Can I Buy a Multifamily Home with a VA Loan?

Are you an active-duty service member or a veteran looking to buy a multifamily home? You are in luck. The Department of Veterans Affairs-backed VA loan program is a great opportunity to purchase a multifamily home with favorable terms.

In this blog, we explore the specific guidelines and considerations to keep in mind for a VA loan. Discover how you can use it to buy a multifamily property and its benefits.

Understanding VA Loans

VA loans are designed to help active-duty members, veterans, and certain National Guard and Reserves members buy their dream homes. VA loans often do not require a down payment and have lower interest rates than conventional loans, nor do they require private mortgage insurance (PMI). Overall, they save you money over time.

Buying a Multifamily Home with a VA Loan

While you can buy a multifamily home with a VA loan, some requirements and restrictions apply:

1. Occupant Requirement: You cannot use the VA loan solely for investment. You must live in one of the units as your primary residence.
2. Property Type: You can buy a property with up to four units. You can live in one and rent out the remaining three units to generate rental income to cover your mortgage payments.
3. Property Condition: The property must meet the VA’s minimum property requirements (MPRs). If it requires significant repairs, you must address these issues before closing, or negotiate with the seller first. It ensures the property is safe and sanitary.

Benefits of Using a VA Loan for a Multifamily Home

By using a VA loan to purchase a multifamily home, you are set to avail several advantages, including:

1. Rental Income: Renting out the remaining units helps generate income that can help you cover your mortgage payments. It is particularly beneficial if you live in a high-cost area.
2. No Down Payment: You may not need a down payment to buy a multifamily property with a VA loan, making it easier to get into the real estate market.
3. Favorable Loan Terms: You can get lower interest rates and more favorable terms than conventional loans, saving you money.
4. No Private Mortgage Insurance: VA loans do not require PMI like conventional loans, helping you save significantly every month.

Also Read: First-Time Homebuyer Programs and Incentives for Californians in 2024

Steps to Buy a Multifamily Home with a VA Loan

Do you want to know how to use a VA loan to purchase a multifamily home? Follow these steps:

1. Get Pre-Approved: You need to get pre-approved for a VA loan, so start there. It should give you an idea of the amount you can afford and show sellers that you are a serious buyer. Work with a VA mortgage broker to streamline the process.
2. Find a VA-approved lender: Few lenders offer VA loans, so you must find an approved lender adept in the program’s specifics. A VA mortgage broker can help you find the best lenders.
3. Search for Properties: You will need a real estate agent experienced with VA loans and multifamily properties to help you find suitable properties that comply with the VA’s requirements.
4. Make an Offer: Work with your agent to make a competitive offer after discovering a property. The property must meet the VA’s MPRs. Prepare for a home inspection and likely negotiate repairs with the seller.
5. Complete the Loan Process: You will close on the property after the loan has been approved, after which you must move into one of the units as your primary residence.

Potential Challenges

Like every loan program, the VA loan program has its many benefits and some potential challenges you should be aware of:

1. Occupancy Requirement: We have mentioned this several times; you must live in one of the units, which may not be favorable if you want it solely for investment.
2. Property Condition: Multihome properties require more management and maintenance, so ensure you are ready for the responsibilities of a landlord.
3. Loan Limits: VA loans have country-specific loan limits, which may affect the cost of multifamily homes. Check the loan limits in your area.
4. Rental Income Considerations: Although rental income can help cover your mortgage payments, there are risks, like vacancies or tenants who do not pay on time.

Conclusion

Buying a multifamily home with a VA loan can be a smart financial move for active-duty service members and veterans. You can live in one unit and rent out the others to generate income and build equity. Work with a knowledgeable VA loan mortgage broker to navigate the intricacies of the loan process and find the best solutions.

Also Read: Can You Buy Land with a VA Loan?