VA Multi-Family Mortgage Lending Guidelines On 2 To 4 Units


This BLOG On VA Multi-Family Mortgage Lending Guidelines On 2 To 4 Units Was PUBLISHED On April 10th, 2019

Gustan Cho Associates are experts in VA mortgage guidelines.

  • What many veterans are not aware of is the fact you may use your VA loan to purchase a multi-family home
  • Most veterans understand they may buy a single-family residence, but they did not know they may buy a 2 to 4-unit multi-family property to generate rental income
  • In this blog, we will detail the ins-and-outs of purchasing a multi-family home with a VA loan

We will dive into the property requirements and how to start the process.

VA Multi-Family Mortgage Guidelines

VA requirements for multi-family properties

  • The first and most obvious requirement surrounds occupancy
  • The veteran must occupy one of the units as a primary residence to be eligible to use their VA loan
  • Other than that, VA guidelines are very similar to a single-family residence
  • You must still pass residual income in fall within AUS requirements or qualify for VA manual underwriting
  • Please see our AUS BLOG for more

While there is no true credit score requirement for a VA loan, loan qualifications get easier with higher credit scores.

VA Multi-Family Mortgage Property Requirements

Property requirements – Minimum property requirements (MPRs)

The VA has established minimum property requirements (MPRs) to protect the veterans, lenders, and servicers regarding VA mortgages.

  • All properties must meet these requirements in order to qualify for a VA guaranteed mortgage
  • The VA appraiser will verify requirements such as no chipping or peeling paint and make sure the property has a solid roof.
  • All of these requirements put in place to make sure the veteran is buying a sound home that will last for a long time
  • When purchasing a multi-family home, it is important to remember that all units must meet minimum property requirements
  • There is no way around this
  • The guidelines for multi-family homes change simply because there is more house involved for a multi-family
  • The VA requires there is a separate service shut off for each unit
  • The VA also needs easements or covenants to protect ALL water connections
  • There must be clear access to all utilities for repairs even if that requires going through somebody else’s unit

These are all things to keep in mind when looking at a multi-family house and utilizing your VA loan.

VA Multi-Family Mortgage Guidelines On Potential Income From Rental Units

Rental Income from Other Units

Rental income with a VA multi-family property is incredibly confusing.

  • Per the VA Pamphlet 26-7 Chapter 4, the lender must verify cash reserves totaling at least 6 months mortgage payment (principal, interest, taxes, and insurance)
  • AND must document the veterans prior experience managing rental unit or background involving both property maintenance and rental
  • This guideline is incredibly vague, making the underwriter use their judgment to allow this income
  • You may use the perspective rental income only if you meet the following requirements
  • Evidence showing the veteran has a reasonable likelihood of success as a landlord
  • The veteran has cash reserves totaling at least 6 months mortgage payments
  • Reserves must be veterans own verifiable assets

The amount of rental income to include debt to income purposes is based on 75% of the following:

  • Verified prior rental payments collected from the existing unit
  • The appraiser’s opinion of the property spare monthly rent schedule

Since the guidelines for rental income on the other units of the property are not the most favorable, it is important for the veteran to have other sources of income to obtain this property

Below is a link to the guideline referenced.

Starting VA Multi-Family Mortgage Process

How to start a VA loan for a multi-family property?

The process is the same as purchasing a single-family home, we will need the same documentation from you to start the process. Please see the list below:

  • Last 60 Days Bank Statements – to source money for escrows AND 6 Months PITI Reserves
  • Last 30 Days Pay Stubs
  • Last Two Years W2’S
  • Last Two Years Tax Returns
  • Driver’s License
  • Certificate of Eligibility

From there call us directly on 630-659-7644 and we will email you an application link.

Gustan Cho Associate at Loan Cabin Inc. are experts in VA loans without LENDER OVERLAYS. The majority of VA lenders will put more stringent requirements on obtaining a multi-family home with your VA benefits. It is important to give us a phone call with any questions regarding buying a multi-family home. We can be reached 7 days a week by calling Mike Gracz directly on 630-659-7644 or shooting him an email at  either Mike or one of his highly skilled loan officers will assist you purchasing your new multi-family home.

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