Is it possible to use a VA mortgage to purchase a duplex? What about using a VA mortgage to buy a multifamily home?
The answer in both cases is “yes” but certain conditions apply. The most important thing to remember when considering your VA loan options to buy multi-unit properties (including duplexes) is that your participating VA lender will require certain compliance with VA mortgage loan rules (and lender requirements), which we’ll cover below.
Veterans Can Buy a Home with $0 Down
{Sponsored} The VA Home Loan offers $0 Down with no PMI. Find out if you’re eligible for this powerful home buying benefit. Prequalify today!
General VA Loan Requirements
No property purchased by a VA mortgage can be located in certain natural disaster hazard areas such as Lava Flow Hazard Zones (zones one and two) and houses in Coastal Barrier Resources System zones. No property that is solely commercial and not residential also do not qualify for VA mortgages.
General VA loan requirements for all properties secured by a VA mortgage include the requirement that the home purchased with a VA loan be “primarily residential” in nature. The non-residential nature of a property must be “subordinate” to the use of the property as a home.
Some are confused by this rule, thinking that the VA won’t allow a mixed-use property to be purchased, or that the VA won’t allow you to buy a home that has some non-residential use. This is not true. The VA allows home loans for owner-occupied primary residences with between one and four living units.
That includes duplexes and multi-family homes. VA loan rules allows these properties to be purchased as long as the borrower certifies that the home will be used as the primary residence. You don’t have to reside in the home every single day of the calendar year, but you are required to use the home as your main address within 60 days of loan closing.
General Lender Requirements
Some borrowers do not understand that lender guidelines apply in addition to VA loan program rules. And lender requirements are VERY important.
You may find that some participating VA lenders won’t offer certain kinds of loans that are part of the VA loan program–borrowers interested in mobile home loans may find some financial institutions simply choose not to offer such loans.
Demand, staffing issues, state law, and other concerns may play a role in whether the lender is willing to offer a certain kind of VA mortgage. Some lenders will allow you to build a home instead of buying an existing mortgage, but may restrict such construction loans to a single-unit home. Others may or may not.
You’ll need to ask the lender you want to use what their own specific VA loan policies are and how they may affect your transaction.
Buying A Duplex With A VA Mortgage
Borrowers interested in buying a condo unit often learn for the first time that VA condo loans require the condominium project to be on or added to a VA approved list.
However, borrowers interested in buying a duplex do NOT have this requirement–the borrower is purchasing property that does not involve a group ownership arrangement, and duplexes don’t have a “VA-approved” list for this reason. Owning a duplex does not make you subject to the same kinds of covenants and group responsibility for common areas, property taxes, and other issues.
The basic issues you encounter when trying to buy any eligible property with a VA mortgage are applicable for duplexes. You must agree to be an owner/occupier and you are permitted to rent out the unused living unit if you so choose, but you cannot be an absentee landlord. You must live on the property you buy with the VA loan.
Duplexes, like all other property you can buy with your VA loan entitlement, must be taxable as real estate, be affixed to a permanent foundation that meets VA appraisal rules, and must not be used as a commercial enterprise such as a bed-and-breakfast, Airbnb, etc.
A duplex must meet specific VA appraisal requirements including one that dictates that each unit has either independent utility services for each living unit OR have a shared water, sewer, gas, and/or electricity connection provided there are individual shut-offs for each utility service in each unit.
In all cases, VA loan rules are only one set of requirements that must be followed; state or local building code, health regulations, and other guidelines may apply above and beyond VA home loan rules.
Buying A Multifamily Home With A VA Mortgage
The rules for purchasing a multi-family home with a VA mortgage are quite similar to the rules for buying a duplex–occupancy is required, you can’t buy a commercial enterprise or non-residential real estate with a VA mortgage, and the multifamily home you buy must meet VA loan requirements for building code compliance, approved foundation, location outside of certain hazard areas, etc.
A multi-family home is not required to be on an “approved” list in order to qualify for a VA mortgage. Multi-family properties still have only a single owner or multiple owners listed on the same mortgage. But even with more than one borrower, these properties are not considered planned unit developments, condo projects, or other group-ownership type properties that require a condo owner’s agreement or other shared-responsibility arrangements.
In both cases, but more often in multi-family home purchases, the borrower may want to know whether they can use projected or anticipated rental income to qualify for loan approval.
This may or may not be allowed depending on circumstances including whether the lender is willing to consider such income, the experience level of the borrower where being a landlord is concerned, state law, and other issues.
A multi-family home purchase under the VA loan program can be as small as two units or as large as four. However, more units may be possible in cases where a borrower is applying for a home loan with other applicants–ask your participating lender about the circumstances where additional living units may be approved.
Often a “business unit” is permitted and you may be permitted to add multiple business units with multiple borrowers.
Nuances Of The VA Loan Program For Multi-Unit Properties
As mentioned above, duplexes and multi-family homes are NOT condos, do NOT require addition to a VA approved list, and even if you rent the unused units out to other people they are not considered investment properties.
VA loans for duplexes and multi-family homes require minimum safety compliance, compliance with local health code rules (especially for properties with wells or shared wells, septic tanks, etc.) and must have a remaining economic life that includes the entire loan term whether that is 15 or 30 years.
If a duplex or multi-family home is located in a neighborhood that requires membership in a homeowner’s association (HOA), VA borrowers cannot be obligated to any legally binding agreements to restrict the owner’s ability to freely sell, transfer, or dispose of the home. VA borrowers cannot be subjected to a “right of first refusal” clause and in general the seller or the HOA must agree to waive that requirement in writing or have it stricken from the agreement you sign to join the HOA.
Joe Wallace is a 13-year veteran of the United States Air Force and a former reporter for Air Force Television News
