If you want to use a VA loan for second home, there are a few factors you will need to consider. To be honest, there are more than a few factors. On the plus side, it is possible to get a second home with a VA loan guarantee. On the minus side, it’s not as straightforward as you might hope. That’s because the VA loan program is designed primarily for one thing: to help active military service members and veterans afford a home. And it’s very, very good at that – one of the best government programs for housing. If you want it to do two things, such as purchasing multiple houses, it is less clear. That’s Ok if you don’t mind doing a little homework (pun intended).
If you are careful, you can buy two homes using your VA benefits. It’s not illegal, but you do need to acknowledge and abide by the VA’s policies. That means understanding rules about occupancy, entitlement, and eligibility. And have a calculator ready because you might need to do some math.
Purchasing a second home can be an exciting prospect for many homeowners With interest rates still near historic lows, now may be an ideal time for eligible borrowers to explore using their VA home loan benefit to buy a vacation property or second home
However there are specific VA second home loan requirements borrowers must meet to qualify. In this comprehensive guide we’ll outline everything you need to know about getting approved for a second mortage with VA financing.
Overview of VA Second Home Loans
The VA home loan program allows eligible borrowers to purchase a primary residence with no down payment. VA loans can also be used to refinance an existing mortgage into a lower interest rate and payment.
But can you get a VA mortgage for a second home? The short answer is yes, but there are limitations. VA loans must be used to purchase or refinance a primary residence – the home you live in most of the year.
However, it is possible to convert your VA-financed primary residence into a second home if you move or relocate. You can also qualify to purchase a new primary residence with VA financing while keeping your old home.
There are specific VA occupancy and entitlement requirements to understand when using VA loans for multiple properties. We’ll break these down in detail later in this guide.
When Can a VA Loan Be Used for a Second Home?
There are a few common scenarios where a VA mortgage can legally be utilized to buy or maintain a second home:
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Active duty service members receiving PCS orders can keep their current residence as a second home when relocating to a new duty station. As long as they qualify with both mortgage payments, the VA loan on their existing property can be converted to a second home loan.
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Veterans or service members may wish to keep their current VA home as a rental investment when purchasing a new primary residence. As long as they occupy the new home, they can begin renting out the old property after living there for at least 12 months.
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Eligible borrowers can utilize their VA entitlement to buy a new primary residence while keeping their old VA home as a second home/vacation property. Specific VA entitlement requirements must be met in this situation.
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In limited cases, VA borrowers may purchase a retirement home ahead of their retirement date as their new primary residence.
The key is that any home purchased with VA financing must be intended for use as your primary residence. Let’s take a closer look at some common second home scenarios.
Buying and Keeping Your First VA Home
Perhaps the most complex situation is when a borrower wishes to purchase a new home with VA financing while keeping their existing VA-backed property. There are a few things to keep in mind:
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You must intend to occupy the new home as your primary residence. Most lenders require you to live there for at least 12 months before renting it out.
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You will need to qualify with both mortgage payments. Lenders will include both PITI payments when calculating your debt-to-income ratio.
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Your ability to get a second VA loan will depend on your remaining VA entitlement. More on that next.
Understanding VA Entitlement
VA entitlement refers to the amount the Department of Veterans Affairs will guarantee on a VA loan in the event of default. This guarantee incentivizes lenders to offer VA loans with minimal or no down payment required.
Here are some key facts about VA entitlements:
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Each eligible veteran has a basic entitlement of $36,000. This equates to a guarantee of 25% of $144,000.
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You also have “bonus” entitlement that equals 25% of any loan amount above $144,000, up to the conforming loan limit in your county.
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When getting a second VA loan, most lenders require you to have enough entitlement left over to cover 25% of the new loan amount.
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If you don’t have full entitlement remaining, you may have to make a down payment to cover the difference.
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You can restore your used entitlement once by paying off your prior VA loan in full.
Let’s look at some examples to illustrate how partial entitlement works when buying a second home with VA financing:
Example 1:
- You have used $100,000 of your entitlement on a prior VA loan
- You want to buy a $400,000 home
- 25% of $400,000 is $100,000
- Since you only have $36,000 entitlement left, you’d have to make a down payment of $64,000 on the new home
Example 2:
- You’ve used $50,000 entitlement on a previous VA loan
- You want to buy a $300,000 second home
- 25% of $300,000 is $75,000
- Since you have $36,000 entitlement remaining, your down payment would be $39,000
As you can see, understanding your available entitlement is key when pursuing a second VA loan. Your lender can help you determine how your entitlement affects your new loan terms.
Occupancy and Waiting Period Requirements
All VA loans have occupancy requirements. For a second home, the following guidelines apply:
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You must occupy the new home as your primary residence within 60 days of closing.
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Active duty service members may provide a future occupancy date if they have orders to relocate within 12 months.
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There is no set time period you must live in the home before renting it out. But most lenders require you to occupy for at least 12 months.
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An exception is made if you are forced to move for military service or a job relocation.
Essentially, you must intend to make the property your primary home when purchasing it with VA financing. But if circumstances change in the future, you can convert it into an investment property.
Using VA Loans for Vacation Homes
Because VA loans require occupancy as a primary residence, they cannot be used to purchase a vacation home outright. However, there are couple loopholes:
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As noted above, you can convert an existing VA primary home into a vacation/second home upon moving or relocating.
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Active duty service members can identify a future occupancy date for a new home if they have orders to PCS within 12 months. So the home could initially serve as a vacation property until occupied.
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A non-veteran spouse may qualify to utilize their spouse’s VA eligibility to purchase a home the veteran will occupy upon retirement from the military.
Outside of these scenarios, the property must be intended as your primary residence when using VA financing.
VA Funding Fees
All VA loans require a funding fee, which helps offset the VA’s costs for the loan program. The fees can range from 0.5% to 3.6% of the loan amount.
The fees are based on the type of VA loan, your down payment, and military service. Importantly, the funding fee applies separately to each VA loan. So you will incur this fee when getting a second mortgage backed by VA financing.
The good news is that the fees can either be paid upfront or rolled into the loan amount. And they can be re-couped once you sell the property and pay off your VA mortgage.
The Bottom Line
VA home loans provide a tremendous benefit that can be used more than once under certain conditions. While VA financing is intended for primary residences, borrowers can legally utilize their benefit to acquire a second home in certain situations.
The keys are understanding entitlement requirements, meeting occupancy timelines, and qualifying with both mortgage payments. By following VA guidelines, eligible borrowers can tap into their earned benefit to purchase an investment property or vacation home.
Can You Use the VA Loan to Buy a Vacation Home?
The general answer is no, but again it’s a matter of timing. If you go out with the intention of buying a new home as a vacation home, that’s a no. But, if you buy a new home and you want to use your previous home as a vacation home, there’s nothing in the way of you doing that. You just need to make sure the new home is your current home, meaning your primary residence. Also if you are close to retiring from the military, you might want to purchase a home that would be in a vacation destination. In that case, you have 12 months to move in, but it will need to become your primary residence once you retire.
Timing is Everything: Occupancy Requirement
Occupancy is the first hurdle. The U.S. Department of Veterans Affairs requires that when you apply for a VA loan guarantee, it must be for the residence that will be your primary home. In terms of timing, buying a second property with a VA loan really means that you are buying a primary residence, leaving your previous home as your “second home.” Let’s say that again: your old house is now your second house and your new house is the one you will live in, i.e. your primary house. This is completely legit, but you can see where timing is critical. If you plan on using your benefit for a second VA loan guarantee, you can’t buy a second home and not live in it.
This is a good place to pause and remind ourselves that the VA guarantees the loan but doesn’t actually lend the money. That comes from VA-approved lenders or private mortgage brokers. The VA’s insurance, however, is a very strong card in your hand. It tells the lender that the VA is backing your loan, and lenders take that kind of insurance seriously. They don’t typically like risk, and you are a lot less risky with the VA on your side.
The whole idea of using the VA loan for second home is contingent on your ability to make the mortgage payments on both properties.
In terms of occupancy, you need to move into the new house within 60 days. The occupancy rules have some exceptions because sometimes, due to deployments or retirements, the new owners can’t move in right away or may be away from the residence. These exceptions are:
- Retirement – If you want to buy a home somewhere well in advance of your actual retirement day, you have up to a year to move in.
- Fixer Upper – If the house needs repairs or renovations that will take longer than 60 days, you can get an exception.
- Spouses – If your spouse moves into the home while you are deployed, that counts.
- Work Away from Home – If your job takes you away from home, you can ask for an intermittent occupancy exception.
- Unusual Circumstances – Talk to your loan officer about other obstacles to your occupancy.
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
FAQ
Does VA allow 2nd home purchase?
How long do you have to wait to get a 2nd VA loan?
Can I assume a VA loan for a second home?
Can I get a VA home loan if I already have one?
Can a veteran buy a second home with no down payment?
If a veteran wants to use a VA loan to purchase a second primary property with no down payment, you typically have to have enough entitlement left over to cover 25% of the overall loan amount because that’s what the VA would guarantee on the first loan.
What are the eligibility requirements for a second-tier VA mortgage?
Eligibility requirements for a second-tier VA mortgage typically include minimum service requirements. The requirements surrounding a second-tier VA mortgage come into play once a veteran has made a first purchase using a VA loan. The minimum active service duty requirements depend on when you serve.
Can I get a second VA loan if I already have a loan?
If you already have an existing VA loan, the amount the VA will guarantee for a second VA loan is limited. This is known as having partial entitlement. Partial entitlement typically occurs when you use a VA loan for a second home and decide to carry two mortgages at once.
What is a second tier VA loan?
The first layer allows a veteran to take out a loan to help fund a primary residence. A second-tier or second-layer VA loan indicates that a veteran likely has two loans. Second-tier entitlement may occur after a veteran previously purchased a home. In certain situations, a portion of the entitlement may be linked to a mortgage.