VA Loans and Multi-Family Units
Some vets applying for a VA home loan aren’t looking for a traditional suburban home, and the Department of Veterans Affairs has plenty of options for those looking at condos, duplexes and other properties. A VA loan applicant who wants to buy a multi-family home or co-borrow on a multi-family unit for the first time probably has lots of questions about what’s considered acceptable and what is not allowed.
Many of these questions can be answered using one guiding principle; VA occupancy rules. When purchasing any kind of property with a VA mortgage, the VA requires the borrower to certify that the property will be used as the borrower’s primary residence. That means that if a borrower wants to purchase a multi-family unit, they must use one of those units as their home regardless of how the rest of the property is to be occupied.
Occupancy is the key for the VA loan applicant–VA loans are intended for use with property to be used by the borrower rather than as an investment. Renting one of the multi-family units does not violate the spirit of the VA mortgage loan, but renting all the units does. The same applies to borrowers who purchase a multi-unit property that has retail applications. If more than 25% of the floor space of the property has commercial use, it’s in violation of the VA guidelines for primary residences. Any commercial use of the home or property has to be “subordinate” to residential nature of the property.
There are plenty of other questions about multi-family units–a single borrower can purchase a four-plex unit without a co-borrower, for example. As mentioned above, this is permitted as long as occupancy requirements are met. The borrower is permitted to rent the other units or assume the responsibilities for existing renters when ownership is transferred.
It is important to know the status of any existing rental units when considering such a purchase because of the occupancy issues-if a four-plex is sold with four existing renters, the VA borrower must make arrangements to move into one of the units after the deal has closed, within what the VA considers a reasonable amount of time (60 days in many cases) to fulfill the letter of the occupancy rule.
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