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.
A VA home loan is one of the best mortgage options for eligible veterans and active-duty servicemembers These government-backed loans offer key advantages like no down payment and flexible credit requirements But can you use a VA home loan to buy a second property?
The short answer is yes you can use your VA home loan benefit to purchase a second home. However there are specific VA guidelines you need to follow.
In this comprehensive guide, we’ll explain everything you need to know about using a VA mortgage for a second home. We’ll cover:
- VA occupancy rules for second homes
- How VA entitlement works with multiple properties
- Tips for buying a second home before selling your first
- Using a VA loan for an investment property or vacation home
- Restoring your VA entitlement after paying off your loan
Let’s get started!
VA Occupancy Rules For Second Homes
The VA has occupancy requirements for properties purchased with a VA-backed loan. These rules exist because VA home loans are intended for your primary residence – not as an investment.
Here are the key occupancy guidelines to know:
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You must personally occupy the home within 60 days of closing. There are a few exceptions for active-duty servicemembers we’ll cover shortly.
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You can keep your current home and buy a new primary residence with a VA loan. Your old house then becomes your second home.
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After closing, you can convert your VA-loan home into a rental property if you move. But it must be your primary residence first.
As you can see, timing is critical if you want to use a VA loan for a second home. The new property must be your primary residence.
Exceptions To The Occupancy Rules
Active duty servicemembers may qualify for exceptions to the 60-day occupancy guideline due to their military service commitments. Common exceptions include:
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Retirement – If you’re retiring within 12 months, you can buy a home in your future retirement location with a VA loan. You then have one year to move in.
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Deployment – Spouses can move into the new home if the servicemember is deployed.
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Work/Training – Exceptions can be made if your military duties take you away from home for extended periods.
Talk to your lender if you think you may qualify for an occupancy exception. VA loans are flexible when it comes to military service requirements.
How VA Entitlement Works With Multiple Homes
Your VA entitlement is the maximum amount the VA can guarantee for your loan. For 2022, the limit is $647,200 for most areas. Entitlement is an important factor when using a VA loan for a second home.
Here are some key points on how VA entitlement works with multiple properties:
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If your first VA home loan is paid off, you can restore your full entitlement to purchase another property. We’ll explain how to do this later.
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If you have an existing VA loan balance, the combined loan amounts for both homes cannot exceed your available entitlement.
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If you exceed your entitlement, you may need to make a down payment on the second home.
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Bonus entitlement above the $144,000 base can help you borrow more. Your lender can explain bonus entitlement.
Check your Certificate of Eligibility to see your current entitlement limit. Know how much entitlement you have left before buying a second home with VA financing.
Tips For Buying Before Selling With A VA Loan
Many second home buyers need to purchase a new residence before selling their current property. Doing this with a VA loan takes some extra planning.
Here are a few tips for buying a second home when you still have an existing VA mortgage:
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Shop for lenders who allow two VA loans at once. Not all lenders permit this.
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Make sure your income and credit can cover both mortgage payments. Lenders will want to see you can handle the dual payments.
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Consider bridge loan options if you need two loan payments for a short time.
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Keep an eye on your entitlement limit as you’ll need enough for both loans.
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If selling the old home, have a plan for paying off that VA loan once the sale closes.
While doable, carrying two VA mortgages simultaneously does add risk and reduced financing options. Have a plan in place before making an offer on a second home.
Using A VA Loan For An Investment Property
The VA program does not allow investors to buy rental properties with their loan. However, you can convert a home purchased with a VA loan into a rental later if you move.
Here are some tips for converting a VA property to an investment:
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Notify your servicer you are moving out and converting to a rental. They will ask for lease agreements and possibly a new appraisal.
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You can count 75% of expected rents to help qualify for the new home loan. The VA deducts 25% for vacancies.
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Manage the property carefully per VA guidelines to avoid headaches. Work with a property manager if possible.
While not the intent, VA loans do offer a backdoor way for eligible borrowers to buy investment properties after meeting occupancy rules.
Can You Use A VA Loan To Buy A Vacation Home?
VA loans must be used to purchase a primary residence, not a vacation home or second home you plan to occupy only part-time.
In reality though, you can effectively use a VA loan to acquire a vacation property if:
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You buy a new primary home with a VA loan and convert your current house into a vacation property.
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You’re nearing military retirement and buy a future vacation home as your “primary” for a year before moving in permanently.
In both cases, you’d need to follow the VA occupancy rules for the new home even if your goal is to use the old home as a vacation property eventually.
How To Restore Your VA Entitlement
As mentioned earlier, if you pay off your VA loan, you can restore your full entitlement and reuse it to buy another home. This is a nice perk.
Here are the key steps to restore entitlement after paying off your VA mortgage:
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Contact the VA to request an updated Certificate of Eligibility reflecting paid-in-full status.
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Submit VA Form 26-1880 and provide evidence the previous VA loan was paid off. This can be a release of lien document, payment history, etc.
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The VA will issue your restored entitlement usually within 10 business days after validating your documents.
Restoring entitlement lets you tap into your full VA benefits again, even if you don’t plan on buying again right away. Don’t leave entitlement dollars on the table after paying off a loan.
The Bottom Line
While buying a vacation property or investment home with a VA loan isn’t possible, you can use your VA benefit to buy a second home under certain conditions.
The key is understanding and following the VA guidelines around occupancy, entitlement, and converting a prior VA-funded home into a second home later.
Armed with the information above, you can make an informed decision about whether a VA purchase for a second home aligns with your financial and life situation. Thinking through the details will help ensure your VA loan experience goes smoothly.
VA Loan for Second Home as Investment Property
In the example of a change of station, you may decide not to sell your previous home and just rent it, using the income to help you pay for the mortgage. That too is within the scope of the VA program. In fact, it doesn’t even have to be a change of station situation. You may just want to keep the previous house as an investment property. The VA will, however, want you to prove you have rental management experience if you are going to use a previous residence as a rental property. If you have had a property management company working on previous rental units, that may also qualify.
As always in these situations, keep an eye on occupancy requirements and have enough entitlement.
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.
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
FAQ
Can I buy a second home on my VA loan?
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How long do you have to wait to get a 2nd VA loan?
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