VA loans are an excellent tool to help active duty military and veterans build wealth because you are able to build appreciation with very little risk. With no money down required, no additional private mortgage insurance, and leveraging the bank’s money enables you to buy real estate with only a monthly cost. Of which, Base Allowance for Housing (BAH) can be used.
Requirements
VA loans can be used an unlimited number of times, provided that requirements for reuse are met. Those requirements typically involve good credit (above 645) and loan entitlement limits.
In the state of Nevada, the VA loan entitlement limit is $548,250 for 2021. The VA does not require you to put any money down but you are permitted to do so, minimizing the loan amount for a smaller monthly mortgage or enabling you to pay the difference should you want to buy a home over $548,250.
That being said, you are not permitted to use a VA loan to buy a home solely intended for investment purposes. You are able to “house hack” by buying a multi-unit property or rent out portions of a home as long as you intend to occupy the property as your primary residence.
In that instance, you may collect rental income as well as BAH to pay off the mortgage and keep any remaining funds. This not only creates cash flow, but it may contribute to you buying a secondary investment property or taking the appreciation and rolling it into larger and larger properties, building your real estate asset portfolio.
The Process
When you are ready to buy, choose a knowledgable and committed Realtor you trust to help guide you through the process. They will be responsible for managing your legal, time-sensitive contracts not only for the home, but between the lender and title company.
A good Realtor is essentially a project manager, juggling the negotiations, responsibilities and communication throughout all the legs of the deal including but not limited to the seller’s agent, title company, inspectors, appraisers, special contractors, lender requirements, underwriting. They will continue to follow up with professionals on the back end to keep your contract on a strict timeline until closing, so your only concern is responding back to them quickly.
The first step is to complete a VA Form 26-1880 to obtain a Certificate of Eligibility. Surviving spouses will use VA Form 26-1817. It’s recommended that this is done as an immediate first step since processing can take up to 6 weeks, and without the Certificate, lenders cannot process the loan, potentially pushing your closing back until it’s received.
Reassignments
While you are permitted to use the VA loan as many times as you would like, you are typically only entitled to one loan at a time. Meaning, you would need to dispose the currently used loan either by selling the home and paying back the loan or paying it off entirely before applying to use the VA loan again.
The exception to this rule being if you are reassigned, you may use any remaining entitlement (in the example of Nevada, any remaining amount up to a total of $548,250) to purchase a home at your new assignment city.
Benefits
There are a great many benefits to using a VA loan. There is no down payment required, the Earnest Money deposit submitted with the offer is returned at closing, and Private Mortgage Insurance is not added to monthly costs. With BAH paying for the majority of the monthly mortgage, military members and veterans are often able to buy homes for less than a security deposit on a rental.
Military members and veterans also have lower likelihood of vacancy when owning a cash-flow rental property, because incoming assignments often work off referrals, and know they can trust a property owned by military members.
Using the VA loan to build equity while in the service is an exceptional benefit that should be utilized.
Next Steps
Buying a home in a new city may seem like a daunting task, but hiring a licensed and knowledgeable Realtor will minimize that stress. With advances in digital technology, record-low interest rates and virtual tours, building wealth through real estate has never been easier.
Investing in real estate is an investment in your long-term wealth goals. Making sure you have the best professionals on your side will ensure you have all the tools you need to see your money grow.
To learn more about the real estate market for Las Vegas and Henderson, visit the blog.
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Are you ready to take hold of your financial future through real estate? Call Jessica Ream with Windermere Real Estate in Anthem Hills to have the highly qualified team of professionals managing your real estate goals in Las Vegas and Henderson, NV, USA.