Buying A Duplex With A Va Mortgage
Borrowers interested in buying a condo unit often learn for the first time that VA condo loans require the condominium project to be on or added to a VA approved list.
However, borrowers interested in buying a duplex do NOT have this requirementthe borrower is purchasing property that does not involve a group ownership arrangement, and duplexes dont have a VA-approved list for this reason. Owning a duplex does not make you subject to the same kinds of covenants and group responsibility for common areas, property taxes, and other issues.
The basic issues you encounter when trying to buy any eligible property with a VA mortgage are applicable for duplexes. You must agree to be an owner/occupier and you are permitted to rent out the unused living unit if you so choose, but you cannot be an absentee landlord. You must live on the property you buy with the VA loan.
Duplexes, like all other property you can buy with your VA loan entitlement, must be taxable as real estate, be affixed to a permanent foundation that meets VA appraisal rules, and must not be used as a commercial enterprise such as a bed-and-breakfast, Airbnb, etc.
A duplex must meet specific VA appraisal requirements including one that dictates that each unit has either independent utility services for each living unit OR have a shared water, sewer, gas, and/or electricity connection provided there are individual shut-offs for each utility service in each unit.
Types Of Loans For Investment Properties In Real Estate
Becoming a real estate investor is a great way to earn passive income. But you will need some money on hand to get started in real estate investing. If you dont have enough cash saved up, taking out loans for investment properties is a great option.
There are actually many types of loans for investment properties. If you choose the wrong type of loan, you can really hinder the success of your real estate investment. So its crucial that a real estate investor understands all of the options available before contacting a mortgage lender.
In this article, we break down the 6 most common types of loans for investment properties to help you, the real estate investor, determine which option works best for your investment.
A Great Way To Get Started
In full disclosure, I’ve since moved on from that first property. When my wife and I decided to start having kids, our side of the duplex was simply not enough space to accommodate a growing family. Plus, the Key West real estate market had appreciated enough during our ownership period that we were able to sell at enough of a profit to put 20% down on our next home a little further north and still have some money left over.
Even though we no longer own the property, using the FHA loan house-hacking method set me on the right path. It allowed me to buy a property that I couldn’t have otherwise comfortably afforded and made my monthly expenses significantly less than I would have paid for rent on a comparable apartment in the area. And because I built equity in the property, I was able to sell it after a few years with enough capital to pursue other investment properties.
Carefully weigh the pros and cons of the FHA loan house-hacking method. If it works with your lifestyle, it could be a great way for you to save big on your first investment property, too.
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How To Get A Va Loan For An Investment Property
For eligible Veterans, getting approved for an investment property is worth it. By turning yourprimary residence into a rental property to generate income, an investment propertyVA mortgage can help make the mortgage payment for you, which will benefit you, the military member, and your family, who may be military dependents.
Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS #1907 Loading Reviewsâ¦
- Veterans United ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In 2021, Veterans United closed 68,763 VA Purchase Loans.
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What Documentation Does The Va Require To Show Evidence Of My Rental Income Earnings
VA loan rental income documentation requirements depend on the rental history of the property.
If you are using income from a separate property you already own, you will need to provide income tax returns from the past two years, including Schedule E.
If you are using income from the subject property or from another property you have owned for less than two years, you will need to provide a signed lease. And if you dont have a signed lease yet, you will need a rental appraisal completed by a licensed appraiser.
While qualifying for a VA loan with rental income is possible, the process can be confusing. Make sure youre working with a lender who has experience using rental income for VA loans.
As an OVM customer, you get access to a dedicated loan officer who can help you navigate the process. Contact OVM Financial at 757-296-2148 for a free consultation. You can even start your loan application online at ovmfinancial.com/QuickStart.
Have Questions about VA Loans?
Contact our dedicated team online or via email to get personalized answers to your questions.
Can You Use A Va Loan For Investment Property
VA loans aren’t intended for investment properties, but there are ways around this rule.
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VA loans come with some serious benefits. Backed by the Department of Veterans Affairs, this handy mortgage program has no minimum, requires zero down payment, and offers 100% financing. It’s really one of the best loan options out there — at least for homebuyers.
But what about a real estate investor? Can you use a VA loan for investment property or multi-unit homes? Let’s dig in and see.
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What You Need To Know When Someone Assumes Your Va Loan
VA loans are assumable which means someone buying your home can take over a great interest rate in addition to buying your home. The important thing to remember is your entitlement wont be restored unless the buyer is an eligible veteran who agrees to substitute his or her eligibility for yours. However, the VA doesnt restrict who can buy your home or assume your current VA mortgage. If you decide to sell a house to a non-military buyer, even if they take over responsibility for the loan payment through an approved loan assumption, some of your VA entitlement will be tied up in the property until the loan is paid in full.
Commercial Investment Property Loans
If youâre into commercial real estate investing, then the above-mentioned types of loans for investment properties are not suitable for you as they are residential investment property loans. You need another financing option â a commercial investment property loan!
The main difference is that to obtain these loans for investment properties, property investors need to have a solid business plan coupled with a good credit score. Lenders are concerned with the benefits and necessary work needed to improve the investment property in order to see cash flow.
There are different types of commercial investment property loans, each with specific terms and qualifications that make them suitable for certain types of commercial properties. For example, commercial hard money loans are short-term loans to purchase and renovate an owner-occupied commercial property. When going for these types of loans for investment properties, a commercial real estate investor should expect to cover a down payment of around 15% 35% of the purchase price. This financing option typically lasts for 1 â 3 years with 8% 13% interest rates.
To learn more about the different types of commercial loans for investment properties and determine which one works best for you, read this.
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Va Loan Entitlement On Second Homes
When youre buying your first home, you can pretty much forget your entitlement amount and worry about things like your credit score and debt-to-income ratio.
But your level of remaining entitlement could come into play when youre using a VA loan to buy a second home.
But the way entitlement limits your home buying budget for a second home isnt always simple.
When Can I Use My Va Home Loan Benefit On A Second Home
Active duty military members move around a lot. Then, upon retirement, veterans may move thousands of miles from their last posts.
Sometimes, relocating veterans and service members dont want to sell their current homes other times, it takes longer than expected for a home to sell.
So the VA allows eligible veterans to get mortgage loans to buy new homes even when they still have an active loan on their first home. To make this work, youll have to show youre planning to move into the new home within 60 days of closing on the loan.
Plus, the VA may limit the size of your second home loan or require a down payment if your home purchase price exceeds your level of remaining entitlement.
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So How Many Times Can You Use A Va Loan
Eligible veterans and military service members are able to use there VA home loan benefits over and over again. There is no limit on how many times you can use your VA loan benefit. This is a benefit you have earned for serving our country, and once you have earned it, it is a life long benefit you can use over and over again. You can restore your entitlement as often as you need as long as you sell the previous property and pay the prior loan in full. In some cases you can even keep your first home and buy a second primary residence if you are required to move for a job or a PCS situation. Everyones circumstances are unique, so give one of our VA home loan specialists a call at 855-956-4040 to find out more. We are here to serve you!
An Aid For Homeownership
The Veterans Administration established the VA loan program to aid veterans in buying homes as residences. They require no down payment. The VA offers a guarantee to the lender in order to keep the costs and rates affordable. But because the program is designed to finance a veterans residence, VA loans are not available for rental properties. The veteran needs to certify that they will be living in the property in order to be approved for an initial VA loan. Refinancing an investment property, however, is still possible.
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Properties You Can Purchase With A Va Loan
Are you interested in a Veterans Administration home loan, but wondering if there are any restrictions on the type of property you can buy? VA loans are designed to help active duty military personnel and Veterans become homeowners at an affordable cost. There are many types of properties covered under your VA loan including single family homes, condos, manufactured homes, and even multi-unit residences.1 But before you start house hunting, youre wise to do your research, explore your options, and understand what restrictions might apply.
The Bottom Line: Yes You Can Buy Two Homes With A Va Loan
VA loans are intended to help eligible clients get primary properties that serve as their principal residence. As such, buying a home with a VA loan for the purpose of making it a second home or investment property is allowed, but you can convert the property after youve lived there. You can also make rental income by living in one unit and renting out the others.
If you do plan to buy a second home with remaining VA entitlement. Its very important to make sure you understand how your remaining entitlement and local conforming loan limits interact. If you have any doubt, you can always speak to us.
Get approved to refinance.
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Can I Use A Va Loan For An Investment Property
No. You cannot use a VA loan for an investment property, but you can turn your current home into a rental property while using a VA loan to purchase a new primary residence. You can also use your VA loan to purchase a multiple-unit property so long as you intend to make one of the units your primary residence. This scenario allows you to rent out the other units.
Calculating Your Qualifying Rental Income
You dont get to count all of the rental income when qualifying for a VA home loan. Underwriters look at the current leases on the property and allow 75 percent of the rent from the units you wont occupy yourself. If the property does not have renters, the lender allows 75 percent of an appraisers opinion of the fair rental value for the units.
VA underwriting guidelines state that, A percentage greater than 75 percent may be used if the basis for such percentage is adequately documented.
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How Does The Va Mortgage For Investment Property Work
You get a VA mortgage for investment property the same way youd get a VA mortgage for a singlefamily residence. Youd qualify based on your income and credit rating.
However, if you want to get credit for the potential rental income from the property, the lender needs to verify that you have some landlord, property management or related experience and that you have savings to cover your mortgage payment even if the units go unrented for six months. According to the VA, lenders must verify:
- Cash reserves totaling at least 6 months mortgage payments , and
- Documentation of the applicants prior experience managing rental units or other background involving both property maintenance and rental.
If the VA lender determines that you have enough savings and the reasonable likelihood of success as a landlord, it allows you to count current or potential rental income to offset your mortgage payment.
How The Va Bonus Entitlement Works
A VA loan is a mortgage guaranteed by the Department of Veterans Affairs exclusively for active-duty military service members, veterans and eligible surviving spouses to buy or refinance a home with no down payment or mortgage insurance. The VA does not lend money but guarantees up to 25% of the loan this guarantee is called an entitlement.
The VA bonus entitlement can help you finance a home with a purchase price of above $144,000 possibly without a down payment or to purchase a second primary residence. The VA loan entitlement refers to the maximum dollar amount that the VA will pay to your mortgage lender if you go into mortgage default, or fail to repay your loan.
With VA loans, there are two forms of entitlement: basic entitlement and bonus entitlement. The basic entitlement is $36,000, or 25% of $144,000. For homes with a sticker price above $144,000, the VA provides a bonus entitlement worth 25% of the home loan amount. Lenders will let you borrow up to four times the entitlement with no down payment.
Full vs. remaining entitlement:
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Can You Buy Your New Home With A Va Loan Again
From 0% down payment options to competitive interest rates, there are many benefits of VA mortgages. So can you take advantage of the VA mortgage program for your next home as well?
Thereâs no limit to the number of times you can get a VA loan, just as long as you have enough VA entitlement available and are buying a primary residence . If you had a short sale, foreclosure, or bankruptcy, you might have to wait two years before you can purchase a house with a VA-guaranteed loan again.
Tip: If youâve bought a VA loan home in the past, you can expect your upfront VA funding fee to be a bit higher the next time around.
What To Know Before Getting A Va Loan For A Rental Property
VA loan programs help veterans and active duty service members to afford a home of their own. What many people are surprised to learn is that a VA loan may also be used to finance the purchase of a rental property, provided that certain guidelines are followed.
- VA loans are originated or backed by the U.S. Department of Veterans Affairs.
- The benefits of a VA loan include no minimum credit score and a 0% down payment.
- People eligible for a VA loan include veterans, service members, National Guard and Reserve members, and surviving spouses.
- VA direct home loans are those where the Veterans Administration serves as the mortgage lender.
- VA-backed home loans are obtained through conventional lenders and partially guaranteed by the Veterans Administration.
- Borrowers using a VA loan must occupy part of the property as a primary residence.
- A VA loan for rental property may be used for 2-4 unit properties, and in some cases a single-family home.
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