Financing with a VA loan covers more property types than homes and condominiums. Qualified veterans and service members can use a VA loan to purchase a property that has up to four one-family units.
The occupancy requirements for these types of properties are the same as with single-family units, and a borrower must certify their intent to live in one of the units as the primary residence.
Minimum property requirements (MPRs) for multi-unit VA loan purchases are different because the property has more living spaces to examine. The VA MPRs change for buildings with more than one unit simply because there’s more housing.
Each individual unit on the property must be private and accessible. There are exceptions to this rule, mostly related to setting up utilities and ensuring access to them for maintenance and repairs.
Although the VA lender’s guide states that every living unit must have independent utility services, shared water, sewer, gas and electricity lines, and water connections are permitted, so long as:
- There are separate service shut-offs for each unit;
- Easements or covenants protect water connections, and the VA approves of a maintenance agreement; and
- Legal provisions ensure and protect access to utilities for repairs, even if passing through other living spaces.
Some shared spaces on the property are permitted. The building can have a common facility for laundry or storage. Heating equipment for all units can be co-located in a single space. But when it comes to the individual privacy of each unit, VA rules require separate and self-contained spaces for each living space.
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VA Loan Income Qualifications and Multi-unit Properties
Purchasing a multi-unit property with a VA loan may sound appealing to borrowers who see it as a means to increasing their income by renting the other units. However, lenders won’t blindly count potential income from tenants’ rent when calculating DTI and other qualifying and affordability ratios.
Lenders will often have standards for borrowers who want to include income from rent when applying for their VA loan. You might need a documented history as a landlord. Purchasing multi-unit properties can also come with cash reserve requirements from lenders. Even trying to use the incoming rental income to offset other costs and fees might not be doable.
Guidelines and requirements can and will differ. Talk with individual lenders about your goals and what they require in order for you to pursue a multi-unit purchase using your VA loan.