How to Get Approved for a 2nd VA Home Loan

If you’re a veteran who already used your VA home loan benefit to purchase your first home, you may be wondering if you can qualify for a second VA mortgage The good news is that in many cases, yes, you can get approved for another VA loan even if you still have an existing one

At my company, we specialize in helping veterans and active duty military take advantage of their VA benefits. Over the years, I’ve helped hundreds of clients navigate the process of getting a second VA home loan. In this article, I’ll walk you through everything you need to know, from VA loan entitlement to funding fees to refinancing options.

What is VA Loan Entitlement?

When you get a VA home loan, the Department of Veterans Affairs guarantees a portion of the mortgage amount. This is called your VA entitlement.

The standard limit is $36,000, though it can be higher in certain high-cost areas. As long as you have available entitlement, you can qualify for a VA mortgage with no down payment.

Each time you use your VA home loan benefit, your entitlement is reduced by the amount guaranteed by the VA. For example:

• If you get a $200,000 VA mortgage, your entitlement would decrease by $36,000.
• If you then want to buy another home with a VA loan for $300,000, you’d have $24,000 of entitlement left to use.

So in most cases, yes you can get a second VA loan – as long as you have remaining entitlement available.

When Can You Restore Your Full VA Entitlement?

Once you’ve used your VA home loan benefit, the easiest way to restore your full entitlement is to move and sell your current home.

As long as you can pay off your existing VA loan through the sale, your full entitlement will be restored. Then you can purchase another home with a fresh $36,000 guarantee from the VA. No down payment required.

Here are a couple scenarios where selling your current home makes sense:

• Active duty service members receiving PCS orders to a new base. Rather than renting out their property, they opt to sell.
• Veterans who need to relocate for a new job or family reasons. Selling allows them to take advantage of the VA loan benefit again.

After closing on the sale, make sure to request an updated Certificate of Eligibility from the VA to reflect your restored entitlement.

Refinancing Options for Your Current VA Mortgage

Instead of moving, maybe you want to stay in your current home but refinance your mortgage. This is another case where you can get a second VA loan.

When you refinance, your current VA loan is paid off and replaced with a new one. Here are two common refi options for VA borrowers:

VA Streamline Refinance

Also called the VA IRRRL, this option lets you refinance to a lower interest rate with minimal documentation. You can reduce your payment or shorten your loan term to pay off your mortgage faster.

VA Cash-Out Refinance

A cash-out refinance converts equity in your home to tax-free cash. You can tap your home’s value to consolidate high-interest debt, remodel your house, or cover other expenses.

In both cases, you must have adequate remaining entitlement to cover the new loan amount. And you’ll need to pay the VA funding fee again unless you put down at least 5% equity.

Using Your VA Benefit to Buy a Second Home

It is possible to purchase a second home with a VA loan while keeping your current property. This scenario is common for active duty service members who get PCS orders but want to keep their house as a rental.

However, there are strict occupancy and underwriting requirements:

• You must intend to occupy the second home as your primary residence. VA lenders usually require you live there for at least 12 months.

• The second VA loan will be limited to your remaining entitlement, typically up to $24,000. Anything above that will require a down payment.

• You cannot use expected rental income from your first home to offset the payment on the second mortgage.

Provided you meet those criteria, a lender may approve you for two active VA loans at the same time. Just know that your debt-to-income ratios will be scrutinized closely.

How Funding Fees Work on a Second VA Loan

All VA mortgages require the veteran to pay a funding fee, which goes to help fund the VA home loan program. On your first VA loan, the fee is 2.3% of the total loan amount.

But on a second VA loan, the fees are higher:

• 3.6% if you make a down payment of less than 5%
• 1.5% if your down payment is at least 5% but less than 10%
• 1.25% if your down payment is 10% or more

The main exception is if you were disabled in the line of duty – then the funding fee is waived. But otherwise, make sure you budget for this cost when getting another VA mortgage.

Renting Out Current Home and Buying with VA Loan

Instead of selling your home to restore your full entitlement, you may want to rent it out and purchase another property with a VA loan. This can work, but there are limitations:

• The second VA loan cannot be in the same area or for a similar-sized home. It needs to be in a different location or larger in size.

• You cannot use any projected rental income to offset the payment on the new VA mortgage.

Essentially, you have to prove you can afford both housing payments simultaneously with your current income alone. But it gives veterans flexibility if they don’t want to sell their house.

When Can You Lose Your VA Home Loan Eligibility?

In certain situations, you can permanently lose the ability to utilize your VA mortgage benefit:

• If you get foreclosed on and the lender sells your home for less than you owe, the VA has to pay them back for the loss. Your entitlement would get wiped out.

• Similarly, if you do a short sale where the lender agrees to sell your home at a discount, your entitlement is forfeited.

• You cannot restore your eligibility through the one-time entitlement restoration after a foreclosure or short sale.

To avoid this, do everything you can to keep your existing VA loan in good standing if you want to use the benefit again. Making payments on time is crucial.

5 Tips for Getting Approved for a 2nd VA Home Loan

Based on assisting many veterans with second VA loans, here are my top 5 tips for ensuring a smooth process:

1. Check your remaining entitlement – Request an updated Certificate of Eligibility from the VA to see how much you have left.

2. Improve your credit score – Aim for at least a 620 FICO score, pay down balances, and resolve errors.

3. Lower your debt-to-income ratio – Reduce monthly obligations so you can afford both housing payments.

4. Save up for closing costs – Closing costs average 3-5% of the total loan amount.

5. Find a VA-approved lender – Work with a lender familiar with second VA loan requirements.

Be prepared to document your current finances extensively. Second VA loans face greater scrutiny, so have your ducks in a row.

The Bottom Line

Veterans who have purchased a home using a VA loan still have options for taking advantage of their VA benefit again in the future.

You can restore your full entitlement by selling your property and moving. Refinancing your current mortgage to lower your rate or tap equity is another possibility. And in certain cases, you may qualify for two active VA loans simultaneously.