If you are an active-duty service member or veteran considering purchasing an investment property, you may ask yourself, “Can VA loans be used for investment properties?” Let’s dive in and answer this question (plus more) so you clearly understand how a VA loan may help you on your real estate investment journey!

What Is a VA Loan and How Does It Work?

A VA loan is a mortgage available through the U.S. Department of Veterans Affairs. Veterans, service members, and surviving spouses can use VA loans to purchase residential homes. These mortgages typically come with little to no down payment, no private mortgage insurance requirements, no prepayment penalties, and competitive interest rates.

Eligible borrowers can use the loan to purchase, build, or repair a home. Borrowers can also use them for refinancing a mortgage. The VA dictates the mortgage terms and qualifying standards and backs the loan. However, the loans are issued by private lenders like Home Mortgage 411 with Fairway Independent Mortgage.

Can VA Loans Be Used for Investment Properties?

Borrowers who want to use a VA loan for an investment property must meet the VA’s occupancy requirements. Under most circumstances, the borrower must move into the home within 60 days of closing.

So, if you must live in the property to get a VA loan, how can you use one to purchase an investment property? Let’s explore a few options below!

  • While the VA-purchased property must be considered your primary residence, you can rent out a portion of your single-family home – many borrowers who want to rent out a room for supplemental income plan ahead and purchase larger homes.
  • The next option is to buy a property with a detached apartment or in-law quarters, which you can rent to tenants for additional income.
  • Eligible borrowers can also use a VA loan to buy a multi-family home. The multi-family home can have up to four units, with the borrower occupying one. If you have an approved co-borrower, you can purchase a home with up to seven units!
  • After 12 months of occupancy, VA borrowers can move away from the property and rent it to tenants. This option is beneficial for service members who are assigned to a new duty station.

Quick note: VA loans can never be used to purchase a commercial property.

Benefits of Investing With a VA Loan

Eligible veterans, service members, and surviving spouses can benefit from using a VA loan to purchase an investment property. Here’s why:

  1. Homes can often be purchased without making a down payment, depending on the borrower’s VA loan entitlement.
  2. VA loans come with lower interest rates than traditional loans.
  3. Borrowers are not required to purchase mortgage insurance, and there are no prepayment penalties.
  4. The VA does not limit how much can be financed.
  5. Borrowers often enjoy lower closing costs and lower credit requirements.

Understanding the Eligibility Requirements For VA Loans

Before applying for a VA loan, borrowers should understand the loan’s eligibility requirements. First, the borrower must be an eligible military service member, veteran, or surviving spouse. They must meet the minimum active-duty service requirements and obtain a Certificate of Eligibility (COE) from the Department of Veterans Affairs.

Depending on their unique circumstances, service members, veterans, and surviving spouses who do not meet the minimum service requirements may still be eligible for a COE. Questions about VA home loan eligibility can be directed to the VA loan center at 877-827-3702.

Lastly, borrowers must use the purchased home as their primary residence, and VA loan borrowers must meet the lender’s requirements for credit and income.

Additional Considerations When Applying for a VA Loan

Here are a few final things to consider if you want to apply for a VA loan to finance your investment property:

  • Ensure you meet the minimum service requirements.
  • Meet other requirements of the VA and your lender. For example, you should aim for at least two years of employment history.
  • Move into your property within 60 days of closing. Remember, VA loan borrowers must live in the purchased property.
  • Create a rental management plan, ensuring you are prepared to be a landlord.

Finding the Right Lender to Finance Your Investment Property With a VA Loan

So, can VA loans be used for investment properties? Yes – If specific considerations are made, and requirements are met.

The first step to financing your investment property with a VA loan is speaking to a VA loan-savvy mortgage professional, who can answer your questions and guide you through each step. Here’s the excellent news: The mortgage professionals at Home Mortgage 411 have you covered!

We understand the importance of using VA loans to finance investment properties, so don’t hesitate to message or call us at (844) 848-3929. We’ve got your back!