt. 

4. what can you reasonably rent your existing property for? 

5. what is the likelihood that you can get, and keep a responsible tenant in that neighborhood? 

odds are that if a person can afford to rent in "the nice part of town" they can also afford to own in the nice part of town, and are probably money-savvy enough to know the pros and cons of each. if you are planning on a mortgage approaching 400K, the rent you would have to charge to account for mortgage, insurance, taxes, and property maintenance would likely price too high for the majority of renters out there, and you risk renters subletting to individuals who might not value your property as highly as you would like. 

hello all,

so here is the situation, I am just now learning how to handle my own finances. a few years ago I opened a managed roth IRA but this summer I decided it was time for me to actually learn where my money was going and take responsibility for my own future. I set up a Roth IRA with Fidelity and rolled my existing Roth over. I looked at the old Roth (which offered very limited information since I was not the account manager) and it said that I had made no contributions to the account (despite a monthly contribution). I was unsure why it would show as having had no contributions for that tax year. I assume that when it was set up the manager rolled my contributions into previous tax years to allow additional contributions if necessary (can anyone provide confirmation?). since the info page showed no contributions I decided to max out my contributions through fidelity.

now I am paranoid that I'm going to get dinged come tax season due to an overcontribution. I understand that one way of getting around this is to recharacterize the overage plus earned interest into a traditional IRA for the new tax year (which I am assuming will come with some sort of tax penalty). since I plan on making more in retirement than I do currently, I would like to continue to hold all of my assets in a Roth vs traditional IRA) so here is my idea and some questions about this particular noob situation.

1. why would my old roth account show no contributions even though I was making monthly contributions? the account was through TD Ameritrade if that information helps. 

2. how do I calculate the earned interest when my holdings are split across several assets (is it just the overage times the average account earned interest?) 

3. is there a tax ding for converting these overaged funds over to a traditional IRA

4. now here is where my "bright" idea comes into play. even though this feels quite complicated, is it possible to recharacterize this overage to a traditional IRA and then immediately set up a backdoor roth and then merge the backdoor roth with my existing roth?

5. since I've never done any of these things, I am uncertain if this would incur fees which would probably exceed the tax penalty on a couple hundred dollars worth of overage. if I did go with this strategy, I would likely keep everything in-house with fidelity so if any of you has experience with this particular brokerage that would be a huge plus. 

this forum is great. even though I am really in no position to invest in real estate (other than buying REIT shares but that's cheating a little), this forum has been extremely helpful in educating myself on things that really are only glossed over in the personal finance field in other parts of the web.

interesting. that's actually good to know. if that is the case, then it would be better to just stick with the Roth. 

hello all,

first time poster. I am curious about tax deferred retirement accounts and income tax brackets. I am right on the edge of the 12%/22% tax bracket making just a couple thousand too much to be in the 12%. I currently contribute to a 403B (kindof like a 401K but for NPOs and contributions are fixed), through my employer and use a Roth IRA for additional retirement investing. my question is if I opened a traditional IRA so that my contributions were coming out pre-tax along with the 403B, would that push me back down into the 12% tax bracket because that money is no longer considered income or am I stuck paying 22% no matter what?

would there be any reason why a person wouldn't want to do this? google seems to be not-forthcoming with an answer. I get the advantages/disadvantages of deferred vs exempt retirement strategies, I am just curious if it is possible to use contributions to save an additional 10% of my income every year.