2 to 4 Unit VA Multi-Unit Requirements | VA Home Loan
Are you looking for a 2 to 4 unit property and how to obtain a VA home loan? An eligible Veteran can obtain financing for a VA multi-unit loan as long as they are going to occupy one of the units. VA multi-unit requirements allow Veterans to finance up to 100% loan-to-value and increase their earnings by renting out the other units.
5 Steps to a Fast Pre-approval for a VA Multi-Unit Loan
1st step: if you have not already, obtain a Certificate of Eligibility (COE). This can be done by applying online through the eBenefits Portal or expediting the process by talking to an experienced Loan Originator who has access to the WebLGY System.
2nd step: you should ask a Loan Originator for a list of documentation required for a VA multi-unit loan. They will ask for a list of documentation required for processing and underwriting the VA multi-unit loan.
Some examples for a VA home loan include, but not limited to:
- 30 day pay stubs.
- Last 2 years tax returns and W2s/1099s.
- 401k and investment accounts.
- Copy of photo ID.
- 2 months checking/savings account statements.
- Awards letters (SSI/pension/disability).
- VA Certificate of eligibility.
- Other documentation depending on your case scenario.
3rd step: once enough documentation and information has been gathered, a Loan Originator will run the Automated Underwriting System (AUS) to determine your VA home loan eligibility. The automated underwriting system is a risk based system that analyzes credit, capacity, and collateral. This system will determine if you are qualified for a VA loan – in some cases a VA loan can be manually underwritten.
There is an option to get a rock solid pre-approval by having an underwriter review everything, but the property. This is often referred to a To-Be-Determined (TBD) pre-approval. This often takes pressure off the end of the process because everything has been reviewed, but the property.
4th step: one of the final steps to the pre-approval process is being issued a pre-approval letter for a VA multi-unit home. If you follow these steps before searching for a VA multi-unit home, financing will go a lot smoother.
Often, the pre-approval process or guidelines vary by lender, which some mortgage companies have an internal guidelines on top of VA guidelines called an overlay. An example of a VA overlay would be requiring a minimum credit score.
5th step: if you do not already have a realtor, the Loan Originator can help you get in contact with one to start searching for a home.
Cash reserves are not always required, but in some cases they are. This will be determined during the pre-approval process when a Loan Originator runs the automated underwriting system. Reserve requirements can depend on many factors, but not limited to using rental income of the 2-4 unit property to qualify, credit, capacity, and collateral.
Using Rental Income to Qualify
Prospective income can be considered effective income with a VA multi-unit loan. When using the subject properties prospective rental income, VA multi-unit guidelines state:
- The applicant must have evidence that indicates the likeliness of success being a landlord.
- Having at least 6 months mortgage payments in reserves.
The rental income can be considered effective income based on the lesser of 75 percent of the verified prior rent collected or the appraiser’s opinion of fair market rent. VA multi-unit mortgage guidelines are similar to FHA 2 to 4 unit guidelines.
Solid Pre-Approval for a VA Multi-Unit Mortgage
Some lenders often write pre-approvals based on verbal information, which can cause stress during the mortgage process and result in a last minute denial. Once a veteran is properly pre-approved, it is important to remember that just because they qualify, this does not mean all properties will. Veterans should make sure that they work with a realtor who understands the basics of VA approved multi-unit homes.