VA Loans, Tenants and Business Use of Your New Phone

It’s easy to forget that VA home loans don’t have to be for a single-unit family home. VA loan rules allow borrowers to apply for loans for properties that have up to four units. The borrower can live in one unit and rent out the other unused parts of the property. VA loans also permit, within certain restrictions, business use of the property as long as the non-residential use doesn’t exceed a certain percentage of the total floor area.

If you’re looking for a VA loan for a mixed-use property, there are some general rules to keep in mind. The overall intent for the VA home loan program is that VA mortgages are for the borrower to purchase a residence for personal occupancy, not as an investment. A borrower can buy a home with up to four units and lease out the unused units as long as he/she lives in one of them. Being an absentee landlord is not allowed.

Having tenants as an on-site landlord is not the issue but asking the lender to count potential income from those tennants to qualify for the VA mortgage loan may be--the lender cannot automatically count projeted rental income as part of the VA loan applicant’s income.

Borrowers who apply for joint loans with other veterans may be eligible to purchase larger properties--VA loan rules allow additional units including business units depending on how many other veterans are signing the mortgage.

With all new purchase VA loans, occupancy rules apply--all veteran borrowers obligated on the VA loan are required to occupy the property as their primary residence--and even with more permitted business units, the residence must be primarily that, a home for the purchasers.

The business and non-residential use of a home purchased with a VA mortgage must be kept at 25% or less (that’s total area). “Non-residential use” would include storage areas as well as office space and other business type dedicated areas.

Whatever business use of the home is desired, it must remain “subordinate” to the residential nature of the property as required by VA loan rules. Borrowers aren’t permitted to redesign the property to be less of a residence and more of a business, based on the interpretation of the rules on maintaining the residential qualities of the structure. Talk to your loan officer about the type of property you want to buy and how it will be used to get more clarification on VA loan rules for your intended use of the home.


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