FHA, VA or USDA loan for investment property

Government-backed loans can be a great way to get started in real estate investing.  USDA and VA loans offer 100% financing, and FHA loans aren’t far from that with down payments as low as 3.5%.  So, can you get a FHA, VA or USDA loan for an investment property? Yes, but it depends.

Before we discuss how these different loan options would work for an investment property, let’s make sure we understand how one qualifies for these loans.

Qualifying for a FHA loan

For a complete breakdown of how to qualify for a FHA loan, click here.  Here are some of the main points:

  • Borrowers must have a minimum FICO of 580
  • Borrowers must have a steady employment history or worked for the same employer for the past two years.
  • Borrowers must have a valid Social Security number, lawful residency in the U.S. and be of legal age to sign a mortgage in your state.
  • Borrowers must pay a minimum down payment of 3.5 percent. The money can be gifted by a family member.

Qualifying for a VA loan

For a complete breakdown of how to qualify for a VA loan, click here.  Here are some of the main points:

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  • Borrowers must be veterans, active duty service members, National Guard members or reservists. (Spouses of military members who died while on active duty or as a result of a service-connected disability may also be eligible)
  • Homebuyers interested in the VA Loan aren’t required to reach any kind of income threshold to use their home loan benefits; however, borrowers are expected to have stable, reliable income that will cover monthly expenses – including their new mortgage payment.
  • Finally, a veteran applying for a VA Loan must not have been discharged under dishonorable conditions.

Qualifying for a USDA loan

For a complete breakdown of how to qualify for a USDA loan, click here.  Here are some of the main points:

  • There is no minimum credit requirement for the USDA loan. However, applicants with a credit score of 640 or higher are eligible for the USDA’s guaranteed underwriting system – an automated underwriting process. Applicants below the 640 mark may still be eligible, but are subject to manual underwriting.
  • The USDA loan is designed to help those in rural areas purchase a residential home. Fortunately, the USDA’s definition of rural is generous and many suburbs of larger areas qualify.  To see if a property is eligible use the USDA’s eligibility map.

Will the property start off as your primary residence?

FHA, VA & USDA loans for an investment property are not an option for a single-family investment property because they require the borrower to occupy the property as their primary residence.  

The only way to work-around to this would be to purchase a single-family property initially as your primary residence, and then use it as a rental property later.

Consider a multi-family property

If you’re willing to live in one of the units, you can finance a multi-family property (2-4 units) with a FHA or VA loan.  

The USDA offers a special loan program for multi-family properties designed to provide affordable multi-family rental housing in rural areas by financing projects geared for low-income, elderly and disabled individuals and families as well as domestic farm laborers. Learn more about this program here.

Final thoughts

It is possible to get a FHA, VA or USDA loan for an investment property.  However, if you’re not a veteran or interested in the USDA’s Multi-Family Housing Programs, then a FHA loan will be the route to go.

You’ve got two choices with an FHA loan for an investment property.  If you want to purchase a single-family property, you’ve got to initially use the home as your primary residence.  If a multi-family property, you’ve got to live in one of the units. I hope all this helps.

About the author

Brandon Jones

Desiring to escape the clutches of corporate America, I started investing in real estate in 2015 and left my job in 2020 to become a full-time real estate investor. I now teach other how they can experience freedom through real estate investing.

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