Limitations with VA loans

Lee Austin · 2018-12-24T09:05:48-08:00

BP,There seems to be no clear, concise information regarding VA loans and more "case by case" scenarios that allow for turning your current home into a rental income property and using another VA loan to purchase your next home that you will live in.There is househacking and there is the cash out refi(which is a pretty valuable asset if used correctly), but in this certain situation neither apply for different reasons. Maybe this fictitious scenario might spark some creativity in helping me understand any limitations from those of you who've personally experienced it or have a VA loan- both houses in Virginia Beach. It's also my understanding that you can't refinance out of a VA loan into a conv loan...?Current mortgage has $244,600 remaining, $1,410 monthly payment. Rent potential, $1,900 minimum Appraised value: 293,000. New house all in: $370,000.Is there any way around having to sell house, and I know a lot has to do with Debt to income ratio and other factors, but generally speaking and not wanting to lose a potential passive income producing asset, what options might I have?Thank you for any responses in advance and if I need to elaborate on anything additionally to help determine I of course will.Lee

Patti RobertsonBusiness Member

Property Manager · Virginia Beach, VA · Member since 2016 · 2k+ posts · 2k+ votes

7y

Hi @Lee Austin. I'm not military but I have had military clients and am familiar with the VA loan. The limit for the Virginia Beach area is $458,850. You don't have to sell your first property to use your remaining VA eligibility for your new primary residence. You don't have enough VA left to purchase the entire home, but you can use your remaining VA and then use an FHA for the remaining balance. You will only have to come up with 3.5% of the FHA portion.

Also, it sirenwhere you heard you can't refi out a VAtp conventional, but you can. You can also refI it out to an FHA.

You need a good loan officer. Do you need a referral to one?

757-472-2547

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Kerry BairdPro Member

Rental Property Investor · Melbourne, FL · Member since 2011 · 3k+ posts · 2k+ votes

7y

You can definitely refinance your VA to conventional. You can also get a second VA depending upon how much entitlement you used initially, also called "second tier entitlement." There is a primary entitlement amount, and an additional secondary entitlement.

For a list of loan limits go to http://benefits.va.gov/homeloans/do...limits.pdf

The IRRRL allows us to do a one time refinance of the VA to another VA mortgage of lower interest rate, which will reuse your original entitlement. Or we can do a cash out refinance with a VA.

They are still assumable, if the person assuming the loan qualifies.

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Brandon L.

Real Estate Agent · Falls Church · Member since 2012 · 2k+ posts · 1k+ votes

7y

@Lee Austin I am not lender, but not being able to refinance out of VA to conventional seems wrong. The VA just wants the loan paid off, I do not think they care who pays it. Once the loan is paid you can use the VA again for another loan.

You not being qualified for conventional seems more likely

Yo don't have to sell the house. If you are a member of Navy fed I think they offer a 0% down product that is not associated with VA. I feel your first step would be to speak with a competent mortgage broker. Let me know if you need a referral

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Zack KarpPro Member

Lender · Schaumburg, IL · Member since 2015 · 833 posts · 774 votes

7y

@Lee Austin

You can absolutely refinance the VA loan to a Conventional loan.

Just remember that if you are doing it as a primary residence, which you can do up to 95% LTV as a 1-unit property, you are signing a new Mortgage that says you intend to live in the property for another year. Otherwise, you can refi it as an investment property up to 80% of the appraised value.

That refi to Conventional restores your entitlement so you can buy the new property using your full VA benefit.

Otherwise, without refinancing, you can BONUS entitlement to buy the new property using a VA loan, but would need a small down payment. The info above from Patti is partially right, however you cannot combine VA and FHA together, that's not possible. The way it works is that it's just a VA loan. The eligible amount is based on your original entitlement used.

Here's the math. The Virginia Beach county loan limit is $484,350. So you take that and divide it by 4 ($121,087) then subtract your current entitlement used ($36,000) which equals $85,087. Then you multiply that by 4, which is $340,350. This is how much the VA will guarantee, or in other words, how much buying power you have with $0 down. Anything on top of this, you will need to come up with 25% of the difference.

So if you want to buy this new property at $370,000, then you would only need to come up with 25% of the difference of $29,650, which is a down payment of $7,413 (only about 2% of the total purchase price) using your VA benefit.

And you can do this without refinancing your existing mortgage.

Lots of bad info out there from other people, and even many other lenders, who don't know what they are doing or how to navigate through VA lending. I am a Military Mortgage BootCamp Instructor and proud to serve those who served. If you need a referral to a local lender who knows their stuff like me, shoot me a PM and I will connect you.

Hope that helps. Best of luck and TYFYS!

847-387-5513

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Ray Johnson

Irvine, CA · Member since 2016 · 545 posts · 614 votes

7y

@Zack Karp perfect explanation of how it works. You need to provide the Boot camp class to the BP community, as you noted many people are posting partial or wrong information. Thanks for the great information being posted.

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Limitations with VA loans

Limitations with VA loans

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