If you’re an active duty service member, veteran, or surviving spouse, you probably know you’re eligible to apply for a VA home loan to purchase your primary residence. But what are the VA loan requirements for purchasing an income-producing multifamily property? Does the VA offer multifamily loans?
The answer is “yes” but with some conditions. VA loans for multifamily properties are available, but the purpose of the purchase has to be “primarily residential.” That means you must live in one of those multifamily units.
Understanding VA loan multifamily requirements
Let’s say you want to buy a four-unit multifamily home. To ensure the property purchase is eligible for a VA loan, you’ll not only need to live in one of the units yourself (to meet that “primarily residential” requirement); you’ll also need to ensure its commercial use (renting out the other units for income) is subordinate to its purpose as your residence.
Here are some basic VA loan multifamily rules to keep in mind:
- The VA permits home loans for owner-occupied, multifamily residences with up to four living units. Properties with five units or above will require a commercial loan.
- VA multifamily loan rules require you to certify the home as your primary residence.
- The VA requires you to occupy the home as your primary residence within 60 days of loan closing.
- The VA has specific cash-reserve requirements for multifamily borrowers. You’ll need to have at least six months’ worth of monthly mortgage payments as well as associated taxes and insurance available in cash assets to qualify for a VA multifamily loan.
Can you use projected rental income to qualify for a VA multifamily loan?
The rules for purchasing a multifamily home with a VA loan are basically the same as those for buying a duplex with regard to the owner occupancy, building code, and non-hazard area requirements.
You may be wondering, however, if you can use anticipated rental income from a multifamily home as part of your income to qualify for VA loan. If the units are occupied, we can use 75% of the verified, historic rental income to potentially qualify for a loan. If the units are vacant, it will depend on:
- Individual lender rules
- Your experience level as a property manager
- Laws in the state where you reside
Keep in mind that even though the VA provides for multifamily loans, you will still have to meet your lender’s borrowing requirements. Not all mortgage companies offer multifamily loans, so if you’re interested in purchasing a multifamily home with a VA loan, make sure you choose your lender carefully.