OfflineIm in the Army and want to use my VA loan to invest. I am think about buying a house, living in it for short while and making repairs, then renting it out.
How long would it be before I could refinance the house with a non VA loan so that I could use my VA loan again to re purchase (I believe this is called seasoning)?
How much equity in the house would I have to have to refinance (I have a current house Im renting out, one I had before joining military, that I am having trouble refinancing b/c there is not enough equity)?
Any help would be greatly appreciated:)
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Astanldtjr,
I'm not sure equity is the problem you should be worried about concerning your VA benefit. The VA loan guarantee is not designed for investment, as there is no good exit strategy other than paying the loan in full, and disposal as well!
(Your BUTT BELONGS TO THE GOVERNMENT UNLESS AND UNTIL THEY LET IT GO... remember the speech the Drill Sergent gave about that, same idea!)
I have a VA Loan on my own home, and know the dos and don'ts fairly well. Please consult your copy of the paperwork for the VA or the pamphlet(s) that may be available to be sure that I am giving you an accurate opinion, but non the less...
1. The VA gives you a certain dollar sum Allotment for your benefit and is legally declared on VA Form 26-8320a . Mine was issued for my service in Army National Guard and may be different than yours, but for the amount you are allowed you may use it for one or more houses. That form is as valuable as the money itself so don't let anyone borrow it to copy unless you can trust them to immediately return it.
2. When you purchase the home, it must (usually) be used for your primary residence. If you decide to buy another property, the first must be placed in secondary position and may need to be declared some form of commercial property, e.g. rental. The second property may then be purchased as long as it is declared primary residence. The VA doesn't set the rules for this as it is usually a requirement of the mortgage underwriters, so pick your lenders very carefully, especially when concerning a VA Guarantee.
3. You may renew your allotment granted in the Certificate of Eligibility (aforementioned VA Form 26-8320a) back to its original amount once you have sold the home(s)and paid the obligation(s) IN FULL, however there is a catch... you MUST dispose of the property COMPLETELY unless you have read and understood the terms of 38 U.S.C. 3702b which may allow for partial disposal. You may wish to consult Black's Legal Glossary to fully understand the meaning of "disposal", but it doesn't sound pretty.
4. Don't EVER, EVER let anyone assume your loan (even though you are allowed to do so with written permission from Lender And/or VA), because you will not be able reclaim your eligibility until the loan is paid IN FULL. YOU are still responsible for paying the balance still owed if the assuming party decides to default. My pamphlet says:
"The fact that you will receive a cash payment representing the difference between the sale price and the balance of your GI Loan which is to be assumed by your purchaser will not prevent you from obtaining a release of liability from the Government.
Your entitlement cannot be restored when you are released from liability to the Government unless VA is also released from liability on the guaranty by the holder, and you are otherwise eligible for restoration. Normally, VA is not relieved of its liability on the guaranty unless your loan is paid in full, as VA continues to be liable on the guaranty even though you have been released from liability from the Government." Rerpinted from: POINTERS FOR THE VETERAN HOMEOWNER, VA Pamplet 26-5 Revise June 1997.
5. ALWAYS retain the services of an attorney when doing anything with your VA loan. If something goes wrong it may very well mean that you will permanently lose your benefit!
Sorry for the verbose response, but I feel this is very important subject, not to be taken lightly.
In summation, I would submit that you use your VA benefit ONLY for your personal property that you wish to own free and clear, because casual buying and selling can invite risks that may not be worth the value of the benefit. I purchased an ARM (5.5%)on my third (and last hopefully)VA Streamlined refi, and have watched everyone else's rates go up and up after the last bounce in mortgage rates, and am very proud that we didn't jump ship like all the rest were scared into doing by the finance industry, and enjoy an APR of only 3.125% because the rate can drop as rapidly as the Government wants, but VA capps any increase in rates to 0.5% PER YEAR MAXIMUM! What a Benefit to protect with wise financial choices. I can always refi again without credit checks or appraisals if I need to if I haven't defaulted.
Good Luck with your investing and hopefully this has been helpful. If you have any other concerns about VA check with your local VA office first.
PS. Make it a matter of business as pointed out in Deans books to retain the services of a TRANSACTIONAL Real Estate Attorney, and in your case one that has working knowledge of VA Loan Programs. You must insure you do not encumber or endanger your VA loan with other personal business that may force your mortgage into recievership, because that will default your VA Loan Guarantee and Government will still hold you liable even in bankruptcy.