REI and effects on VA Home Loans

[Derek S.]

Hello BPers!

I am looking into obtaining a standard mortgage for purchasing a home as an investment rental property. I have a little money to put down for my first rental (likely less than 20%).

I am a veteran and have the VA loan benefit. However, I would like to do this without a VA loan.

Then later, sometime in mid/late 2018, I am looking to use my VA home loan benefit to purchase a primary home as a residence for my family.

Is there any rule against doing this? Would having a prior mortgage for a cash-flowing rental property affect my ability, and interest rate of my VA loan benefit? Would it change any of the other benefits like zero-down financing, no mortgage insurance and the more flexible requirements that are part of a VA loan?

I don't want the rental property to lower my credit score so much that it would significantly change my rate for my VA loan. Also, debt-to-income likely couldn't be considered since the rental property wouldn't be cash-flowing for more than two years and the income would not be counted in my credit score as "income".Any help/advice or insight to this would help. Thanks!

[Andrew Postell]

@Derek S. I'll do my best to keep this brief but this will have the right information for you.

First, you can have as many "conventional" loans as you want to buy a home with a VA loan. Conventional loans are loans governed by Fannie Mae and Freddie Mac (those are the loans for investment properties). No worries there. Some banks will have little "overlays" though. Overlays are little rules banks put on top of the guidelines from VA/Fannie/Freddie/FHA/etc. So some banks might limit you to a certain amount but there are plenty of banks that won't restrict this. The VA has no issue with you owning other properties...well, as long as you can afford them. It will not affect your interest rate nor would it change your down payment, mortgage insurance, or any other feature for a VA loan.

Second, the spacing between your purchases also won't lower your credit score.  Your score could be affected by other things (like paying on time or buying a car) but the homes you purchase will not affect them if they are a year apart.  

Do keep in mind that the minimum down payment on an investment property is 15% with a conventional loan. That is the minimum. However, the moment you move into that home and make it your primary residence it becomes 5%. So many people try to "house hack" (search for the term to learn more on it) on their first property. And many Veterans also use their VA loan to house hack too.
I hope this helps and if you have any other questions feel free to ask. Thanks!