Firstly, try to move away from the traditional idea of investing. Most of the VA loan companies cannot outright state that your loan will lead to a profitable investment. Plus, there are rules in place that say you shouldn’t get an enhanced financial benefit from your purchase.
The VA loan scheme was set up to help people who are struggling to get their first house, not for people to plump up their portfolios. Nevertheless, most people consider housing to be a viable investment instrument, so here are a few things you need to know.
Affording Your Investment Costs is More Difficult Than You Think
Some people think that paying back their loan is no different from paying for rent, but owning a house and paying its mortgage is far more expensive than renting.
Start by using a VA Loan Calculator and a tool like WhatsMyPayment to figure out your costs beforehand. Then consider repairs, taxes, insurance, and so forth. Turning a profit, in the long run, is difficult because house prices are so high, so you are starting out in a very risky position.
You Cannot Buy an “Investment” Property
The VA lenders are not allowed to finance a property that was built or designed to be an investment. For example, have you seen those condominium advertisements where that tell you that your condo is going to increase its value by 300% in just two years?
Those are the ones that your VA lender will not finance. On a similar note, it is difficult to get a VA loan for a house that isn’t built yet unless it is part of a planned military building area (like when they build houses near the base). The VA loan company is going to appraise your choice of property, and the truth is that they may say no.
Getting Extra on Your VA Loan
The VA loan company is going to appraise your choice of property for suitability (the stuff mentioned above) and for damage and possible losses. The loan company wants you to buy a place that will go up in value. On that note, if the house is in disrepair, you can ask for a little extra money with your VA loan to pay for energy efficiency improvements like a better roof, insulation, a good heating system, and so forth. Each VA lender has its rules, but they are often willing to negotiate if they are confident the house will go up in value over time.
Checking If You Are Eligible
There is a slew of rules regarding eligibility, but they cast a pretty wide net. People in the national guard can get a VA loan, and so can people in the reserves. People who have served and are vets can get a loan, and even certain family members of a military employees may get the loan. There are also rules around how much you can borrow, and how much you can borrow before paying a deposit.
One of the best things about VA loans is that they don’t often ask for a deposit. In many cases, you can get a loan up to a healthy amount without having to pay a deposit. If you go over that amount, they charge you a deposit based on the extra amount rather than the entire amount.
You Can Get Another Loan
Let’s say that you get your VA loan and buy your house. You live in it for around three years and then decide to sell (you have to use it as your primary residence for a set number of months before being allowed to sell).
After selling the house, taking a bit of profit, and paying off your loan, there is nothing stopping you from going back for another loan. Some companies are going to charge you a few added fees for it being your second loan, but thanks to the paid loan and the sale, your credit rating should be a little better, which means you may get a lower interest rate on your next VA loan.