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The Department of Veterans Affairs backs mortgages for veterans and service members who want to buy a home. The VA loan program has generous terms for borrowers, like low closing costs, no mortgage insurance, and no down payment.
If you bought your home with a VA loan, you might be wondering how the VA mortgage can affect the homeselling process. You’ll be happy to know that a VA-backed home sale isn’t all that different from a typical transaction for other types of mortgages. 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 your home.
For most homeowners, including VA loan borrowers, 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 (backed by the VA loan program 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 VA home to?
As a VA homeowner, there are 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.)
VA loan requirements for sellers
Selling your home to a VA loan buyer helps support veteran homeownership. The VA loan process is slightly different than for conventional loan. When someone purchases your home using a VA loan, you will have to use a VA appraiser. The home you're selling must also meet the minimum property requirements (MRC) set by the VA.
People mistakenly think that sellers are required to pay closing costs for VA loans, but this is not the case.
While the Department of Veterans Affairs sets up general requirements for VA loans, individual lenders may also have additional guidelines. That’s why it’s important to talk to your loan officer about your plans to sell.
Can you buy a new home with a VA loan again?
From 0% down payment options to competitive interest rates, there are many benefits to VA mortgages, and you can 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, as long as you have enough VA entitlement available and are buying a primary residence. (Investment properties aren’t eligible for VA loans). Your upfront VA funding fee may be higher than it was the first time you took out a home loan. 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.
If you’re looking to buy a house with a VA loan, make sure to shop around for a lender that offers products that meet your needs. Need help finding the perfect lender? Orchard Mortgage can help.
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 government. When you first bought your home, you used some or all of your VA entitlement, and 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.
Buying and selling a VA loan home
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 a guaranteed offer on your current house, 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.