Financing Multifamily Homes with a VA Loan

Financing Multifamily Homes with a VA Loan

Financing Multifamily Homes with a VA Loan

How VA loans can be used to finance multifamily homes

Is it possible to be approved for a VA loan for multifamily homes and/or rental property? The answer is complicated–it’s possible for a VA borrower to apply for a loan to purchase a home with up to four living units. The borrower is required to occupy the property as the primary residence, but the owner is free to rent out the unused living units.

There is no such thing as a VA loan for multifamily homes per se. All VA mortgages are single-family home loans approved for up to four living units. You won’t be approved for a VA mortgage to buy property you don’t intend to personally live in as your home address. 

 If you are eligible for a VA home loan you can consider purchasing a multi-unit property to become an owner-occupier landlord. 

Those who apply for a VA mortgage with another veteran (a VA “joint loan”) may be permitted extra units for business purposes, which means your multi-unit property could have more than four units. Chapter Seven of the VA Lender’s Handbook clearly states:

“If a property is to be owned by two or more eligible Veterans, it may consist of four family units and one business unit, plus one additional unit for each Veteran participating in the ownership”. 

That means if you and another veteran apply for a VA mortgage together you can build or buy a property with as many as “six family units (the basic four units plus one unit for each of the two Veterans), and one business unit.”

With VA mortgages you may even be permitted to consider potential rental income as a qualifying factor for the mortgage.

Points to be considered when using VA loans for multifamily homes:

  1. The owner has to ensure that he moves into one of the units in not more than 60 days of the purchase.
  2. Other financial agencies like FHA and USDA allows loan for the maximum number of 4 units. Any number beyond that would make it a commercial property. However in the case of VA, one can take for more than 4 along with other people provided they qualify as an eligible person.
  3. In the case of 2 veterans buying the property together using their eligibility, the property can have 4 residential units and 1 business unit. It can also have one more additional unit which would be in joint ownership. This makes the total units to be 6.

Consideration of rental income:

VA loan rules allow veterans buying homes to include potential rental income from unoccupied units to be considered as a mortgage payment offset for loan approval purposes. 

VA loan rules state that the lender may include prospective VA loan rental income when the lender determines that the borrower “has a reasonable likelihood of success as a landlord” according to Chapter Four, and the borrower must have cash reserves with funds for at least six months of VA mortgage loan payments.

What you need to know about qualifying for a VA loan with rental income

VA loan rules in Chapter Four of VA Pamphlet 26-7 (The VA Lender’s Handbook) say lenders must gather specific documentation from the applicant in cases where some or all of the income a borrower has is derived from rental properties. You’ll be asked to provide specific documentation to prove income–rental agreements, verification of the “rental offset” of the property (prior to purchase and occupancy by the buyer), etc.

VA loan rules instruct the lender to “Use the prospective rental income only to offset the mortgage payment on the rental property, and only if there is not an indication that the property will be difficult to rent. This rental income may not be included in effective income.”

In case of point 1 to prove experience, the owner has to prove one of below:

  1. You must have owned a multifamily home in the past.
  2. If you have prior experience in managing multifamily homes in the past.
  3. If you have prior experience in collecting property rentals.
  4. If you were employed in the past for any property maintenance role.

In the case of an already rented-out property, 75% of the verified rent amount is considered as rental income. If the loan is applied for a property that is still in the proposal mode and not yet occupied, the appraiser needs to send a letter to the VA which determines, what is the ‘Fair Rental Value’ of the property.

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Out of it, we need to deduct the vacancy cost or operating cost which is usually accepted at 25%.

So, we have seen that a multifamily home is a good option for veterans. They provide a good source of income to the veterans and at the same time, it’s easier to take loans for such proposals.

  • Home Loans for Veterans
    Posted at 05:53h, 03 July Reply

    Whether you are ready to upgrade to a larger home for your growing family or need to downsize, you can take advantage of a VA home loan at any time.

  • Jason D. Young
    Posted at 16:10h, 28 July Reply

    Can you build 4 separate houses on a single lot or property and still have it considered a multifamily property under VA guidelines, or must the units be in one single building?

  • Daniel Tamez
    Posted at 14:50h, 26 May Reply

    I am a having trouble finding a lender that will do a VA new construction duplex loan PLEASE HELP!

  • Amanda Brannan
    Posted at 13:28h, 30 March Reply

    You must occupy one of the units, not the basement.

  • Dave Carlton
    Posted at 15:31h, 07 February Reply

    What about 2 veterans? M y son and I are both retired military and wish to combine our incomes to purchase a multi-family property we both would live on. We both are rated 100% disabled by VA and looking at Texas which has no property tax for vets >60%.

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  • John E Burris Jr
    Posted at 00:48h, 10 April Reply

    Somewhat offensive that an FHA loan is a better one to get (as a Veteran) for a 2, 3, or 4 plex than a VA loan is. That needs to change ASAP.

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    Posted at 12:12h, 19 January Reply

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  • Parrish F Weaver
    Posted at 06:05h, 26 November Reply

    I contacted The VA Guaranty Dept and I was told that the VA Guaranty for multifamily properties only covers one (1) of the units in a multifamily property and not the other units. Is this true? If so, it limits my ability to purchase a multifamily property in a jurisdiction that exceeds the maximum VA loan amount (e.g., Washington DC) without a significant downpayment. Please explain if there is a work around.

  • Andrew Mc
    Posted at 19:36h, 14 November Reply

    Does the max amount you can borrow increase for multi unit properties?

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    Posted at 00:34h, 01 July Reply

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  • Benjamin Fowler
    Posted at 18:45h, 28 June Reply

    I’m a veteran and we have property in the rural county can I use VA to build a 4 unit apartment and use 3 units for transitional housing for parolees for Re-entry to society?

  • Josue
    Posted at 18:58h, 04 June Reply

    Where in the VA loan Handbook can i find information about being able to purchase a multifamily home using the VA Loan?

  • Charles Tarpley
    Posted at 18:11h, 17 January Reply

    I am a veteran who would like to buy a duplex in which I’ve been living in for 15 years. I have experience in the rental business for the past 15 years , since I’ve been my landlords go to guy for maintenance. The 1/2 of duplex is currently rented and he’s had no problem renting. Would I qualify for a VA Loan and use the rental as income , I only qualify for 1/2 because of income.

    • Matt Terry
      Posted at 19:19h, 23 April Reply


      Contact the Veterans Affairs office nearest you for the answers you seek.


  • johnathan rodriguez
    Posted at 04:36h, 21 August Reply

    i found a 4 unit property with a finished basement will i be allowed to use the rental income from the other 4 units as they are currently occupied and allowed to live in the basement?

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