Reader Question: Can I Get A Streamline Loan For My Rental Property?
A recent reader question came in on the subject of VA IRRRLs, “I have a VA Loan on a house in Texas, and I’m looking to streamline the loan. I currently live in Illinois and renting the house in TX. Do you know if I can streamline the TX house for 15 years, even if I don’t live in the house? I’m being told I can’t, but I’m finding information contradictory to that.”
There are a couple of issues with this question–the first being the residency issue. Based on a literal reading of the question, borrowers should know that technically speaking, the situation the reader is asking about is generally not permitted–borrowers are not allowed to take out new purchase VA home loans for investment properties or to purchase properties where they are not the primary occupants.
The exact circumstances for this borrower are not fully known, so it’s not possible to say whether the VA rules are violated in this particular case. The VA does have flexible standards for some situations and this reader may be in full compliance with VA rules or qualify for an exception–it’s not for us to judge. But readers should not interpret our answer to this question as an endorsement of the situation as presented here or as an encouragement to buy property with VA loans for investment or rental purposes.
That said, the VA official site clearly states, “Some lenders offer IRRRLs as an opportunity to reduce the term of your loan from 30 years to 15 years. While this can save you a lot of money in interest over the life of the loan, if the reduction in the interest rate is not at least one percent (two percent is better) and lots of new loan costs are rolled into the new loan, you may see a very large increase in your monthly payment.”
As far as the occupancy issue is concerned, the VA official site adds, “The occupancy requirement for an IRRRL is different from other VA loans. When you originally got your VA loan, you certified that you occupied or intended to occupy the home. For an IRRRL you need only certify that you previously occupied it.”
About Joe Wallace
Joe Wallace has been specializing in military and personal finance topics since 1995. His work has appeared on Air Force Television News, The Pentagon Channel, ABC and a variety of print and online publications. He is a 13-year Air Force veteran and a member of the Air Force Public Affairs Alumni Association.