If you’re a military service member or veteran, did you know that there is a way for you to start investing in real estate with no down payment? Ambitious service members can utilize their VA benefits to access VA home loans that offer 100% financing.
VA loans are finance products designed to make it easier for active and retired service members as well as their spouses to buy real estate. It’s one of the many benefits afforded to US military members. But these loans can be used for more than just buying your home. Because individuals have unlimited access to VA home loans (however can only hold one at a time), VA loans are an excellent product for investing in property and building wealth.
The VA provides guarantees for 25% of a property’s purchase price, meaning that qualified parties can purchase with no down payment and no lender’s mortgage insurance. VA loan benefits include:
– No down payment for owner-occupied properties
– No LMI
– Reduced closing costs
– Low-interest rates
– Being available for new construction
VA loans make it easy for service members and their families to purchase property because of their low requirements.
But here’s the kicker, VA loans can also be used to buy an investment property. So while an individual can only hold one VA loan at a time when the property has either appreciated or the borrower has paid off a significant portion of the loan, they can refinance into a conventional loan product.
For example, if a servicemember uses a VA loan to purchase a primary residence for $200,000, then two years later, that property is now worth $300,000, they have $100,000 in equity. Therefore, they can refinance to a conventional loan product and use their VA benefits to purchase an investment property to grow their portfolio.
Once the original property is no longer mortgage with a VA loan, the borrower can use their VA benefit to purchase another property with no down payments.
VA loans can also be used to purchase multifamily properties as they have the same limitations as Fannie Mae conforming loans. This is where qualified borrowers can really level up their property investing.
The standard VA loan limits for properties with up to 4 units are:
• 1-units: $647,200
• 2-units: $828,700
• 3-units: $1,001,650
• 4-units: $1,244,850
What’s more, VA loans allow up to 25% of a property’s floor space to be used as a business, meaning that it is possible to use them for a mixed-use asset.
VA loans offer better interest rates and lower requirements than any typical consumer loan. It’s a hugely underutilized service member benefit. If you are a current or previous military service member, reach out to a member of our team. We will help you assess your eligibility so you can start your property investment journey.