Can a Veteran Home Owner Rent out a His/Her Current Home and Buy a New Home With a New VA Loan?

Using a VA loan to purchase your home is one of the smartest things you can do as ahome buyer.  I have said time and time again that anyone that is entitled to a VA home loan and does not use it, has got to be very uneducated when it comes to understanding his/her VA benefits.

One place where Veterans have tried and keep trying to use their VA benefits and are struggling, is when it comes to buying a rental or investment property or when the veteran is not able to sell his/her current home and wants to rent it out in the meantime and then go buy a new home.

Perhaps the most constant guideline that all lenders have when it comes to VA loans, is that the home most be intended as your primary residence and that you can only have one VA loan outstanding at a time per veteran.  The reason this VA loan guideline is pretty standard for all VA lenders is because it is an actual VA program guideline issued by the Department of Veterans Affairs.

I will attempt to layout some examples in the following table:

Veteran’s Question About the VA Loan and it’s Usage

Simple Answer

Suggestions for Veteran

Can I buy a home with a VA loan and rent it out to someone? NO If you are buying a multi unit property like a duplex or 4-plex and you are going to occupy one of the units then you could essentially buy a home with a VA loan and rent it out
Can I rent my current home that has a VA loan on it to someone else that is a NON-Veteran? Yes You will not be able to buy a new home with a VA loan until you refinance the home that is now being rented into a loan that is NON VA.
Can I have more than one VA loan at a time? NO Some exceptions to this rule are possible.  If two veterans are married and one veteran had a VA loan on a home prior to getting married, then the two try to buy a home together once married; this could happen if the veteran that has not used his/her VA loan before is able to qualify.
Can a Veteran use a VA loan more than once? Yes It is possible to have unlimited access to your VA home loan eligibility. As long as you are able to sell your current home with a VA loan on it, then you can always buy again with a new VA loan.

 

There are always cases or questions that may not have been discussed in this post, and I hope you find the little bit of information I have shared useful.  Should you need more details or have a specific question, I certainly hope you can find it on LowVARates.com or that you will feel free to submit your question to our Contact Us page.

Posted in VA Loan, VA Purchase, VA Refinance | Tagged , , , , | 78 Comments

78 Responses to Can a Veteran Home Owner Rent out a His/Her Current Home and Buy a New Home With a New VA Loan?

  1. Eric Kandell says:

    absolutely!

  2. Eric Kandell says:

    You can certainly do that and today you may be even able to buy a new home with VA again!

  3. Gordon says:

    Ok. So my wife and I have a JOINT VA loan on our current property we have lived in for over 5 years. We only used MY VA benefit when purchasing the house, but used a JOINT loan to qualify.

    We want to move into a bigger home, better school, etc. but are not able to sell our house at what we owe => we plan to rent out the current house. We also hope to use my WIFE’s VA benefit on a JOINT loan to purchase the new property. Is this ok to do?

  4. David says:

    Moving out of state to another state. Can a VA home owner lease to own to another buyer who is also a Veteran and wants to buy but was denied do to not enough credit from a mortage company.

  5. James Miller says:

    Eric,

    My wife and I purchased a VA financed home and have lived here for 7 mo. My Mother needs some help taking care of my Dad since he’s in poor health and she needs to continue to work. I’m 100% disabled and stay home with my kids so I would be able to assist. The problem is they live a couple hours away. We would like to possibly rent out our current home, and were thinking about buying a 2nd home in that area. Would we have any issues in at least renting out our current home? Thanks for your help,

  6. Craig Walton says:

    James,

    Since you have occupied the home for 7 months you can definitely rent it out. That should not be a problem at all. You should be able to get a VA loan on your new home as well. What number can we reach you at?

  7. Wes Grieve says:

    Eric,

    I have owned my home for about 7 years. I refinanced it last year using my VA loan. Since then, I have gotten married. My wife has her own home on her family’s property and does not want to leave there. What can I do with my VA loan house? Can I sell it? Can I rent it? Can I run a business out of it? I have searched and searched for policies on these questions but have not found anything.

    Thanks,

    Wes

  8. Craig Walton says:

    Wes,
    You can sell or rent it no issue. Selling it frees up your VA entitlement for a new home, renting it you still keep it and own it, but will be hard to buy a new house with your VA until you sell the rented home. As far as running a business out of your home, check with city in which you live and they may have a rule on this, but the VA loan has no bearing on that

  9. Wes Grieve says:

    Craig,

    Thanks for the info. Where can I find policy on this to refer to?

    Wes

  10. Donald says:

    I currently have a primary residence that is an FHA loan. I want to use my VA loan to buy a 4-plex and live in one unit as my primary residence and rent out my current FHA residence.

    Can I do this or is there going to be an issue with the Saying that this a second residence?

  11. Craig Walton says:

    Yes, You should be able to do this

  12. colten says:

    we bought a fourplex over a year ago, I deployed and my wife went back home and we started renting our unit out. I will be returning soon can I buy another fourplex in the same city. the realtor and lender say that I cannot because it is in same city. so can I try and buy one in another close by city.

    do you know the regulations that explains situations like this.

    I would like to know how long you have to live in your house before you rent it. because the lender thinks some how I could be accused of occupancy fraud because I didn’t live there for 2years.

  13. colten says:

    I purchased a fourplex 8 months ago. I lived there for about three months and then deployed. Can I purchase another fourplex in the same city and use that as my primary residence. I was talking to a lender and they believe that I did not fulfill the occupancy requirement on the first home and felt that I could be reported to FinCEN or the VA OIG. any validation to this point.

  14. Craig Walton says:

    Colten,

    This is a very tough situation and one that does not have a black and white answer. Most banks and lenders will have an issue if you have bought a fourplex to live in then started to rent it out and then want to buy another fourplex. Multi unit homes are almost always for rental purposes and for investors. It can easily be interpreted that you are tyring to abuse the real purpose of a VA loan.

    The VA does not come down hard and fast with rules on this because essentially they are leaving it up to the bank or lender to make a decision. Our thoughts are you will run into problems at almost any bank if they second home you are buying is also a fourplex and anywhere close to the same area.

    Good luck

  15. Mike Valles says:

    Craig,

    I am going to be EAS’ing in the next couple of months and bought my house last December, I was going to live in the area after my EAS but my wife’s father is getting sick. Is it possible to rent the house out and live primarily in our home state which is about 11 hours away?

    Thanks,
    Mike

  16. Craig Walton says:

    Of course it is! You can keep the VA loan and rent it out and also use your remaining entitlement and buy a new home with your VA benefits in the city you are moving to 11 hrs away

  17. alan says:

    I purchased a 3 decker about 6 months ago with a VA loan. I am hoping to buy another multi-family in the future, possibly with an owner-occupied conventional loan (to lower the req down payment). Is there a minimum time I have to have the 3 decker VA as my primary residence, or is it for the life of the loan that I have to remain in the three decker?

  18. Craig Walton says:

    there is no timeline, you can move whenever you want

  19. Leslie says:

    Hi,
    Thank you for posting this information!

    We have questions regarding our specific situation: Our current house was not obtained with a VA loan. We would like to buy a new home using the VA loan, and retain our current house as a renter, (and occupy new home). The lending institution is giving us mixed answers regarding our options. We have been told several things:

    1. We qualify for covering both mortgages due to the unique debt to equity requirements with the VA, in relation to residual income requirements. (Our residual income is greater than 120% of this zone’s set amount for our family size, even after accounting for BOTH mortgages and any other outstanding debt, so we may exceed the 40% typical debt to equity.) And thus we do not need any sort of rental contract/income to qualify for financing.

    2. We would need to show a 12 month signed lease agreement for the “near future” on our current house, at time of closing to qualify for financing.

    3. We cannot keep current house at all, because we do not have a 2 year rental history on this house. (this statement was per a property manager in this area, not our lending institution.)

    I am unable to confirm any of these answers, and would like to know if you have heard of anyone in this situation, and what the guidelines were for them. While I still want to hear it FOR SURE from the lender, it would give me peace of mind to know what your experience has been. :)

    Thank you!
    Leslie

  20. carol says:

    We purchased a home with a VA mortgage 6 months ago. We rented out our other conventional loan home to our daughter. The VA home is two stories with the bedrooms on the 2nd floor. My husband is having major issues with his back now. Would it be possible for us to move back to our 1st home which is one story and rent out the VA home to our daughter now or do we have to sell it? If we can rent it do we need to contact the lender about this?

  21. Craig Walton says:

    Carol,

    You can certainly move back into the other home and start renting your VA home immediately

  22. carol says:

    Craig,

    Thankyou for your quick response. I am concerned because I read elsewhere online that if you transfer your homeowners insurance to a rental policy that they will contact your lender or the VA and that would be considered fraud.
    Is there any legal requirement as to how long you must occupy the home? We don’t want to do anything illegal. My husband is 70 yrs old with diabetes and we don’t need that. If we have to we can sell the house but would probably end up taking a substantial loss… and are we even allowed to turn around and sell it after only 6 months? We certainly
    wouldn’t be making a profit. Thanks again or your advice.

  23. Craig Walton says:

    Carol, thanks so much for using this forum to get some questions answered, however if you could email me at craig@unitedmil.com I would love to chat and get you on the phone with a licensed loan officer. That said here are some answers to your questions

    1. if you transfer your homeowners insurance to a rental policy that they will contact your lender or the VA and that would be considered fraud. This is NOT TRUE and it is NOT FRAUD, we can 100% assure you of this.
    2. Is there any legal requirement as to how long you must occupy the home? No nothing legal or official though the VA does only give loans to those that INTEND to occupy the property at the time of purchase. They do not want you buying investment properties with VA loans. That said the VA allows multiple VA loans at once so that there alone tells you that you can have non owner occupied loans as a Veteran and they are very common due to situations like your own or others.
    3. If we have to we can sell the house but would probably end up taking a substantial loss DO NOT DO THIS, the VA does not want it and neither should you. NO LOSS taking necessary.

    We can even try to help you get a new VA loan on the other home if you need.

  24. Chris says:

    Craig – You may have answered this but I need some reassurance.

    My wife and I bought a home on a VA loan about 6 months ago. Now we found out my Job is being transferred to northern california (6 hrs away). We dont want to sell the home we want to keep it since my job eventually may move back. Our home loan was sold to wells fargo.

    If we change to a renters policy will this cause Wells fargo to trigger full repayment because they will consider it fraud?

    Can we rent it out without the VA freaking out about it?

    What about doing an IRRL?

    Thanks for any advice – We can get a renter to cover the entire mortgage, we are just afraid of what they will do.

    Thanks,

    Chris

  25. Craig Walton says:

    Chris,

    this will be easier to explain over the phone. Email me at pr@lowvarates.com and send me your phone number and we can chat.

    Thanks,

  26. Craig Walton says:

    You can change your home occupancy at any time after getting a VA loan. The VA realizes plans change. There is not penalty and your lender will not do anything upon finding out you no longer live in the home. The only thing that is a MUST, is that you must intend to occupy the home as your primary residence at the time of purchase.

  27. Anson says:

    I have a home in Florida (currently rented out) with a VA loan and I have been transferred to Texas with my job. I am currently in the process of buying a 2nd home using a VA loan. My question is, Can I do a rent to own lease with my renters where I lock them in for a period of time and a portion of their rent goes to the down payment? Or will they have to purchase the home out right from me with their own loan from the bank.

    My current renters have bad credit and do not have the down payment required for a FHA loan. What are my options to help them out?

  28. Craig Walton says:

    Anson,

    If you have a lease agreement that’s good for at least the next 12 months then I can use that to offset the mortgage payments on the home in FL and we could use their secondary entitlement to purchase a home in TX and exclude their mortgage payments on the FL home so their DTI is low enough. This sounds very doable. The only requirement would be the lease agreement and you would need to have 3 months reserves in a checking or savings account for the amount of the mortgage payments on the FL home. The tax returns for 2 years will be required even though you won’t show any rental income, it just going to be required on DU.
    As far as the renters lease agreement goes and putting some of that towards the down-payment, that is up to you. For example, if the buyers are paying 1200 in rent and the seller wants to put $200 of that each month towards the total purchase price to be used to help make up the required 3.5% down-payment on an FHA loan than that should be ok. It could be considered a gift of equity. We would want to confirm this with our lenders of course but in the past that has been allowed on an FHA loan as part of the 3.5% down-payment because it’s coming from the buyers own funds.

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