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How VA Lenders Treat Rental Income

Veterans who own rental properties or hope to purchase one might be able to use rental income toward qualifying for a VA loan.

Guidelines on using rental income will vary by lender and other considerations. But you’ll typically need a proven track record as a landlord in order to count rental income from any current rental properties as effective income toward a new mortgage. The same is often true if you’re trying to purchase a multiunit property and count income from it.

Here's a closer look at using rental income with a VA loan and whether you might be able to use future rental income to help with loan approval.

Counting Income From Existing Rental Properties

Lenders commonly want to see a two-year history of rental income on tax returns in order to count this as effective income toward mortgage qualification. Some lenders might need lease agreements and other documentation, while others won’t.

Veterans wanting to use income from rental properties might also need a certain amount of cash reserves on hand.

For Veterans with multiple rental properties, lenders will typically treat each one individually. Having a long track record as a landlord for one property doesn’t mean you can automatically count income from a property you’ve owned for less than two years, for example.

You’ll also need a track record as a landlord if you’re hoping to purchase a multiunit property and count income from current or brand new tenants.

Counting Rental Income From the New Property

The VA loan allows qualified Veterans to purchase a multiunit property (up to a four-plex), provided they occupy one of the units as their primary residence. Generally, it’s possible for the buyer to count rental income from the home they’re planning to buy.

Lenders will often need signed leases for the units the Veteran buyer won’t be occupying. They might also require cash reserves and have caps for how much of the rents they’ll count as effective income.

Policies and guidelines can vary by lender.

How Rental Income Can Offset Debts

VA buyers who can’t count rental income as effective income might still be able to use it to help their loan approval chances.

This is perhaps most common with Veterans who buy a house and then later rent it out. When the time comes to apply for a new loan, the monthly mortgage payment on the rental property gets counted toward the Veteran’s debt-to-income ratio.

Veterans receiving rental income might be able to offset, or basically eliminate, that monthly mortgage payment from their debt and income analysis.

Guidelines on this can vary by lender and can include things like cash reserve requirements, lease agreement conditions and more. Veterans may need to have rented out their old home within 12 months of vacating it as their primary residence in order for this to be an option.

Help with Rental Income Questions

Lenders evaluate rental income situations on a case-by-case basis. There are a lot of potential considerations, and guidelines will vary based on the lender and a range of other factors.

Every VA buyer’s situation is different. Talk with a VA lender to get a handle on what might be possible for your specific scenario.