VA loan financing covers more types of real estate than houses and apartments. Can I buy a multifamily home with a VA loan?
VA Qualification for loan income and properties for multiple entities
Purchasing a multi-apartment property with a VA loan may seem attractive to borrowers who see it as a way to increase their income by renting other units. However, lenders will not blindly calculate potential rent income when calculating DTI and other qualifying indicators and affordability.
Lenders often have standards for borrowers who want to consider rent income when applying for a VA loan. You may need documented history as an owner. Purchasing multi-seater properties may also involve requirements for cash reserves from lenders. Even trying to use rental income to offset other costs and fees may not be feasible.
Points to consider for a VA loan for multi-family homes
The owner must ensure that he moves into one of the units within no more than 60 days of purchase.
Other financial agencies, such as FHA and USDA, allow loans for a maximum of 4 units. Any number would mean that it is a commercial property. However, in the case of VA, you can take more than 4 people together with others, provided they qualify as an eligible person.
For 2 veterans buying property together based on their eligibility, the property can have 4 housing units and 1 business unit. It may also have another additional unit that would be joint ownership. This makes the total number of units 6.
What to take care of before buying a house?
As with most investments and being a homeowner, there are risks, so it’s important to do your homework:
- Identify the area you want to buy: if you want to generate rental income, it’s important to look at areas of low value home with higher rents.
- Start looking at home: any real estate agent can configure you with MLS (Multiple Listing Services) updates based on your criteria.
- Know your costs: you should focus on the amount you will pay each month on which the rule, interest, taxes and insurance are based.
- Know your rents or potential rents: you can ask your broker about average rents in the market you are looking at.
- Other notes: if you follow this path, you’ll be the owner who is a small part-time job and not for everyone.