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Refinancing Rules, Rental Income, and Occupancy

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VA loan rules state that a new purchase VA guaranteed loan can only be used for a home the borrower intends to personally occupy. But do the rules forbid the borrower from owning other mortgaged properties at the same time as the new VA mortgage loan is being paid?

While there is no specific condition ruling out a VA loan while a borrower owns another home, VA loan credit requirements state a borrower must meet debt-to-income ratio rules.

Lenders may have guidelines and requirements regarding how many mortgaged properties you can have at one time. While it is possible to hold two active VA home loans at the same time, as a general rule you must intend to occupy the most recently purchased home as your primary residence.

If you are paying a conventional mortgage loan for one property and apply for a new purchase VA loan on another property, the question of debt-to-income becomes a big one. Many borrowers wonder if they can count rental income from their old property or use it as an offset for the mortgage payment.

VA loan rules say rental income may be considered under the right circumstances. According to Chapter 4 of VA Pamphlet 26-7, the borrower must provide documentation of cash reserves totaling at least 3 months mortgage payments (principal, interest, taxes, and insurance - PITI), plus individual income tax returns and all applicable schedules for the previous 2 years. These schedules must show rental income generated by the property.

Here's some additional information from VA pamphlet 26-7, which includes these instructions for the loan officer:


Rental income verified as stable and reliable may be included in effective income. If there is little or no prior rental history on the property, make a determination based on review of:

  • Documentation of the applicant's prior experience managing rental units or other background involving both property maintenance and rental,
  • any leases on the property, and
  • the strength of the local rental market.

VA lenders can have their own guidelines and may require you to have a two-year history as a landlord in order to count that rental income. But you may have an easier time using it to offset the old mortgage payment, meaning it would not count against you when the lender analyzes your debts and income.

Primary occupancy rules differ in cases where the home is being refinanced with an Interest Rate Reduction Refinancing Loan--the borrower must certify that the home being refinanced was the primary residence prior to refinancing.