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Financing a Duplex with a VA Loan

By: Grant Moon 08/05/13 07:24 am

Financing a Duplex with a VA Loan

VA loans can be used to purchase almost any type of residential property. As long as the home will be your primary residence, a VA loan can finance the purchase of a condo, a single family home, town home or rural property. What you can also finance is the purchase of a two, three or four unit property. And for some, that’s an ideal opportunity. Why?

VA loan guidelines accept multi-unit properties up to four units as long as you do in fact occupy one of the units. You still get the best interest rates as those offered for a single family home or a condominium but you also get the benefit of having additional cash flow each month from your renter. This is a major draw.

For example, say you find a duplex for sale at $200,000. You do a little research and see that the units are currently rented and the tenants are paying $1,500 each month for rent. Now compare that with a typical mortgage payment with those numbers. Using a 30 year loan at 4.00 percent, property taxes of $150 per month and homeowner’s insurance at $75, your total monthly payment is $1,175.

It doesn’t take a whole lot of time to figure out that buying that duplex doesn’t cost you anything but in fact you’ll make money every month. What a deal, right? It is for a lot of people but there are a couple of things you need to be on the lookout for.

First, unless you’ve been a landlord before, you can’t count the rent from the duplex as part of your monthly income to help you qualify. The VA lender will approve your loan based upon what you currently earn. And second, there needs to be other duplexes in the area similar to yours. If there’s not, a lender may not be able to establish a value with an appraisal.

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