Purchasing a home with a VA loan is an exciting moment, but there are some limitations with what you can do with the property even after you close. Occupancy requirements are going to be the biggest hurdle for Veteran homebuyers, but that's not to say turning your home into an Airbnb is impossible.
Owning your own Airbnb is an attractive option for bringing in some extra cash. Veterans looking to use their VA loan benefit may wonder if an Airbnb property meets all the requirements set out by the VA.
While it might be possible to purchase a home and turn it into an Airbnb with a VA loan, you’ll need to ensure you are still following all the guidelines set out by your lender and the VA.
Let’s dive into it.
Yes, it is possible to turn your home purchased with a VA loan into an Airbnb. However, this is only allowed if you keep your home and then purchase a new primary residence. If you are looking to buy a home with a VA loan solely for the purpose of renting it out as an Airbnb, then no, it is not possible.
The biggest issue with using your VA loan benefit for an Airbnb is that it violates the VA’s occupancy requirements. The VA will only back home loans that Veterans intend to use as their primary residence. This means the property cannot be used as a rental property, vacation home, timeshare or Airbnb.
But, again, if you are looking to purchase a different home and keep your current home, then you are permitted to use your current home as an Airbnb.
Yes, you can Airbnb your house while you’re away on deployment. However, there are a few things to keep in mind.
First, you’ll need to make arrangements for who will manage the property while you’re away. This includes tasks like dealing with guests, cleaning and maintaining the property, and handling any other issues that may come up.
Second, you will need to check with your VA mortgage lender to make sure that you’re not violating any terms of your contract.
If you're using a VA loan to purchase a home that you'll eventually rent out, you’ll typically need to occupy the home for at least 12 months. This ensures that you're using the home as your primary residence and not simply purchasing it as an investment property.
While 12 months is the typical standard, it’s always a good idea to check with your mortgage lender.
If you have a VA loan and you want to use your home as an Airbnb, the first thing you should do is check with your mortgage company to see if there are any restrictions. You should also check with your HOA, if you have one, to see if there are any rules or regulations about short-term rentals.
Any time you buy or sell a home with a VA loan, there will be some impact on your entitlement. VA entitlement is the amount of money the Department of Veterans Affairs is willing to guarantee on your loan. If you default on your loan, the VA will pay the lender up to 25% of the loan amount. So, if you have full entitlement and you take out a $200,000 loan, the VA will pay the lender up to $50,000.
Since you wouldn’t be selling the home you want to make into an Airbnb, your VA entitlement would be tied up in the property.
If you’re looking to use your VA loan benefit for a second home, it's possible to have two VA loans at once. However, when you have two VA loans, your entitlement will be diminished, which could impact your ability to put $0 down.
Your secondary entitlement is tied to the VA loan limit in your county. And if you're looking to buy a home above the amount of your remaining entitlement, you’ll need to make a down payment.
Here’s a quick example:
Let’s say you purchased a $350,000 home a few years back. You will be using $87,500 of your entitlement ($350,000 / 4). If you want to purchase a home again, the VA puts a loan limit on what they will guarantee for the second home. Take a look at the VA loan limit in your county and divide that by four.
In most counties, the VA loan limit is $766,550, meaning your remaining entitlement will be $155,637.50 ($766,550 / 4) minus the entitlement you’re currently using ($87,500). This means you will have $68,137.50 left of your entitlement. Since the VA guarantees 25% of the loan, this puts the maximum loan amount you can get without making a down payment at $272,550 (68,137.50 x 4). You can still get a loan for a higher amount—you will just need to make a down payment to cover the cost that exceeds the maximum loan amount.
It is possible to fully restore your VA loan entitlement without having to sell the home; but you can only do this once, and you must have either paid the loan off or refinanced into a different loan type.
The VA on-time restoration of entitlement is a pretty big deal for Veteran homebuyers. With your full VA entitlement, you have no cap on how much you can borrow and can purchase a home for as much as a lender is willing to give you.
Are you interested in restoring your VA entitlement? Connect with a loan expert at Veterans United to see if you qualify.
If you’re planning on using the money you make from your Airbnb to qualify for your second mortgage, you might have some challenges ahead of you. While it’s possible to do this with most other types of properties, there are unique factors involved with Airbnbing that can make it difficult. In many cases, it won’t be possible to count this income right off the bat.
Ultimately, it’ll be difficult for lenders to count this income as there are no long-term leases on the property and too much volatility in the market. Lenders need a steady and consistent income (usually for two years) before it can be used towards qualifying for another loan.
While being an Airbnb owner sounds great, there are a few things that potential owners will need to consider before determining if it’s the right decision for them:
All things considered, using your VA loan benefit to turn into an Airbnb eventually can be a financially savvy move. It’s not right for everyone though, so be sure to talk to a home loan expert to weigh your options.