VA Residential Lending Benefits Multi-Unit Purchasing
The VA Home Lending residential mortgage program benefits are extremely far-reaching once you understand them.
Many people believe that VA benefits are complicated or restrictive, but that’s just a myth. Using your VA loan benefits may be a relatively painless process and they may even be used to assist in the purchase of multi-unit residential properties.
VA loans, which are provided by private lenders, go through regular channels to get approved and funded. You start by working with a local Realtor to find the home you want to buy. Once you find the home, you will work directly with a mortgage lender who will take and process a mortgage loan application just like how any other mortgage loan gets processed. And assuming you and the property meet the criteria established for multi-unit housing, the loan will ultimately be approved to close with the mortgage lender. The VA guarantees a portion of the loan so that private lenders may provide more favorable terms to borrowers, but the VA does not deal directly with the veteran consumer or provide the financing itself.
Financing Your Multi-Unit Home with a VA Loan
If you are interested in a multi-unit transaction, which consists of one to four units, you should be aware that VA benefits are not available for investment properties, so you’ll need to live in one of the units.
Your VA loan for this type of residence may have similar features to a VA residential mortgage loan for a single family purchase, including the ability to borrow up to 100% of the appraised value of the property, up to the county-wide maximum, as established by the VA. These values can be found at the VA’s website at homeloans.va.gov. You would only be required to put down 25% of the amount exceeding the county-wide limit, should the property exceed the established threshold.
Property appraisals are done by the VA, so appraisal costs are generally lower than typical FHA or USDA property appraisals.
Your Rental Income
Since you may only be living in one of the units, you’ll be free to rent out the other units. The mortgage lender may use the projected cash flow from projected rents when evaluating your income calculations provided you have at least two years’ experience as a landlord or property manager. If you don’t have that experience, you may be able to hire a property manager, which will allow you to count 75% of the projected rents as verifiable income.
Property management fees for multi-family units are generally minimal and not prohibitive in the overall costs of ownership/management.
With a shortage of starter and first-time homes available for purchase nationwide, many veterans and their families are finding that multi-unit homeownership provides them more- than-adequate housing for their families, with a cash flow that may cover the costs of their mortgage and property insurance. With rising equity rates throughout the U.S., these investments may yet prove worthwhile options to our veterans seeking housing in today’s market.
Michael Macari is an award-winning writer and communications professional. He serves as Chief Communications Officer for Stamford, CT-based National Asset Direct and writes nationally on housing, mortgage and related topics. He lives in Stamford, CT with his wife of thirty-seven years, Sally, their five children and two grandchildren.
John William McDade (NMLS #239553) is a licensed loan originator in California and Washington State. If you are interested in discussing VA home loans in these states, John can be reached at email@example.com, or 858-435-4667.
iServe Residential Lending, LLC (NMLS # 2914), a licensed mortgage lender and Equal Housing Lender