2nd tier va loan

How to Get Approved for a 2nd Tier VA Loan

Buying a home is an exciting time in anyone’s life. For veterans and active duty military members, VA loans provide great benefits like no down payment and no mortgage insurance. What many don’t realize is that it’s possible to tap into VA home loan benefits more than once through something called second-tier entitlement.

In this comprehensive guide we’ll explain everything you need to know about getting approved for a second VA mortgage.

What is a 2nd Tier VA Loan?
The VA home loan program provides borrowers with a certain entitlement amount that the VA will guarantee in case of default. For most borrowers, this entitlement is $36,000.

However, there is also a secondary tier of entitlement worth $144,000. When added together, this creates the full VA entitlement of $180,000 that qualified buyers can tap into.

The second tier of VA entitlement makes it possible for borrowers to

• Get approved for a second VA mortgage while still holding their first
• Buy again after foreclosure or bankruptcy wiped out entitlement on a prior VA loan

Without this second tier, it would be much harder for repeat VA borrowers to get approved. Here are some common examples of using second-tier entitlement

1. Active duty service members with PCS orders being able to qualify for two VA loans at once – one on their current home and another for a new primary residence near their next duty station.

2. Veterans who lost their home to foreclosure and want to buy again, but their entitlement is still tied up in the old mortgage. Second-tier entitlement gives them additional guarantee to qualify for another VA loan.

3. Military families needing to upsize as they grow bigger and requiring more entitlement than they have available from their first VA mortgage.

As you can see, second-tier entitlement opens up options that provide veterans with financial flexibility through their military benefit. Now let’s look at how to tap into it.

VA Entitlement Calculations

When you use a VA loan, the Department of Veterans Affairs guarantees 25% of the total mortgage amount. For example, on a $200,000 loan, they are backing $50,000. This is your entitlement usage on that first loan.

For most borrowers, you have $36,000 in basic entitlement, and up to $144,000 in second-tier entitlement available. Here’s a sample entitlement calculation:

• Basic Entitlement: $36,000
• Second-Tier Entitlement: $144,000
• Total Entitlement: $180,000

On that $200,000 loan above, you used $50,000 of entitlement. So you would have $130,000 left:

• Total Entitlement: $180,000
• Usage on First Loan: -$50,000
• Entitlement Remaining: $130,000

The remaining entitlement is used to calculate your max second VA loan amount. VA guarantees 25% of total loan amounts. So in this example, 25% of $130,000 is $325,000 ($130,000 / 25% = $325,000).

That means you could potentially qualify for a second VA mortgage around $325,000 before needing a down payment.

How to Qualify for a 2nd VA Loan

To be eligible for second-tier entitlement, you must first meet the standard VA loan requirements:

• Served minimum duty requirements
• Have honorable discharge
• Show satisfactory credit

In addition, second VA loans have a few other guidelines:

• Current on all payments on existing VA loan
• Provide valid justification for second home purchase
• Meet VA debt-to-income ratio and residual income rules

For buyers trying to carry two VA mortgages at the same time, lenders scrutinize your finances very closely. They want to see your income and debts make it feasible to handle both housing payments.

Having a tenant in place who will rent your current property can help offset the mortgage costs. But in general, qualifying for concurrent VA loans is challenging.

Using VA Entitlement after Foreclosure

If you lost a home to foreclosure on a prior VA loan, second-tier entitlement can be your path to buying again with a VA mortgage.

Here’s a quick example:

• Old VA Mortgage Amount: $200,000
• 25% Entitlement Used: $50,000
• Total Entitlement Remaining: $130,000
• Max Next VA Loan (25% of $130,000): $325,000

So despite the foreclosure, you may still have significant entitlement left depending on the loan amount. VA requires a minimum 2 year waiting period after foreclosure to qualify again.

Tips for Getting Approved

If trying to get approved for a second VA loan, keep these tips in mind:

• Seek out a VA lender who specializes in this type of financing
• Provide lots of documentation on your income, debts, and assets
• Be ready to explain your justification clearly
• Have funds for a down payment in case you need one
• Work on improving your credit profile

It’s best to start the mortgage process early, so you can gather all needed paperwork and get financing locked down. Rushing into a second VA loan rarely ends well. Patience and preparedness is key.

Also know that second-tier entitlement is not unlimited. If you’ve exhausted your eligibility through multiple VA loans, you will need to explore conventional financing or other options.

The VA home loan benefit is a valuable program for military personnel, but it comes with restrictions. Learn the guidelines fully before pursuing a second-tier VA mortgage.

Summary

The little-known secondary VA entitlement allows qualified borrowers to obtain more than one VA loan over their lifetime. This provides financial flexibility and home buying power.

By calculating your current entitlement usage and remaining eligibility, VA borrowers may tap into second-tier benefits to get approved again after foreclosure or bankruptcy, carry two VA loans concurrently, or simply buy another primary residence.

Just be aware that qualifying standards are strict, so work closely with an experienced VA lender. With proper planning and preparation, a second-tier VA loan can help veterans continue accessing a key military benefit.

Frequency of Entities:

2nd tier va loan: 21
va loan: 16
va loans: 7
va entitlement: 9
va mortgage: 6
va borrowers: 5
veterans: 4