VA Loan first time home buyer, out of state.

[Ramiro De Leon]

Hi. First time posting.

I'd like to buy my first home in the Denver area. I'm not really sure how to proceed with the home buying process, so I'm hoping to get some advice in the form of what you'd do next given my financial situation and the fact that I'm out of state.

Profile:

- I am currently renting in Austin, TX and have never been to Denver despite really wanting to live there.

- I know I want to househack through either a multifamily or a single family home.

- I have the VA loan and have a VA disability rate over 50%.

- I have excellent credit and over $100k in non retirement investment accounts intended for buying my first home.

- No kids, just a significant other.

- Zero debt.

If you were me, what would be your next step?

What sort of lender should I work with if I'm out of state and want to move to Denver?

Connections would be greatly appreciated.

Most importantly, what questions should I be asking (e.g. unknown unknowns)?

[Seth Wilcock]

Welcome to BP @Ramiro De Leon and thank you for your service to our country. 

I have always loved the idea of multi-family with your VA benefit. It really is the best way to grab multiple doors with 0% down. With your disability rating, you'll also be exempt from the VA funding fee which will save you thousands of dollars.

It can be difficult to scale a rental portfolio using only the VA loan because VA designed this loan to be a benefit to the veteran to help you acquire a primary residence. Usually after your first or second home under VA, you'll run out of entitlement and likely need to switch to conventional financing later on, unless you sell the previous homes that were originally acquired with VA financing. Additionally, it raises red flags in underwriting if you were to originally acquire a single family home, and then move into multi-family after that. If you're interested in multi-family, I highly recommend starting out with multi-family with your first VA loan as it will be easier to get a single family residence after that.

If you decide to pursue multi-family, you'll want to ensure that each unit is separately metered for utilities (water, gas, heat, electricity, etc.) as this is a requirement under VA financing.

Since it sounds like you have full entitlement under VA, you can do 0% down up to any loan amount you want. This means you could do 0% down on a $1M, $3M, $5M, etc. property as long as it's a residential property with 4 units or less. With multi-family, we can use 75% of the gross rent from the vacant units to help you qualify for the loan. This means that if you were buying a quad and the tenant-occupied units rented for $2,000/mo, we would give you $4,500/mo additional qualifying income on your loan application ($2,000 x 3 units x 75% = $4,500/mo net rent). If you do multi-family, you'll need to have 6 months of payment reserves, which it sounds like you have, so that shouldn't be a problem (e.g. if your mortgage payment is $3,000/mo, you would need $18K in reserves on multi-family). There is no monthly payment reserve requirement on 1-unit homes (single family, condos, townhomes).

VA also looks at what is called "residual income" for qualifying, not necessarily your debt-to-income ratio. The residual income calculation is a little different from DTI, and it is one of the reasons that even though VA is 0% down, it is also one of the lowest defaulting loans in history. Often, the VA residual income calculation gives us more flexibility with qualifying, especially for a 2 person household.

We can use any disability income you're receiving from VA to qualify. Since you'll be relocating to Denver from Texas, you'll likely want to have work lined up in order to demonstrate monthly qualifying income as your ability to repay the mortgage. If you're receiving any military pension or social security income, we can use that as qualifying income as well.