VA Loans: How Many Units Can The Property Have?
VA guaranteed home loans have certain restrictions and requirements when it comes to the nature of the property for sale. For example, VA loans require that the property be primarily residential in nature, and no more than 25% of the total floor space for the building can be used for non-residential purposes.
There are also requirements on the number of units a property can have to qualify for a VA home loan. It’s easy to assume that only single-unit buildings or homes qualify for VA mortgages, but this is not true. A borrower can apply for a VA loan for multiple units, provided the building meets VA standards.
What do the rules say about multi-unit properties? Single-family homes can have as many as four units, but the rules change when multiple veterans want to purchase property together. Chapter seven of the VA Lender’s Handbook states the following:
“If a property is to be owned by two or more eligible veterans, it may consist of four family units and one business unit, plus one additional unit for each veteran participating in the ownership. Thus, two veterans may purchase or construct residential property consisting of up to six family units (the basic four units plus one unit for each of the two veterans), and one business unit.”
The VA rules add, “If the property contains more than four family units plus one family unit for each veteran participating in the ownership and/or more than one business unit, the loan is not eligible for guaranty.”
In such cases, each veteran must credit-qualify on the loan, and the credit shortcomings of one borrower cannot be offset by the credit strengths of the other applicant(s).
When it comes to individual VA borrowers purchasing up to four-unit properties, the VA rules state the borrower must use that property as his or her primary residence, but is free to rent out the other units.
For purposes of qualifying income, income from future rentals of those units cannot be counted–only current income and certain kinds of documented future income (retirement, military benefits or other specific income sources as documented in VA loan rules) may be considered by the lender on a case-by-case basis.
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