Owner occupied 3&1 SFR with $110,000 VA backed mortgage. Owner is approximately $7500 behind but has an short term (4 months at a time) loan reduction agreement. Is it possible for this homeowner to refi this mortgage as a non owner occupied and rent it out? The VA occupancy statute has been reached. The home needs about $8000 worth of work before renting. ARV is approximately $125000. Area rents are from $800 to $1200 as the property is near three college campuses.
Here's the long and short of it, to refinance as a non owner occupied property and rent it out will require:
At 75% LTV = $93,750 new loan which will require $16,250 additional for principle and if I read your post correctly $7,500 in unpaid interest (Mostly) and $8,000 required for remodel (Rehab) so provided your willing to come out of pocket $31,750 and this does not include loan cost, points or closing cost’s. This scenario put’s you $500 over ARV!
At 80% LTV = $100,000 new loan which will require $10,000 additional for principle and if I read your post correctly $7,500 in unpaid interest (Mostly) and $8,000 required for remodel (Rehab) so provided your willing to come out of pocket $25,500 and this does not include loan cost, points or closing cost’s. This scenario put’s you $500 over ARV!
I think if this owner had $30k to $35k they would be making their payments! This is a “Owner” scenario as an “Investor” scenario would be required to put either $25,000 or $31,250 down plus paying off back payments and rehab cost’s, and all associated loan cost’s, points and closing cost’s!
First, missing mortgage payments is going to make getting a favorable refinance rate nearly impossible. My recommendation is to rent the home “As Is” at market rents adjusting for the condition. Have the owner rent a much cheaper place and use all the profits from the rental to get the mortgage back in good standing.
Once the mortgage is restored and the credit score repaired, then look at refinancing which will free up the VA loan eligibility. Additionally, renting houses out in college towns can be much more profitable to rent them by the room. Could be a good option.