Written by Isaac F. Davis 

Many VA-eligible borrowers know that the VA Home Loan Guaranty Program is there to help veterans and active duty military members become homeowners.  But, the eligible uses for VA loans might not be as widely known.  There are a lot of different ways to use the VA home loan benefit. Under the VA guidelines, a VA-guaranteed loan can be used to finance:

1. A single-family home purchase
2. A VA-approved townhouse purchase
3. A VA-approved condominium purchase
4. A new home construction
5. Home improvements, repairs or alterations
6. A fixer upper purchase (in some cases)
7. Energy Efficient Mortgage up to $6,000 for “green” upgrades
8. Cash-out refinance of an existing loan (VA or otherwise)
9. An interest rate reduction refinance (Streamline) of an existing VA loan

One requirement placed on VA borrowers is that they occupy the homes financed with VA-backed mortgages.  All eligible uses of the VA loan guaranty program, with the exception of VA to VA streamlines, require owner occupancy within a reasonable time after closing.  The intent of the VA mortgage program is to help veterans purchase homes to live in.    

Using homes financed with VA loans as income property typically goes against the original intent of the program.  However, a VA borrower is allowed to purchase a multi-unit property and occupy one of the units while renting the others out.  A VA loan may be used to purchase a multi-unit property with up to four units.  If two or more VA-eligible borrowers purchase a multi-unit property together, then one additional unit per borrower is permitted.  For example, two VA-eligible borrowers might own a sixplex together.  Three VA-eligible borrowers might own a seven-unit dwelling together, and so on. 

Regarding the purchase of multi-unit properties, if the VA borrower plans to collect rental income from the multi-unit property financed with the VA loan, then he or she must prove to have experience in property management.  Also, the VA borrower purchasing a multi-unit complex must show enough cash in savings for at least six monthly mortgage payments.  Future rental income rental income projected to be generated from the property cannot be counted as the first six months of cash.

Even though financing a multi-unit home with a VA-backed mortgage is permitted, the majority of VA borrowers end up buying single family homes.  Considering all the acceptable uses for VA mortgages under the VA guidelines, there are many reasons to take advantage of the VA home loan benefits. 

VA-approved lenders may have additional guidelines for VA mortgages.  Additional information about the acceptable uses of VA loans can be obtained by talking with an experienced VA mortgage professional.