Homeowners wanting to generate income can start with their own property. If you are purchasing a new home consider buying a multi-unit home instead of the standard single dwelling. You can purchase a duplex, triplex, or fourplex and lenders will still consider this a single family loan rather than a commercial loan. As long as the homeowner lives in one of the units the underwriter will view the property as owner occupied, not a rental property. This is an important distinction as it is easier to get approved for a mortgage loan that is owner occupied than a home loan for a rental property.
Here are some loan programs that allow a borrower to purchase a multi-unit home as their primary residence:
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VA Home Loans
The VA will guarantee mortgage loans for qualified veterans. Those that have served in the military, and have a certificate of eligibility, can purchase or refinance a one to four unit home under this loan guarantee. The key is that the veteran must live in one of the units. The VA will underwrite the loan, reviewing the home’s value and the income of the borrower. For more information about underwriting speak with a VA approved mortgage lender.
One of the best things about a VA home loan is that you can purchase a home for as little as zero down. This means you could purchase a property to live in, that also produces income, with no money down. By simply purchasing a multi-unit home you could generate rental income on a monthly basis and lower your personal expenses. If your tenants are paying enough they can even pay your entire mortgage payment through their monthly rent checks.
In order to qualify for the VA guarantee you need to have served for 90 days or more during wartime or 181 days or more during peacetime. There are additional rules of eligibility based on the time period the veteran served. You can obtain more information and apply for your Certificate of Eligibility through the U.S. Department of Veteran Affairs.
FHA Home Loans
The FHA offers home loans to qualified borrowers for as little as 3.5% down. As long as the borrower is living in the home the FHA allows a homeowner to obtain a loan for a one to four unit dwelling. This means that similar to the VA, borrowers can purchase a property that has other tenants using an FHA home loan. For those that never served in the military the FHA offers the best loan program for those without a large down payment. The FHA will use your income to qualify along with the rental income that is derived from the existing tenants. This is excellent news for borrowers that may not qualify to purchase a home based on their income alone. By simply purchasing a multi-unit home you may qualify and be able to purchase for the first time.
Speak with an FHA approved lender to learn more about how you can use an FHA loan to purchase a multi-unit property and have your tenant start paying your mortgage.
