How to Help with a Departing Residence When Originating a VA Home Loan

When you’re working with a Veteran client who is converting their current primary home into a rental property and buying a new primary residence, it’s important to know how the Department of Veterans Affairs (VA) treats that “departing residence.” You, as the loan officer, can use that information to structure the loan correctly and help the file close smoothly.

What is a “Departing Residence”?

The departing residence is the home the Veteran is moving out of, turning into a rental, and simultaneously using their VA loan benefit to buy a new home as their primary residence.

Why this matters

• For VA loans, there are clear rules about how the mortgage payment on the departing residence can be handled. These rules are more flexible than many conventional or FHA loan programs.
• If you understand how to apply them, you can make the qualifying process easier for the Veteran and reduce delays.

Key points to know

• The full monthly payment on the departing residence (principal, interest, taxes, insurance, association dues) may be fully offset by rent received on that property—this means it can reduce the total debt considered for the new loan. 
• A lease agreement is not always required by the VA for the departing residence offset to be allowed. 
• The property must be the one the Veteran recently vacated (the immediately prior principal residence).  

Compare to other loan types (for your knowledge)

• Conventional loan programs often allow only up to 75 % of the rent to count and usually require a signed lease or proof of two months’ rent received.
• FHA loans may apply a 100-mile rule if the original loan was FHA (not VA), demand a 1-year lease, only allow 75 % of the rent, and might require 25 % equity if the borrower has no prior rental history.

What you should do as the Loan Officer

• Early in the process, ask: “Will the Veteran be converting their current home to a rental and buying another home as primary using a VA loan?”
• If yes, document the current mortgage payment (PITI + any HOA/association dues) on the departing residence.
• Gather evidence of rent for the property or documentation of market rent from a reputable source (if a lease isn’t yet executed). Rentometer.com is a popular one. 
• Structure the file so the departing residence payment is offset appropriately in the debt-to-income calculation.

Why this gives an advantage

Because the VA allows the full payment to be offset  and may not require a formal lease, you can help your Veteran client qualify more easily than if they were using other loan programs. That means fewer obstacles and potentially smoother closings.