Picture of for rent sign and street.

“I have a VA Loan–can I rent out my house?”

While some homeowners rent out their homes for a major source of income, other homeowners rent theirs as a temporary solution to keep their property maintained when they’re must away for an extended period of time. Either way, the idea of renting out your house might seem appealing. However, let’s say instead of a conventional mortgage you have a VA Loan. Can you still rent out your house?

renting your home

The Rent Race

First things first: VA Loans can’t be used to purchase a second house as an investment property. With VA Loans you can only purchase a property as a primary residence. You wouldn’t be able to buy a vacation home either. VA rules state that you and your immediate family must live in the home. Using a VA Loan to buy an investment property is considered mortgage fraud (a felony).

However, there are rare circumstances where a property purchased with a VA Loan can be rented out. Here are three scenarios where you could rent out your property:

  • You’ve already repaid the mortgage in full.  With VA Loans, you are not penalized for paying the loan off early. If your late grandmother leaves you a substantial amount of money in her will and you want to pay off your six-month-old mortgage, you can. Once you’ve paid off the mortgage, you don’t have a VA Loan anymore, and are no longer bound by VA Loan rules. Live in the house, rent it out, or sell it to someone who wants to tear it down and build a McMansion. The choice is yours!
  • The loan was used to buy a multi-unit (vs a single-family) property. You can buy a duplex, threeplex, or even a fourplex with your benefits. If you’re living in a unit, you can rent out the others without having problems with the VA. Just keep in mind that, as the property owner, you’re responsible for the mortgage. What happens when you can’t find renters or they don’t pay on time?
  • You refinance your VA Loan into an Interest Rate Reduction Refinancing Loan, or IRRRL. Homeowners often take this option when they need to relocate temporarily. This could be due to a job transfer, deployment or for other reasons. In addition to other benefits, IRRRLs don’t have the same residency requirements as VA Loans. You need only affirm that the property was used as your primary residence. When a VA Loan becomes an IRRRL, the home can be rented out.

In the majority of cases, these are the only circumstances when you can rent out a home you purchased with a VA Loan.

“But what if I…?”

If you have any questions about what is allowed under the terms of your VA Loan, consult with your lender, another reputable lending firm, or a representative for the U.S. Department of Veterans Affairs. Be open and honest about your situation. Explain why you’d like to rent out your house (you’re being deployed and will be out of the country for a year; your job is relocating you out-of-state temporarily; you’re moving in with a sick/disabled family member, etc.).  Bottom line: Ask if you can legally rent out your property. This is one of those situations where it’s much better to ask for permission than forgiveness!

Final Thoughts

Finally, VA mortgages help veterans become homeowners as opposed to real estate investors! If you are still interested in renting out your home, an IRRRL refinance might be the first step. And that’s something that VA Lending Group may be able to help you with!

Photo courtesy of Elvert Barnes on Flickr