Can I Buy a Multifamily Home with a VA Loan?

Is it possible to use a Veterans Affairs mortgage to purchase a duplex? What about using a VA mortgage to buy a multifamily home?

The answer in both cases is yes, but certain conditions apply. When considering using your VA loan benefit to buy a multi-unit property, remember that your VA lender will require compliance with VA mortgage rules and lender requirements.

The VA home loan program provides many advantages for eligible borrowers, including the ability to purchase a multifamily home with no down payment. However, there are specific guidelines that must be followed when using a VA loan to finance a duplex, triplex, or fourplex. In this comprehensive guide, we’ll cover everything you need to know about purchasing a multifamily property with a VA mortgage.

What is a Multifamily Home?

A multifamily home is a single residential property that contains two to four separate housing units, each with its own entrance, kitchen, and bathrooms. Common examples include:

Duplex: Two units in one building
Triplex: Three units in one building
Fourplex: Four units in one building

Multifamily properties provide homeowners with rental income from the extra units, which can help cover the mortgage payments on the property.

VA Loan Requirements for Multifamily Homes

The VA has specific requirements in order for a multifamily property to be eligible for financing with a VA loan

Occupancy Requirement: The borrower must occupy one unit of the home as their primary residence.
1-4 Units: The multifamily home can contain two, three, or four units. More than four units may be allowed in certain cases.
Zoning: The property must be zoned for residential use. Commercial properties do not qualify.
Rental Income: Projected rental income can be used to qualify for the loan in some cases.
Cash Reserves: Most lenders require 6+ months of PITI reserves for each rental unit.
Appraisal: A VA appraisal must be completed to confirm eligibility.
Building Codes: The home must meet all local building code and zoning requirements.

The property cannot be used solely as an investment property – the VA requires owner-occupancy in one unit.

The Benefits of Using a VA Loan

There are several advantages to financing a multifamily dwelling with a VA mortgage versus other loan types:

No Down Payment: VA loans do not require any down payment, unlike FHA and conventional loans. This provides significant savings.
No Mortgage Insurance: VA loans do not charge monthly mortgage insurance premiums. This provides cost savings over the life of the loan.
Lower Rates: VA mortgage rates are very competitive with other loan programs. This makes financing more affordable.
Ability to Rent: You can live in one unit while renting the others to generate income to help pay the mortgage.
More Units: VA joint loans allow two eligible borrowers to purchase a property with up to 6 units.

Overall, VA loans provide exceptional benefits for financing multifamily homes.

Using Rental Income to Qualify

When applying for a VA loan, most lenders allow you to use a portion of the projected rental income from the extra units to qualify for the mortgage. There are a few requirements:

Provide a valid lease agreement or other documentation to confirm rental income.
Have a history of managing rental properties, or hire a property management company.
Keep 6+ months of PITI in reserves for each rental unit.
Occupy 1 unit as your primary residence within 60 days of closing.

Consult your lender to see if they will allow rental income to be used for qualifying purposes.

The VA Loan Process

The process of obtaining a VA loan for a multifamily property is similar to that of a single-family home. Here are the basic steps:

Get Pre-Approved: Work with a VA-approved lender to get pre-approved and check loan limits. Shop and compare multiple lenders.
Find a Home: Once pre-approved, start searching for multifamily properties within your price range. Hire a knowledgeable real estate agent.
Make an Offer: Make an offer and negotiate the purchase price. Use a VA amendatory clause allowing you to back out if the appraisal is low.
Appraisal Ordered: Your lender will order a VA appraisal to determine eligibility and confirm value.
Underwriting: The lender will verify your income, assets, credit, and eligibility. Multifamily appraisals take longer.
Loan Approval: After underwriting approves the loan, you’ll get a clear to close.
Closing: Review final documents, sign, and close on your new multifamily VA loan!

Expect the entire process to take 30-60 days in most real estate markets.

Tips for Purchasing a Multifamily Home

If you’re considering buying a multifamily dwelling with your VA benefits, keep these tips in mind:

Shop multiple lenders to get the best rates and fees. The VA limits origination fees to 1% of the loan amount.
Seek out an experienced real estate agent familiar with the VA loan process. They can help guide you and negotiate on your behalf.
Make sure the property meets all zoning laws and building codes. This is confirmed during the VA appraisal.
Have a plan for property management – will you self-manage or hire a company? This is often required to use rental income.
Calculate your monthly cash flow – make sure rental income exceeds PITI payments and other expenses.
Review condo requirements if purchasing a unit in a condo building. VA condo rules must be met.

With proper planning and preparation, purchasing a multifamily residence with a VA loan can be a great way to invest in real estate and generate rental income.

Alternatives to VA Multifamily Loans

If for some reason you do not qualify for a VA loan, there are alternative financing options to consider including:

FHA Loans – Allow 3-4 unit buildings with a 3.5% down payment. Mortgage insurance is required.
Conventional Loans – Offer mortgages for 2-4 unit dwellings with a minimum 5% down payment.
USDA Loans – Finance some rural duplexes and fourplexes in designated areas. These are 100% financing options.
Portfolio Loans – Some local banks offer portfolio multifamily and investment property loans.
Hard Money Loans – Asset-based financing from private lenders at higher rates.
Cash Purchase – Buying a multifamily home with all cash if you have funds available.

Be sure to explore all your mortgage possibilities if you do not qualify for a VA loan program.

Final Thoughts

The bottom line is that purchasing a multifamily residence with a VA home loan is certainly possible if you meet the requirements outlined above. Just be sure to connect with a knowledgeable VA lender, research homes thoroughly, and have a solid understanding of the VA’s guidelines for owner-occupancy. With the right property and preparation, you can utilize your hard-earned VA benefits to invest in real estate and start generating rental income.

Buying a Duplex With a VA Mortgage

VA condo loans require condominiums to be on or added to a VA-approved list.

However, this does not apply to duplexes that don’t have a group ownership arrangement. Duplex ownership doesn’t subject borrowers to the same covenants, property taxes and common area group responsibilities that come with a condo.

To purchase a duplex with a VA loan, you must agree to live on the property. You can live in one unit and rent out the unused living unit, but you can not rent out both units as an absentee landlord until you’ve met your VA home occupancy requirements.

The VA requires duplexes – or any property you purchase with your VA loan entitlement – to be taxable as real estate and affixed to a permanent foundation.

To meet VA appraisal requirements, duplexes must either have independent utility services for each living unit or shared utility connections with individual shut-offs for each unit’s water, gas and electricity.

Duplexes must also meet state and local building codes, health regulations and other guidelines.

General VA Loan Requirements

VA home loans secure mortgages for primary residences. Any non-residential property use must be subordinate to the property’s use as a home. That means that if you’re planning to purchase a multifamily building, you must live in one of the units.

The VA allows home loans for owner-occupied primary residences with one to four living units.

This includes duplexes and multifamily homes, as long as the borrower certifies that the house will be their primary residence.

You do not have to reside in the home every day of the calendar year, but you must move into the house and use it as your primary address within 60 days of loan closing.

Additionally, any properties you purchase with a VA mortgage can non be in certain natural disaster hazard areas, like lava flow hazard zones (zones one and two) or Coastal Barrier Resources System (CBRS) zones.

Property that is solely commercial and not residential also does not qualify for VA mortgages.

Lenders may have additional guidelines beyond VA loan program rules, and some VA lenders may not offer certain kinds of loans that are part of the VA loan program.

For example, some institutions may not offer loans for mobile homes or new construction loans for duplexes and multifamily dwellings.

Housing demand, staffing issues, state law and other concerns can influence which VA mortgages lenders offer.

Reach out to your lender to find out their specific VA loan policies and how they might affect you.

VA Loans: How to Guide For Buying a Mult-Family Home Using Your VA Loan in 2023

FAQ

Can you use a VA loan on a 4 Plex?

VA home loans can be used for any eligible 1-4 unit property. This includes any 2 unit (duplex), 3 unit (triplex), or 4 unit (fourplex) home, as long as the veteran will occupy one of the units in property. It is considered an owner-occupied purchase as long as you live in one on the units.

Can I use my VA home loan for a rental property?

If you happen to have a property big enough for you to rent out a bedroom or even a guest house, you can always do this to earn some rental income on the side. As long as the property is your primary residence, how you rent out your rooms is up to you, and you can use a VA loan to fund the purchase of the property.

Can VA loan be used for duplex?

A duplex, a triplex or a four-plex all qualify for a VA loan. However, the property purchased cannot be used solely for investment or rental purposes.

Can you have a VA loan on 2 properties?

It’s possible to get a VA loan for a second home, but there are limitations. One of the most common circumstances is when an active military member has to PCS to a new duty station. Borrowers may keep their home because it’s difficult to sell. Others like the idea of using their first home as a rental property.