Here’s a question we sometimes receive about VA home loans. There are several variations on this type of circumstance, but in general the question goes something like this:
“I have a home now, not financed through the VA. I want to put that house up for sale and purchase another house through the VA Loan.
Do I have to sell my home first or will the VA let me purchase the home, while my first home is still for sale? I will be living in the home purchased through the VA Loan.”
The short answer is that a borrower does not have to sell another property currently owned in order to qualify for a VA mortgage. But a borrower should know that there are considerations with owning other property that might affect the VA mortgage if payments are still being made on the first home.
VA loan rules have no prohibition against a borrower owning another property purchased with a non-VA loan while trying to apply for a new-purchase VA mortgage or refinance loan.
In this type of situation, the main issue wouldn’t be whether other property is owned, but whether there are house payments being made at the time of the VA loan application. Also considered is how those payments affect the borrower’s debt to income ratio (DTI) when the new VA loan is factored into the equation.
If the borrower is already making a mortgage payment, the VA lender will examine the borrower’s current debt to see if the new loan is affordable for the borrower.
The lender cannot simply assume that because the other property is offered on the market for sale, an existing house payment will end soon or won’t be a factor in affording the new VA loan. The borrower’s current DTI plus the expense of the new VA loan would be calculated. Of course, it would be another matter if the sale has gone through and there is paperwork stating such.
Unless there is proof that the home is either sold or about to be sold, the house payment would likely be factored into the borrower’s current financial obligations.