A low-cost home loan backed by the U.S. Department of Veterans Affairs (VA) — also called a VA home loan — is more than just a way for Veterans to afford homes. VA loans allow Veterans, active-duty personnel, and surviving spouses to buy homes with no money down and low mortgage rates.
VA loans can also be used to buy rental property. The main requirement is that you must intend to live in the property as your primary residence.
Step 1: Qualify For a VA Loan
The VA loan program exists to support Veterans, service members, and eligible surviving spouses in achieving homeownership by offering favorable loan terms — a way to recognize and reward their service to the country.
The VA sets the eligibility requirements for VA loans, while individual lenders set the financial standards.
VA Loan Eligibility Requirements
To qualify for a VA loan, individuals must meet at least one of the following criteria:
| Who Is Eligible for a VA Loan? | |
| Veterans | Who served on active duty for 90 consecutive days during wartime or 181 days during peacetime and were discharged under conditions other than dishonorable. |
| Active Duty Service Members | Who served at least 90 consecutive days during wartime or 181 days during peacetime. |
| Reservists and National Guard Members | With at least 6 years of service or 90 days (with at least 30 days being consecutive) under Title 32 orders. |
| Surviving Spouses | Whose active duty spouse died in the line of duty, is missing in action, is a prisoner of war, or died as a result of a service-related disability. |
Once you’ve confirmed eligibility, you’ll need to obtain a Certificate of Eligibility (COE), which confirms your VA loan eligibility to lenders. You can get your COE through a lender during the application process, online via the VA’s eBenefits portal, or by mailing VA Form 26-1880 to the VA Eligibility Center.
VA Loan Financial Requirements
VA loans are known for their 0% down payment option and more lenient qualifications than conventional loans. The no-down-payment benefit is possible in part because the VA insures 25% of the loan amount to lenders in the event of borrower default.
The VA itself doesn’t set financial requirements or make loans directly — you’ll need to qualify through an individual lender. While there are no official VA-set financial minimums, lenders generally use the following benchmarks:
- Income – You need a stable income (typically two years of consistent employment history) sufficient to cover your monthly expenses and the proposed mortgage payment.
- Credit Score – The VA doesn’t set a minimum credit score, but most lenders require at least 620. Keep in mind that individual lenders may set their own minimums above this threshold.
- Debt-to-Income (DTI) Ratio – Lenders evaluate your DTI ratio, which compares your monthly debt payments to your gross monthly income. Veterans with a DTI above 41% may need to meet additional guidelines, though requirements can vary by lender.
Once you’ve verified your VA loan eligibility, you can begin looking at properties to use as an investment.
Using Rental Income to Qualify for a VA Loan
If you already own investment properties, you may be able to use rental income when qualifying for a VA loan.
Rules around rental income vary by lender. It’s common for lenders to allow up to 75% of rental income to count toward a new mortgage if you have an established rental history. Some lenders may require several years of rental history documented on your tax returns before counting it as qualifying income.
If you’re unable or unwilling to rent out a current property, it may be difficult to find lenders who will count potential future rental income when determining how much house you can afford.
Step 2: Find an Investment Property
VA loans have occupancy rules because they are intended for use as primary residences. Beyond the main requirement that the service member must intend to live on the property, there are a few additional conditions when using a VA loan to buy rental property:
- You typically must occupy the property within 60 days of closing
- You can use a VA loan to purchase a single-unit home, duplex, triplex, or fourplex
- You may need to live in the home for a set period to satisfy lender requirements
The property itself must also satisfy certain VA requirements.
VA Loan Rental Property Requirements
Any property purchased with a VA loan must undergo a VA Appraisal. This involves a qualified appraiser assessing both the property’s market value and its basic safety conditions.
The VA sets Minimum Property Requirements (MPRs) that appraisers use to ensure the home meets safety, soundness, and habitability standards. Key requirements include:
- Safe Living Conditions: The property must provide safe and sanitary living conditions.
- Structural Integrity: The home must be structurally sound and free from significant defects.
- Mechanical Systems: Heating, plumbing, and electrical systems must be in good working order.
- Roof Condition: The roof must be in good condition with no active leaks.
- Safe Water Supply: The property must have a safe and adequate water supply.
- Sanitary Facilities: The property must have functioning sanitary facilities, including a bathroom.
- Safe Electrical Systems: Electrical systems must be safe and up to code.
- Accessibility: The property must be accessible from a public or private street.
- Adequate Space and Privacy: The property must provide adequate living space and privacy.
- Termite Inspection: In certain regions, a termite inspection may be required.
If repairs are needed to meet MPRs, buyers can negotiate with the seller to cover them or pay for them out of pocket. If the home appraises below the listing price, further negotiations are also an option. Either way, an approved VA Appraisal is required before a lender can approve your loan.
Step 3: Consider What’s Next
VA loans aren’t designed for accumulating multiple investment properties. That said, it is possible to have more than one VA loan at a time, and some Veterans do use their benefit across more than one property.
If you’re happy house-hacking a multi-unit home with a VA loan, you can continue living there while renting out the other units. But if you eventually want the property used solely for investment purposes, there are a few things to keep in mind.
Entitlement
After living in the home for a period of time, you can move into a new property and rent out your unit in the multi-unit home — and in many cases, you can use another VA loan to purchase that new home. However, your VA benefit has limits.
VA loans come with “entitlement” — a cap on how much of the loan the VA will guarantee. When you buy a home, you use some or all of your entitlement, and it stays tied to that property until the loan is repaid in full. This limits how much you can borrow without a down payment on a future VA loan.
If you want to buy a second home with a VA loan, you may need to make a down payment — or you may not have enough remaining entitlement to use a VA loan at all. In that case, a conventional, USDA, or FHA loan may be the right path forward.
Refinance
Another option is to refinance your multi-unit home into a conventional or other loan type that doesn’t carry occupancy requirements. This pays off your VA loan and restores your entitlement, freeing you up to purchase a new primary residence with a VA loan — potentially with no down payment again. Generally, you can only restore entitlement this way once.
Keep in mind that refinancing comes with closing costs and potentially an appraisal fee. If interest rates have risen since you got your original mortgage, the numbers may not work in your favor.
Thinking about refinancing your current VA or conventional loan? Start your refinance application at Refi.com — our team can help you evaluate your options and find the right loan for your next move.
