Sound to good to be true? VA home loans are often the most flexible loan product when it comes to renting a current home to buy another. These days if someone wants to rent out their current home and then purchase a new primary residence, most mortgage loan products will potentially count 75% of the new rental income. Additionally, an FHA loan requires the rental home have verified 25% equity in order to even count the rent. But VA rental income allows 100% of the new rental income to qualify for the purchase of another home. Even if the prior home had a VA loan, it is possible to use VA again for the new purchase! Maybe even no money down!
Now, there is a caveat to counting the new VA rental income. Let’s say a Veteran owns a house that has a VA loan on it. The Veteran wants to rent it out rather than sell it. Furthermore, the Veteran wants to purchase a new home while using another VA home loan. This is very possible and like mentioned, potentially with no money down on the new VA loan! While VA loans will allow up to 100% of the new rental income towards qualifying on the new purchase, the rent used may only go up to the total mortgage payment. So, if the total mortgage payment on the converted rental home is $1000 and the rent will be $1100, only $1000 of the rent could be used for qualifying on the new VA loan.
VA Rental Income General Rules
- Current mortgage on rental may be any type
- To count new rent: signed lease, copy of security deposit or first month’s rent, and proof of deposit must be provided
- May have 2 VA loans at once – Check out this article on multiple VA loans at once
- If rented during the prior year, must provide tax return to prove rental income
- 100% of new rental income may be counted up to the mortgage payment
- No appraisal of current home is required
- All other normal VA guidelines apply
Keep in mind that if there will be 2 VA loans at once, it is very important to get the Certificate of Eligibility first. Check out our article, 6 Reason to Get Your Certificate of Eligibility Before Buying.
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Author: Russell Smith
Team Move OVM Financial loan officer success is Russell’s primary focus. He provides the tools and techniques he used as a top producing loan officer. Additionally he offers the Team Move OVM Financial Agent Training Program. Sharing is so important to Russell so he works diligently to be a resource to loan originators and Realtors.