People who want to secure their future would dive into the opportunity of making an investment in various forms. The good news is that creating a stream of investments chooses no age, and it’s absolutely essential for veterans to take this route of having a worry-free future. Today, we will look into the possibility of using a VA loan to fund an investment.
What is a VA Loan?
This type of loan is designed by the U.S Department of Veterans Affairs for people who have gone into military service to have a more stable financial status. Despite its structure, the program is available not only to veterans but also to military members who are currently serving in the U.S. military. In addition, reservists and surviving spouses of former military members (provided that they do not remarry) may also take out this loan.
VA loans may be used in purchasing single-family homes, multi-unit properties, or condominiums. May also be taken out for house construction.
The main purpose of the VA home loan program is to extend home financing to eligible veterans wherein they are no longer required to shoulder a hefty down payment when buying a property. A veteran may loan up to 103.3% of the sale price of the property or a reasonable value of the home, whichever is less.
Although the VA loan may seem to be a type of loan that the veterans and current military members can enjoy, some factors need to be considered prior to being qualified for a VA loan:
VA Loan for Investments
The law of extending help to veterans and ongoing military members through the VA loan may introduce the idea of investing on property for the sake of profit. However, the Department of Veterans Affairs does not allow the use of VA loan to purchase a multi-unit property for rental purposes.
In other words, the homebuyer has to present proof that they are planning to reside in the property. Suffice it to say that the VA loan program is intended for purchasing primary residences. This means that the borrower must live in the purchased property financed via the VA loan all-year-round and is not intended for rental homes.
Additionally, the VA has another program called the Interest Rate Reduction Refinance Loan (IRRRL),which allows for refinancing of a property that they have previously purchased with a VA loan in order to get a lower interest rate. The difference of this program from the previous one is that it does not require the borrower to live on-site, but would just need to guarantee that the property has been previously occupied.
If a borrower purchased a four-unit home using a VA loan, for example, the person should determine if he/she is eligible for an IRRRL a year after. If it is possible, apply for an IRRRL on the first property and continue living in the said property. If it has been approved, the borrower may search for a second property (it can be an existing home or another multi-family property or construct a new home).
After the borrower has purchased the new property, he/she should assume occupancy right away. If a multi-family property has been purchased, it is possible to rent out the remaining unoccupied units. Your property can be rented out, thus making it a guaranteed investment property.
Using a VA loan to purchase a multi-family property can help set up a solid cash flow. Just make sure that you abide by the rules set forth by the VA to ensure that the property remains under your name and will not be foreclosed or taken from you due to the inability to pay the mortgage.