VA Loan | How to buy a 2-to-4 unit in Chicago

You can use a VA loan to buy a 2- to 4-unit property with no down payment or mortgage insurance and a low 30-year fixed rate.

These benefits make homeownership affordable, but there are essential details to know first.

We'll walk through them together, following Alex, a veteran who recently purchased a 3-flat in Chicago's Humboldt Park neighborhood.  

Alex plans to live in one unit and rent out the others.  Here's how NewCastle Home Loans helped him make it happen with a VA loan. 

Do I have to live in my multi-unit property if I use a VA loan?

Yes, you must live in the multi-unit property as your primary residence when you buy with a VA loan.

The VA requires you to occupy one of the units within 60 days after closing and live there for at least 12 months.  After the first year, you can convert it to an investment property and rent out all the units.

Are VA loan rates higher for 2-to-4-unit properties?

No, VA loan rates are the same for 2- to 4-unit properties as they are for single-family homes, which is one of the best features of the VA program.

Keep in mind that some lenders may charge higher rates for multi-unit properties. Always compare quotes from VA-approved lenders to ensure you're getting the best deal possible.

With NewCastle Home Loans, you won't pay higher interest simply because you're purchasing a 2, 3, or 4-unit home. Our VA loan rates consistently beat those of the big banks and online lenders.

That means you can enjoy rental income from extra units while maintaining a low monthly mortgage payment. A low payment makes it possible to live nearly cost-free in one unit, offsetting your housing expenses with tenant revenue.

Can I use rental income from a 2- to 4-unit property to qualify for a VA loan?

Yes, you can use future rental income from a 2‑ to 4‑unit property to help qualify for a VA loan. However, if you depend on that projected income, you must meet two key conditions:

1. Have landlord experience, or hire a property management company
2. Have six months' worth of cash reserves

Suppose your current income is sufficient to qualify for a VA loan. In that case, your lender won't require a landlord history or cash reserves.

You only need it when relying on rental income from the 2-to-4-unit property to meet the qualification requirements.

Is property management experience required for a VA loan on a 2‑to‑4 unit?

VA loans require property management experience only if you are counting rent from the 2-to-4-unit property as income on your mortgage application.

Your lender will require proof of your prior management experience. If you own a rental property, send them copies of your tax returns and signed leases, which will verify two years of landlord history.

If you don't have prior landlord experience, the VA allows you to hire a professional property manager. The property manager handles tenant screening, rent collection, maintenance, and more, enabling you to qualify using projected rental income without requiring two years of personal management experience.

Questions? Schedule a time to ask a local VA loan expert.  We've been helping Chicago veterans buy homes since 2003.  Get straight answers from a trusted VA-approved lender. 

Do VA loans for 2‑to‑4 unit properties require cash reserves?

VA loans require cash reserves only if you are counting rent from the 2-to-4-unit property as income on your mortgage application.

When you count rental income to qualify, lenders require reserves equal to six months of mortgage payments (PITI—Principal, Interest, Taxes, Insurance).

These funds must be your own, not a gift from someone else. The money must be in your bank, retirement, or brokerage account, and the lender will verify it before closing.

Reserves demonstrate to the lender that you're financially stable and can cover payments during a vacancy.

How much rental income can I use to qualify for a VA loan on a 2- to 4-unit property?

You can count 75% of the gross rent from the non-occupied units as income.

Lenders subtract 25% to account for vacancies and maintenance costs. You don't get to count 100% of the rent.

A VA-approved real estate appraiser will determine the fair market rent. The lender will use the fair market rent to calculate the income you can use.

Check your rate, payment, and costs for a VA loan, so you know what to expect when buying a multi-unit home. 

What is the VA loan limit for a 2-to-4-unit property?

For Illinois properties, veterans with full entitlement can use a VA loan to purchase a multi-unit property, specifically a 2- to 4-unit property, for up to $806,500, with no down payment required.

If the purchase price is higher, you'll need to make a down payment.

VA-approved lenders, such as NewCastle Home Loans, use the conforming loan limit to set the maximum amount you can borrow with a zero-down payment.

Here's a picture of Alex's Humboldt Park, Chicago 3-Flat.

What is the first step to buying a multi-unit property with a VA loan?

Take the first step toward becoming a homeowner and investor by getting pre-approved for a VA loan with NewCastle Home Loans.

Buying a multi-unit property with a VA loan is an incredible opportunity. It takes careful planning and the right lending partner. Our team of local VA loan experts is here to guide you every step of the way.