What do you think of va loan . . . no downpayment

Question

In 3 years i will be out of the army and i will investing in multifamily homes. I willbe eligible for no downpayment loan, however at the same time i will  have 30,0000 that i could use for a downpayment . I feel that the 30,000 could be better spent on renovations and repairs to increase the buildings value.
With the  va  loan i  must have 1 veteran tenant (myself ) and 4 units max.

What do you think ? Va loan to be used for this investment or would you pick a conventional loan?

Sorry for the grammar ! My tablet autospell is ridiculous

John Evan Miller · Answer

To get this type of loan, you will need to go through a private lender and the VA guarantees the loan with that lender. In other words, if something goes wrong and you cannot make the payments, the lending institution would go to the VA to cover their losses. The VA is basically a guarantor, much like insurance, to the lender. The VA doesn't get involved in the loan approval process as that is handled entirely by the private lender.

There is no down payment required as long as the price doesn't go above the appraised value. You also have to qualify for the loan using your credit and income. You will need to purchase any private mortgage insurance, and the VA limits how much the lender can charge you for closing costs. There is no prepayment penalty for paying the loan off early.

In order to use this loan, you don't have to be a first-time home buyer, and you can reuse the benefit if you ever sell the property. VA loans are also one of the last remaining assumable loans as long as the person qualifies.

Mark H. · Answer

Adam,

Thank you for your service to our country!

Va loans are awesome, but there are a few caveats - the property has to be in really decent condition - not necessarily sparkling clean, but 100% "habitable" as is.  A missing light fixture or a torn-up carpet can sink a va loan - so if there are issues, make sure you or the seller are willing & able to fix those issues before closing.

The fees can be high- so run the numbers a couple of times before jumping in.

Be honest with yourself about expenses- attach a value to things you're handling yourself, so that if & when you don't have time to do those things, there's still enough profit in the kitty to hire them done.

No downpayment *doesnt* mean $0 out of pocket at closing.  The seller can pay most expenses, but you may need to "overbid" to get them to do that.   Make sure the numbers still work after that..