I would agree you should not borrow against your house if you have no idea what you are doing.

Also the borrower must pay it for 5 years.  

Also, you may want to consider the solo 401k if you need to use debt financing as solo 401k plans are not subject to unrelated debt financed income  (UDIF) tax which applies when an IRA uses borrowed funds to invest in real estate.

It is living on borrowed time and money.

I understand the borrower must commit to live in the property for 1 year but cannot find anything anywhere about the 1year requirement my lender speaks of.Is my lender confused?

Far from it.It was a combination of borrowers using their homes for ATM's, Wall St. hedge fund managers who created mortgage  backed security products and the greed of the lenders who needed to "feed the beast."

As an agent in a competitive market, VA offers are already problematic due to the inaccurate but commonly held perceptions that:1) The borrower doesn't have enough money for conventional and thus is at risk of being unable to close in case of a low appraisal or income issues during underwriting.2) The VA appraisal, often called a VA inspection, will uncover arbitrary but costly problems that need to be fixed before closing.This can be compounded if buyers are trying to use some of these non-local, call-center based lenders who are unable to accommodate quick settlements.

@Andrew Cushman Do you know if the agency (Fannie/Freddie) debt/loans are only for local investors because  the borrower must have “local ownership.”

You will have essentially borrowed 20K at 0% interest.  

I was on a site today called LendingOne.com and they have a great Q&A section about borrowing hard money.