Quote from @Robert-Lee Pass:
Or was the change nothing to do with insuring the loan? and It had to do with lowering the down payment of a multifamily from 15-25 down to 5%? for conventional. I just thought a 5% down conventional on an owner occupied was already a thing?
-- I'm researching now (that recent YouTube video " Game changing mortgage news " live about 2 days ago) got me confused on what the actual change was. So now I'm just reading the actual printed changes.
Update - looks like we wouldn't have to worry about the self sustainability rule going conventional and the down payment was lowered from 15% (2units) 25% (3-4 Unit) down to 5% across the board and doesn't need to meet the self sustainability rule. Sound about right?
The change was that before the update, the requirement was (at minimum) 15% down. Now it's 5%.
It's a regulation update by the Government Sponsored Entities (GSE's) that regulate us as lenders. They set rules, provide guidelines, and ensure we are compliant with the requirements that ensure folks have the ability to repay. Meaning borrowers have jobs and their income can support the monthly payment - they do this so we don't run into another financial meltdown.
These GSE's, Fannie Mae in this instance, understands that with the higher rate environment, it's tough for some folks to qualify for homes. As a result, they changed this guideline because people can use the prospective/current rents as qualifying income to help them qualify for a home when maybe they otherwise couldn't with a larger down payment.
I'm also a veteran and using your VA entitlement is the best option here if you're going to purchase either a new construction or already existing property.
It sounds like you dig into the details to understand what's available to you. Because of that, I recommend you check out Ch4 of the VA guidelines to understand how to calculate your projected rental income as well as what other requirements are necessary to get you going. They can be found HERE.
Do a CTRL+F for "rental income." Specifically, start reading from the header that says "Verification of Multi-Unit Property Securing the VA loan."
A few things to note when qualifying for the prospective rental income on the other units, you must have...
Cash reserves totaling at least 6 months mortgage payments (PITI). [which is sounds like you do]
and
the borrower has a reasonable likelihood of success as a landlord
Reasonable success as a landlord means 1 of 2 things. 1, you have 2 full years documented of being a landlord on your taxes. Or 2, the VA requires you hire a property manager to manage the property, while hitting you for the monthly obligation to the hired property manager.
Additionally,
The amount of rental income to include in effective income is based on 75 percent of the amount indicated on the lease or rental agreement unless a greater percentage can be documented.
For example, If you are receiving $1000/mo in the other units on the prospective property, $750/mo can be used as qualifying income.
As a veteran that has used the VA loan myself and also quit my old job to become a lender to show other vets how to also, getting into a home using your VA loan is really a great tool in your toolbelt while you pursue other real estate methods of obtaining property. While you are maximizing your VA loan to get up to 4 (or more) homes, you can also pursue off market properties like you are mentioning to build your portfolio. I do recommend that folks fully understand how to maximize their VA entitlement to their advantage while pursuing other forms of investing. If you click on my profile, I've written about it a handful of times because this question (about having more than 1 VA loan at a time) gets asked pretty frequently.
Welcome to the club, Rob. We wish you luck and feel free to join us over a the Military Investing Forum. Best.
