VA loans are intended to be the buyers' primary residence. However, under certain circumstances, you may be able to use a VA loan for rental property.
Potential homebuyers are often drawn to the appeal of using their VA home loan benefit on an investment property. Doing so can bring in extra revenue and, in some cases, pay off your mortgage.
Using your VA loan benefit on an investment property isn’t so cut-and-dry, however. There are specific property and occupancy requirements you must follow.
The Department of Veterans Affairs allows VA homebuyers to purchase multi-unit properties with the intention of using one of the units as their primary residence.
So, yes, it is possible to use your VA loan for rental property, bearing one of the units is your primary residence.
However, a VA mortgage cannot be used to buy property or land solely as an investment or rental property.
Potential homebuyers can buy up to a fourplex with their VA loan by occupying one unit and renting the additional three.
As stated above, you must meet the VA loan occupancy requirements and live in the property to use the VA loan.
The period you must occupy the residence varies by lender. Most lenders will want you to certify you intend to stay in the property for at least 12-months.
If you buy another home in that timeframe and want to keep the first, it’s best to talk to your lender. It may be possible to keep the first home as a rental property, as it is a common scenario for active military homebuyers receiving PCS orders, but isn’t a guarantee.
Many buyers come to the table thinking they will be able to use their future rental income to qualify for their VA home loan.
For example, if your mortgage payment is $3000 and you will make $1500 a month in rent, you’d only need to qualify for a $1500 a month mortgage. The problem is, you may have a hard time assuring your lender that this income is stable and steady enough to count on.
Some lenders may count future rent as an effective income if you can prove your history as a landlord and have at least two years of experience under your belt.
Multi-unit properties must meet unique requirements that differ from single-family homes. The VA lender’s guide states that every living unit must have:
For buyers looking to purchase a condo with their VA loan, you must check to see if the property is already on the VA approved condo list. If it isn’t, you must apply for it to be added. This list does not apply to buyers looking at purchasing duplexes.
While each lender may have different requirements when it comes to purchasing rental and investment properties with a VA loan, the hard work and longer approval process could pay off in a huge financial win for you and your family.