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How to Use Boarder Income to Qualify for a VA Loan

Understanding Boarder Income

Using boarder income when applying for a VA home loan program is a valuable and little known feature that many Veterans (and inexperienced loan officers) may not be aware of.

One such opportunity is leveraging boarder income to enhance financial flexibility. But what exactly is it, and how can it benefit veterans? Let’s dive deep into this topic, unraveling its nuances and understanding its impact on your real estate ventures.

note pad with the words "rental income" written on it sitting next to a calculator. Image accompanies an article about using boarder income to qualify for a va home loan

What is Boarder Income?

Boarder income refers to the revenue generated from renting out a portion of your property. It’s a concept that can turn part of your living space into a source of passive income, aiding in the financial management of the property. For veterans utilizing VA loans, this approach offers a blend of residential stability and entrepreneurial spirit.

Key Considerations for Utilizing Boarder Income

While boarder income presents an appealing opportunity, it comes with specific requirements and considerations, especially for veterans using VA loans. Awareness of these can pave the way for a smooth and compliant income generation path.

Property Space Allocation

One of the primary rules revolves around the space allocated for renting out. The designated area for rental purposes must not exceed 25% of the total property’s square footage. This limitation ensures that the property remains primarily residential, aligning with the VA loan’s primary residence stipulation.

Landlord Experience Requirement

A veteran must demonstrate a two-year history of landlord experience to incorporate boarder income into loan considerations. This criterion underscores the importance of responsible property management and rental operations. However, newcomers to the landlord arena aren’t left without options.

The Property Management Loophole

For veterans lacking landlord experience, hiring a property management firm with over two years of business history emerges as a viable solution. This workaround not only meets the VA loan requirements but also provides veterans with professional assistance in managing their rental space.

Financial Implications of Boarder Income

Understanding the financial dynamics is crucial for veterans. The rent generated from the leased space directly impacts the mortgage payment obligations but with certain limitations.

Rent-to-Mortgage Offset

The rental income can be used to offset the mortgage payment, a significant relief in financial management. However, it’s essential to note that any excess rent beyond the mortgage amount doesn’t contribute to additional income recognition for loan qualification purposes.

For instance, if your mortgage payment is $1,500 and the rental income is $1,700, the VA loan framework allows the $1,700 to neutralize the $1,500 mortgage payment. Yet, the surplus $200 doesn’t translate into recognized additional income.

Navigating Boarder Income Opportunities

For veterans intrigued by the prospect of generating boarder income, several steps and considerations can ensure a fruitful and compliant endeavor.

Assessing Your Property’s Potential

Evaluate your property’s layout and available space to determine the feasibility of dedicating a portion to rental use. Ensure compliance with the 25% square footage rule and local zoning regulations.

Gaining Landlord Experience

For those new to property management, consider gaining landlord experience through smaller, short-term rental arrangements or by participating in property management courses. Alternatively, explore the option of partnering with a seasoned property management firm.

Financial Planning and Compliance

Carefully plan the financial aspects, including setting the rent, managing expenses, and understanding the tax implications. Consult with a VA loan specialist and a tax advisor to ensure adherence to all regulations and to optimize your financial strategy.

A Helping Hand for Veterans

The VA loan program’s flexibility regarding boarder income underscores the commitment to assisting veterans in their post-service lives. Whether it’s through leveraging rental income to manage mortgage payments or exploring real estate as an investment avenue, the possibilities are vast.


Boarder income represents a unique opportunity for veterans to maximize their property’s potential while adhering to the VA loan’s guidelines. With careful planning, compliance with regulations, and a strategic approach to property management, veterans can unlock new financial possibilities.

If you’re a veteran considering this path or a realtor working with the veteran community, embracing the intricacies of boarder income can lead to rewarding outcomes.

Thank you for your service, and here’s to your success in navigating the opportunities that boarder income and VA loans present. Should you have any questions or need further assistance, feel free to reach out.

I'm Wade Betz, your go-to mortgage broker in Dallas, Texas, with a focus on VA loans. My goal is to make home financing seamless and worry-free for our veterans. If you're looking for dependable and knowledgeable support with VA loans, I'm here to help.

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