VA loans are one of the most appealing and powerful mortgage options on the market. Why? Because qualifying military service members, veterans, and spouses are not required to carry mortgage insurance, make a down payment, or have a specific credit score.
And the advantages do not end there. While VA loan programs were designed for buyers purchasing a primary residence, a VA loan can also be used to buy an investment property.
We’ll tell you everything you need to know about VA loans for investment properties, but first, what is a VA Loan?
What is a VA Loan?
A VA loan is a government-backed mortgage for active and veteran military service members. To be eligible for a VA loan, you must serve 90 consecutive days of active duty during wartime, 181 days during peace, or six years in the National Guard or Reserves and be able to show an official certificate of eligibility.
While the federal government backs VA loans, the application process is very similar to those used by conventional mortgage lenders.
VA loans are some of the last zero-percent-down home loans on the market and have some of the lowest average fixed interest rates. They’re also easier to qualify for because they have more forgiving credit and underwriting guidelines.
Can I Use a VA Loan for an Investment Property?
The short answer is yes—as long as you comply with these two rules:
Rule 1: The Property Must Be Your Primary Residence
To be considered a “primary residence,” you must occupy your home for the majority of the year and be able to prove you’ve done so. Your primary residence must be the legal address listed on your license, tax forms, and voter registration card. It must also be registered with the United States Postal Service (USPS).
Rule 2: The Property Must Be a One to Four-Unit Property
You can use a VA loan for an investment property if you purchase a single-family home, duplex, triplex, or fourplex property. In other words, you cannot use a VA loan to finance a property that exceeds four separate units.
What Else Should I Know About VA Loans and Investment Properties?
Here are a few additional facts about using a VA loan to finance an investment property.
→ VA Loans and Native Americans: Veterans that are either Native American or married to a Native American may be eligible for a Native American Direct Loan (NADL), which may help them secure a loan to buy, build, or improve a home on federal trust land.
→ VA Loans are “Assumable” Mortgages: When we say “assumable,” we mean that someone can buy a home by taking over the seller’s VA loan. This may allow the buyer to benefit from financing with a lower interest rate.
→ You Can Reuse Your Loan Benefit: In other words, VA loans are available as long as the qualifying service member maintains eligibility and qualifies with a lender. This means you can buy a second home without experiencing a use limit.
→ Keep Your Home and Rent It Out: Military service members are often transferred to a new domestic base or sent abroad with little warning. A VA loan allows service members to keep their homes or use them as rental properties to generate long-term income that is recurring and predictable.
Contact the Experts
Don’t hesitate to contact our mortgage advisors for more information on using a VA loan to purchase an investment property. You can also fill out our online form to request a free personalized rate quote.