Have anyone used a VA loan to buy a multi family?

9 Replies

I am hearing several different things about buying a second home with a VA home loan. Our first home we did with an FHA. We understand that with the VA home loan the property you purchase must be a primary residence. I've also heard from a VA loan mortgage company that this isn't necessarily true. Has anyone been creative using the VA home loan to buy a property that isn't their first? Thanks!

Be wary of folks telling you how to "skirt" the VA rules. Not sure what they are telling you, but I am pretty sure it has to be a primary residence to use the VA. That being said, you could, for example, but a duplex and live in one side. If this is a second home purchase, you need to check your entitlement you have remaining, and it might still be an option. Other than that, I think perhaps the only other thing that I have heard of is applying for a one-time restoration of benefits.

If you haven't used your VA loan yet, then the later advice might not be relevant, so the house hack option might be fair game.

The VA Loan requires the veteran using their benefit to "certify that he or she intends to personally occupy the property as his or her home." You can read more about this topic in VA Pamphlet 26-7, Lender's Handbook (Ch3. para. 5). https://www.benefits.va.gov/wa...

I'm not an attorney, but the risk of misrepresenting your intent to occupy may open you up to review for committing mortgage fraud. While there may be no one looking specifically into your occupancy status following the loan approval and purchase, there are still certain activities that could initiate an audit on your VA Loan acquired property. For example, some mortgage brokers will initiate several loans and then sell them as a package of loans to another financial institution. It is common for lenders purchasing these types of loan packages to conduct an audit.

I personally would stay away from any "creative" options when using the VA loan for investment properties.

That being said, @Brad Fisher nailed it when he mentioned the potential for purchasing a duplex with the VA loan. In fact, the VA loan can be used for one, two, three, or even four-unit properties. I always begin evaluations with the tax records when determining if these small multifamily properties are lendable through the VA loan. Look for a property class of "residential." Also, you can use the VA loan entitlement more than once. These entitlements are broken down into two tiers, primary (basic) entitlement and your secondary entitlement. Check out this video from Low VA Rates on how to calculate the remaining VA loan entitlements.

How to calculate your remaining entitlement in 2020

Best of Luck!

So long as you plan on living in it, it doesn't matter if it's your "first" purchase or not. My first purchase was a 4-unit with a conventional loan. Then I used VA to buy a 3-unit that I occupied as my primary. A VA loan is not exclusively a first time home buyer loan.

When we say "primary," we mean usually mean the property you actually live in most of the year. Typically, "first" home means it is the first time you are purchasing a property (usually to use as a primary, certain programs have more nuanced definitions of what constitutes a first time home buyer). Second home usually means a property you live in less than half the year, but is not exclusively rented out. As others have mentioned, if the intent is to use the VA loan-financed property exclusively as a rental or as a vacation/second home, the lender should not be approving the loan. But, if you intend to hold on to your current property as a rental and move into the one you're buying with a VA loan (regardless of how many units) then you are fine.

@Christopher Eure

Everyone nailed the question, but here are my two cents. I purchased my first two homes with VA loans and was able to get both of them with the same eligibility. Once you use your eligibility, you have to sell the property or pay off the loan in full, from my understanding. Your lender should be able to confirm. 

If I were about to do it all over again, I would find residential multifamily and house hack the home using the VA loan. I love the VA loan because you can hold the property for up to 15 years without worrying about capital gains taxes. Must easy to plan for exits if needed. 

I'm pretty sure you have to live on the property for up to one year. The only way around that rule I know of is military orders that come down while you live on the property. 


I hope that helped. 

Sincerely, 

Josh

I have not but I know many who have. IF I had a time machine, you can bet I would go back and a start my REI journey as soon as I moved off base with a 4 unit purchase using my VA loan. The power behind this strategy can not be overstated.

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