VA loans offer veterans a convenient way into the property market. As they’re backed by the Department of Veteran Affairs, applicants can get away with no credit score minimum and no money down.
But what about investment properties? Are you able to use a VA loan for investment property or multi-unit homes?
Short answer —
The VA loan program is designed to assist veterans, and military members find a home they will use as their primary residence.
As such, you cannot use the program to shop for an investment property, meaning one you intend to repair and flip immediately or one you plan to rent out wholly.
However, that does not mean you cannot earn money from a VA-financed property entirely.
To use a VA loan for an investment property, you will need to fulfill the following three requirements:
1. You’ll need to have military service
To even consider a VA loan, property investors must make sure they meet the program’s military service requirements. Meaning, you (or your spouse if you’re co-buying) must be an active military member or veteran.
You also should have clocked a specific number of days within the military, counting on once you served. The requirements are pretty specific based on whether your service was during wartime or peacetime, so check the charts at VA.gov to make sure you’re eligible before going further.
If you ultimately find yourself applying for a VA home loan, you’ll have a Certificate of Eligibility from the Department of Veterans Affairs.
2. You have to live on the property
Have you ever heard of a strategy called house hacking? That’s what you’ll need to do in order to use a VA loan for an investment property.
One of the more important VA loan requirements is that the borrower uses the house as their primary residence. Meaning, if you propose to use the program to buy a multifamily property, you will need to live in one of the units. You’ll also have to move into it within 60 days of closing on your loan.
3. Your property cannot have more than four single-family units
VA loans can only be used on properties with up to four units. If you go above this, your rental property won’t qualify for financing. Meaning duplexes, triplexes, and quadplexes are all fair game. But big apartment complexes? Definitely not.
Using rental income to qualify for a VA home loan
If you and your property meet these requirements and plan to rent out some units for extra money, you might use that income to help you qualify for the loan.
To do this, you’ll need to have cash reserves to cover at least six months of mortgage payments and documented experience as a landlord. Meet both those qualifications, and you can collect 75% of rents previously collected on the property or 75% of the rent an appraiser projects you can ask for each unit.
Article Courtesy Of: Gabriel Merchen, Money.com