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If you’re looking to move out of your VA loan home, you might be wondering how the VA mortgage can affect the selling process. You’ll be happy to know that a VA-backed home sale isn’t all that different from a typical transaction. Here are some common questions from homeowners about selling a house with a VA mortgage.
When can you sell a VA loan home?
With VA-guaranteed mortgages, there’s typically no requirement for how long you have to live in the home before selling. VA loans also don’t have any prepayment penalties (a fee if you end your mortgage early), so there’s no need to worry about that if you’re considering selling.
For most of us, including VA homeowners, it’s often a smart idea to wait and sell your home once you have enough equity to either profit or break even. The money you make from the sale would ideally cover your mortgage balance, real estate commissions, and closing costs. For any home (VA-backed or not) you may have to pay capital gains tax if you sell within two years and make a profit.
Who can you sell your home to?
As a VA homeowner, you have no restrictions on who can and can’t purchase your home, so your buyer can be a non-veteran or veteran. VA home loans are also assumable, which means a qualified buyer can take over responsibility for the mortgage, even if they aren’t a vet.
A loan assumption can make your house more attractive to buyers since they’ll save on closing costs and receive your likely competitive VA interest rate. If you’re interested in this option, make sure to ask your lender what requirements your buyer will need to meet. (Keep in mind that if a non-VA buyer assumes your mortgage, it will affect your own VA entitlement.)
Can you buy your new home with a VA loan again?
From 0% down payment options to competitive interest rates, there are many benefits of VA mortgages. So can you take advantage of the VA mortgage program for your next home as well?
There’s no limit to the number of times you can get a VA loan, just as long as you have enough VA entitlement available and are buying a primary residence (investment properties aren’t VA eligible). If you had a short sale, foreclosure, or bankruptcy, you might have to wait two years before you can purchase a house with a VA-guaranteed loan again.
Tip: If you’ve bought a VA loan home in the past, you can expect your upfront VA funding fee to be a bit higher the next time around.
What happens to your VA entitlement when you sell?
As you might remember, every VA member has a specific amount of money they’re “entitled” to by the VA government agency. When you first bought your home, you used some or all of your VA entitlement. Chances are you’ll need access to your full entitlement for your next home purchase to avoid having to make a down payment. Your original entitlement can be restored when you sell your house just as long as you pay off your initial VA loan in full. You’ll just need to submit some reinstatement paperwork to the VA beforehand.
While restoring your entitlement is relatively straightforward, the timing of it all can get tricky. You’ll need to sell your home and then get your entitlement restored before you can buy your new house with a VA loan. You’ll also be required to occupy the new property within 60 days of closing (up to 12 months in individual cases) which could further complicate your timeline.
You can buy and sell your VA-backed home on your schedule by using a service like Orchard. We’ll give you an offer on your current house that’s valid for up to 6 months, giving you plenty of time to find your new dream home. We’ll also help line up your closing dates, so you can avoid potential entitlement issues and occupy the home on time. Learn more about Orchard’s Move First service here.
The final word: Talk to a lender
While the Department of Veteran Affairs sets up general requirements for VA loans, individual VA lenders may also have additional guidelines. That’s why it’s important to talk to your lender about your plans to sell your VA loan home. And if you’re looking to buy a new house with a VA loan, make sure to shop around and choose a lender that offers mortgage products that fit your needs. Need help finding the perfect lender? At Orchard, our Home Advisors, licensed agents, can connect you with a trusted lender – just send us a note at email@example.com.