Unlocking the doors to a second home with a VA loan is a strategic and often overlooked opportunity for veterans and eligible service members. From understanding the entitlement process to maximizing benefits, this guide will provide the information you need to make informed decisions and leverage the full potential of VA financing for a second home.
How many times can you use a VA loan?
There’s no limit on how many times eligible veterans and service members can use a VA loan. You’ll generally have a lifelong entitlement that can be used multiple times. It’s important to understand how entitlement will impact your financing options.
VA loan entitlement is the maximum loan amount the VA will guarantee. When obtaining a VA loan, you typically use 25% of your total entitlement. The remaining entitlement will determine the amount of the second VA loan you can obtain. In some cases, you may be able to restore your full entitlement by paying off the previous VA loan.
How much VA loan do I qualify for?
Eligible veterans, service members and survivors with full entitlement do not have a limit on loans over $144,000. If you have remaining entitlement and are looking to take out a second VA loan, the limit is based on the county loan limit where you live. You can check the Federal Housing Finance Authority website to find out your county’s limit.
You can use whatever entitlement you have left to take out another VA home loan.
Can you have two VA loans at the same time?
It’s possible to have two VA loans simultaneously under certain circumstances as long as they are both used for primary residences.
Let’s say you have an existing VA loan and need to move. If you have difficulty selling or want to hold on to your current home and rent it out, you can use your remaining entitlement to finance your purchase. This is common for active-duty service members who receive a permanent change of station (PCS) order that moves them to a new duty station.
VA second home loan requirements
You’ll need to meet certain requirements to qualify for a second VA home loan. The second property you purchase must be a primary residence, which means you have to occupy the home most of the year and move in within 60 days, in most cases. You must have remaining entitlement to qualify for a second VA loan, provide proof you can afford the additional loan and be approved for multiple loans by a VA lender.
If your first home is paid off, you can take out another VA loan through a one-time restoration of your VA entitlement. If you plan to sell your first home, the person who buys your house can assume the terms of your mortgage. This option cancels your current loan and starts a new one. You may also sell your home and use that money to repay your loan in full and restore your entitlement.
As with your first VA loan, you will need to pay a funding fee for the second home you purchase. Funding fees for second VA home loans are typically 3.3% —however, you may be able to lower the fee by making a down payment of at least 5%.
How to get a second VA loan
1. Check eligibility and VA entitlement
You’ll need to ensure that you have remaining entitlement or restore your entitlement by selling your home and paying off the loan balance. You must also intend to occupy your new home for more than six months during the year. You’ll need to provide proof of income, credit and asset documentation.
2. Request an updated certificate of eligibility (COE)
Just like when you purchased your first home with a VA loan, you must request your Certificate of Eligibility (COE) from the Department of Veterans Affairs. The COE serves as proof to lenders of your qualifications.
3. Research lenders who offer second VA home loans
Find the VA-approved lender that fits your individual needs as a homebuyer. Your lender must approve you for multiple loans if you choose to keep both properties under VA loans, and you’ll have to show that you are able to repay both loans.
4. Submit a mortgage application for a second VA home loan
Apply for a second VA mortgage through your lender and secure approval.
5. Get a home appraisal and inspection
The VA will assign an independent appraiser at your lending team’s request. The appraiser confirms whether your property meets VA standards and is worth the amount you paid.
6. Go through the mortgage underwriting and approval process
Once you’re pre-approved for a loan amount, the underwriting process will begin. Your lender will either use the VA loan automated underwriting system (AUS) or manually underwrite your loan. The latter is usually used for higher risk borrowers who may have a limited credit history, past bankruptcy or foreclosures or a history of late payments.
7. Accept your loan terms and close on the loan
At the time you close on your purchase, which typically takes 40 to 50 days, you’ll pay any closing costs, such as the funding fee. You’ll also pay for any title-related costs, like taxes or loan origination fees. Finally, you’ll meet with a closing agent, title company representative, any real estate agents or attorneys you used and the home seller to review the terms of your loan and sign the necessary documents.
Second VA home loan vs VA refinance loans
The VA’s cash-out refinance option is available to qualifying homeowners — you’ll have to take the net tangible benefit test to determine whether refinancing is beneficial for you. Your new loan must result in a lower interest rate, reduce your monthly payment or convert an adjustable-rate mortgage into a fixed-rate mortgage.
You must also be able to show that you’ve made at least six payments on your current loan.
A VA cash-out refinance loan allows you to take cash out of your home equity, which you can use to purchase a second primary residence. The loan is provided as a lump sum at a fixed rate. As with a VA purchase loan, you’ll need to get an appraisal and pay a funding fee, which can be rolled into the cash-out refinance loan.
Second VA home loan vs VA home equity loans
Home equity loans are paid out in a one-time lump sum and have fixed rates, much like the cash-out refinance loan. But a home equity loan, aka a second mortgage, places a second lien on your property while the rate or term of your first mortgage stays the same.
Can I get another VA loan before I sell my house?
You can get a second VA loan before selling your home as long as you satisfy primary residency requirements and demonstrate that you can pay both loans. The use of a second loan often happens when active duty service members have to move to a new duty station or when it’s difficult to sell a home. You may also choose to use your first home as a rental property to balance the cost of your new loan.
Summary of Money’s Second VA Home Loan Guide
A second VA home loan can be a helpful benefit for eligible veterans and active duty service members who have to relocate before selling an existing home. As long as you have remaining entitlement, meet eligibility criteria and satisfy primary residency requirements, there’s no limit on how many times you can tap into the VA’s home loan benefit.