VA Loan for 2-4 Unit Properties (Duplex, Triplex, or Fourplex )
The federal government provides specialized loan facilities for the veterans, looking to buy their 2-4 unit homes without calling it an investment property. This loan facility is exclusively available for the military veterans only. The reason behind calling it an investment property without actually classifying the loan facility for investment is that, as a home buyer, you also get an opportunity to earn from this investment in the form of earned rental income on separate or detached units.
VA loans are applicable for all kinds of residential properties of 1-4 units. This would include- a 2 unit (duplex), 3 unit (triplex), or 4 unit (fourplex) home, as long as the borrower is willing to occupy one of the units, soon after the purchase. By this, the unit technically classifies under owner occupied category which makes it a perfect suit for being undertaken by the VA home loans and not being directly classified as an investment property.
VA Loan Limits for Multi-Family Homes
The loan limits for VA loans are like the Fannie Mae conforming loan limits as set by the Federal Housing Finance Agency (FHFA). Given below is a represented standard limit, applicable in most of the counties throughout the country. There are 235 counties that have higher loan limits, so make sure which county offers the highest loan amount.
- 1-units: $647,200
- 2-units: $828,700
- 3-units: $1,001,650
- 4-units: $1,244,850
Do you wish to view the conforming loan limits for your county? Take a look at the 2022 conforming loan limits for any location using this conforming loan limits lookup tool.
VA Loan Requirements for Multi-Unit Properties
The requirements and eligibility criteria for 2-4 unit properties is almost similar to the other single-family residence (1 unit home), which includes the following:
- Certificate of Eligibility– A COE is available for any veteran or active duty military veteran who has served the country for either 180 consecutive days during peacetime, or 90 days during war or, any reservists with 6 years or more of service.
- Credit – Even though, there is some degree of flexibility in case of credit scores, but VA loans essentially need a credit score of 620 or higher.
- Income– The income requirements for VA loans are more related to the borrower’s debt-to-income ratio (DTI ratio) than the actual income of the borrower. This mainly concerns that the veteran must be able to validate their ability to pay their mortgage payments, regularly. This includes- they should not have excessive debt that might impede ones capability to pay their monthly payments on time. Most VA lenders want to see a 41% DTI or less (once the new mortgage payment is factored in).
These are some of the basic requirements to be eligible for the VA loan for a 2-4 unit property. Do you wish to validate your qualification for a VA loan for a multi-unit property? We can surely help you match and find the best rate offering mortgage lender offering VA loans in your location.
Advantages of VA Loans for Multi-Unit Properties
VA loans offer excellent terms for veterans willing to make an indirect investment in a residential property. It is said to be one of the best options for a multi-unit home buying that can further be potentially be used as an (unofficial) investment property to earn rental income.
Do you wish to know its benefits?
- 100% Financing– Borrowers qualifying for the VA loans, can purchase a 2-4 unit property without having to pay any down payment at all.
- No PMI– VA loans do not require private mortgage insurance to be paid regardless of the LTV.
- Low Rates– VA loans often have significantly lower rates as compared to the FHA and conventional loans.
How does a VA multifamily home loan match up against a FHA or conventional multifamily mortgage?
If we compare the best possible loan terms (from any lender) for an FHA loan or conventional mortgage, it is clearly evident that VA loan terms are way better. An FHA loan requires at least a 3.5% down payment (which is still pretty good), along with essentially required both- upfront and monthly mortgage insurance payments. A conventional mortgage would require 15% down on a duplex and 25% down on a triplex or fourplex, and for the duplex the borrower needs to pay PMI (on any loan over 80% LTV). So, clearly, if a borrower qualifies for a VA loan, this one is surely the best loan facility to avail.
Frequently Asked Questions:
Below are some of the most frequently asked questions and answers about VA loans for 2-4 unit properties:
Can I buy a property that has more than 4 units?
VA loans are strictly applicable for 1-4 units. Any property that has 5 or more units is considered as commercial and would require a different type of loan and mortgage lender.
Are VA multifamily loans available for new construction?
Yes, VA loans can be used for the new construction of 1-4 unit homes.
Can rental income count as qualifying income to help DTI ratios?
Yes, the rental income from tenants in the other unit or units can be counted as an income, potentially helping the borrowers DTI ratios which are part of the loan qualification considerations.
Can a first time home buyer apply for a multi-family home loan?
Yes, first time home buyers are treated in similar way as they want to buy a 1 unit, 2 unit, 3 unit, or 4 unit home. The only difference is that a borrower can qualify for a higher loan limit (as already mentioned on this page) for multi-unit properties.
I have already purchased a home in the past using a VA loan will disqualify me?
VA loans are reusable and you will not be disqualified for it. As a borrower, you can be a second time home buyer, or even be an owner of other homes even in the past. However, you must use that home as your primary residence though as VA loans are not considered as an actual investment property.
I want to buy a multi-family property and use part of it for my business, what should I know?
VA loans allow up to 25% of the floor space to be used for a business, however, this cannot be exceeded, else the borrower will get disqualified.
Can I have a cosigner / co-borrower apply for a VA loan with me?
Yes, you can have a cosigner, but depending on your relation to them, it will be handled differently. It is best if it is a spouse, or another military member or veteran. If it is a non-spouse, non-military co-borrower, then there are fair chances of the loan process getting complicated, but is certainly feasible to get an approval.