If you have a VA loan, renting out a rental property can help you pay the monthly
mortgage. However, if you want to rent out your property, there are many things
you should know first. You should know the limitations of a VA loan and how to
refinance a rental property.
Renting Out a Home you Bought With a VA Loan
If you are eligible for a VA loan, renting out a home you bought is perfectly legal. In
fact, the Department of Veterans Affairs even allows you to rent out unused units
of your home. But you have to make sure that you meet all the requirements for
renting out your property.
You should consult with your lender first. They may prohibit you from renting out
your home or may have certain requirements for tenants. They may also want to
make sure that you provide them with updated contact information. If you don’t, the
bank may evict you.
As with any rental, you must provide documentation of the income generated from
the rental property. This may vary depending on your property’s rental history.
Typically, you’ll need income tax returns from the past two years, Schedule E, and a
signed lease. A rental appraisal is also required.
Refinancing a Home You Bought With a VA Loan
If you bought your home with a VA loan, you can take advantage of cash-out
refinancing to access your equity. This type of refinancing allows you to tap your
equity to pay off debt, finance home renovations, and more. To qualify for this type
of refinancing, you must have a minimum credit score, a VA-approved appraisal, and
own your home as your primary residence. You will also need to pay the closing costs
When you’re refinancing a home with a VA loan, you should carefully compare the
interest rates available from other mortgage lenders and choose the one that will
best suit your needs and financial situation. Conventional mortgages offer lower
interest rates than VA-guaranteed loans and don’t require the fee you’ll pay for VA
funding, which can be as much as 3.6% of the loan value.
However, you’ll still have to pay mortgage insurance if your loan value is higher than 80% of the home’s value. Refinancing a home with a Veterans Affairs loan is usually a good idea, but make sure to compare it to other options before making a decision.
When refinancing a home you bought with a VA loan, you can ask for a lower interest
rate and get a lower closing cost. You may have to pay a funding fee upfront, but
this fee is typically wrapped into the closing costs. You may be able to avoid this fee
if you have a service-related disability or surviving spouse of a veteran who served
in the military.
Limitations of a VA Loan
Limitations on a VA loan for rental properties include the need for rental income
verification and the need for an appraisal of the property’s fair market value. In
addition, borrowers may be required to maintain six months of cash reserves to
cover mortgage payments and property operating expenses. Moreover, VA loans
only apply to primary residences and cannot be used for investment properties.
Nevertheless, this does not mean that buyers with a VA loan will have to sell their
property if they change their minds and move elsewhere.
Limitations on a VA loan for rental properties vary from lender to lender. However, in
general, VA lenders count 75% of the rental income from a rental property to help
determine the borrower’s income. For example, a three-unit triplex may generate
$1,000 in rental income each month. As long as the borrower resides in one unit, the
income will total $24,000 per year.
VA loans for rental properties do not require a down payment. However, lenders
prefer to see a credit score of at least 620. Furthermore, they will require that debt
is no more than 41% of total income. For income verification, VA lenders consider
verified rent, current rent collected on the property, and fair market rent as income.
They may accept up to 75% of verified rent, depending on the credit score of the
borrower. Recent discharges may qualify the borrower for exceptions to these
Requirements for Obtaining a VA Loan
First, if you want to obtain a VA loan for rental property, you must meet some strict
eligibility requirements. These requirements include demonstrating your ability to
make monthly rent and mortgage payments on the property, and proving that you
have some professional experience as a landlord. In addition, you must choose a
property that doesn’t have any problematic issues. Finally, you must have six
months of cash reserves, which cannot come from gifts or VA refinance.
First, you need to prove that you are an eligible service member or spouse. If you
are a spouse of a service member, you must obtain a Certificate of Eligibility (COE)
from the VA before your loan is underwritten. Your lender should be able to help you
complete this requirement. Alternatively, you can apply for the COE through the VA’s
Second, you must have a steady rental income. In most cases, VA lenders will credit
up to seventy-five percent of the income that the property generates. If you have a
three-unit triplex, for example, this income would be approximately $1,000 per
month. This income would amount to $24,000 per year.