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.
VA loans offer significant benefits to eligible buyers, including no down payment and flexible credit requirements. With VA loans available throughout your lifetime, many wonder if they can use them to buy multiple properties. Specifically, is it possible to use a VA loan for a second home or vacation property?
The short answer is yes, you can buy a second home with a VA loan under certain conditions However, VA loans are intended for primary residences, so there are occupancy and eligibility rules to follow
Below we’ll explore when and how you can use a VA loan for a second property including examples entitlement impacts, and alternatives to consider.
VA Loan Occupancy Rules
The key factor is that VA loans require you to occupy the home as your primary residence within 60 days of closing. Some exceptions apply which we’ll discuss, but in general the VA wants to help buyers finance their main home.
So you can’t use a VA loan just to directly purchase a second home or investment property upfront. However, you can convert a VA-financed primary residence into a second home later if you move.
When Can a VA Loan Finance a Second Home?
There are a few scenarios where using a VA loan to end up with two financed properties is possible:
You move but keep the first home – If you get a new VA loan for a primary residence at your new location, the old home can become a second home or rental. You’ll need enough entitlement for the new loan.
Building a retirement home – Active duty service members can use a VA loan to build a second home if they document they’ll move in within a year of retiring.
PCS orders – Permanent change of station moves allow two VA loans at once – one at each duty station.
Home is rented out – If you buy a multi-unit home and occupy one part, VA treats it as a primary residence. You can rent other units.
So while directly buying a vacation home with a VA loan isn’t allowed, there are paths to end up with two financed properties using your VA benefits.
Examples of Buying a Second Home with a VA Loan
To understand better, let’s walk through some examples of how and when a VA loan can finance a second home:
Scenario 1 – Ryan has paid off his previous VA loan and kept the home. He can get a one-time restoration of his VA entitlement and buy a new primary residence with a VA loan. The old home becomes a second home.
Scenario 2 – Amber is active duty military and will retire next year. She uses a VA loan now to buy and start building her retirement home in a new location. She’ll move in within 12 months of closing.
Scenario 3 – Mark just PCSed from Texas to Virginia. He takes out one VA loan to buy a new primary home in Virginia. His Texas home becomes a rental, but he keeps both VA loans active.
Scenario 4 – Stacy buys a duplex with a VA loan and lives in one unit as her primary home. She can rent out the other unit for added income.
In each case, strategic planning allows the buyer to end up with two financed properties using the VA home loan benefit.
How VA Entitlement Impacts Second Home Buying
When buying a second home with VA financing, your remaining entitlement is a key factor. Here’s how entitlement works:
- The VA guarantees 25% of the loan amount as entitlement
- Most borrowers have full entitlement of $144,000 in basic and $36,000 in bonus entitlement
- Bonus entitlement covers loans above $144,000 up to the county limit
- Each VA loan uses a portion of your total entitlement
So if you have an existing VA loan, you likely used some entitlement already. That impacts how much you can borrow with a VA loan for a second property.
For example, if you have $100,000 in entitlement already used, you may only have $80,000 remaining. On a $300,000 loan, you’d be short $45,000 in entitlement, requiring extra cash to cover the gap.
Carefully calculate your entitlement when pursuing a second VA loan. Know you may need a down payment if your remaining entitlement doesn’t cover 25% of the new loan amount.
Pros and Cons of Using a VA Loan for a Second Home
Like any financing strategy, using a VA loan for a second property has both advantages and drawbacks:
Pros
- Requires less cash than conventional financing
- Can buy before selling your current home
- Lower rates than alternative financing options
- Lets you keep first home as a rental or second home
Cons
- Requires enough remaining entitlement for new loan
- Monthly payments on two homes can strain finances
- Higher funding fees than first VA loan
- Can be complicated to coordinate transactions
The pros often outweigh the cons, but evaluate your specific situation carefully before deciding if financing a second home with a VA loan makes sense.
Alternatives to Consider for a Second Home
While possible, VA loans aren’t always the best fit when buying a second property. Here are a few alternatives to consider:
Conventional Loan – Conventional loans allow investment properties and second homes. You’ll need a down payment and solid credit.
Cash-Out Refinance – If you have enough equity in your current home, a cash-out VA refinance can provide funds to buy a second home conventionally.
Down Payment Assistance – State and local programs can help with your down payment on a conventional second home loan.
Portfolio Loan – Bank portfolio loans sometimes offer more flexible guidelines than conforming loans.
Crunch the numbers to see if these alternatives make more sense than using your VA eligibility for a second property.
Tips for Buying a Second Home with a VA Loan
If you’ve determined a VA loan is the best approach for your second home, keep these tips in mind:
- Verify you have enough remaining entitlement to cover the new loan
- Be conservative when estimating costs and rental income from your first home
- Get pre-approved to see maximum loan amounts specific to your scenario
- Know you may need a down payment if below full entitlement
- Be ready to document future occupancy plans to meet VA requirements
- Prepare to manage taxes, insurance, maintenance, and mortgages on two properties
It’s Possible, with Proper Planning
At the end of the day, buying a second home with a VA loan is feasible with the right preparation and circumstances. While not the intended use, VA guidelines provide some flexibility through entitlement, converting primary residences, and documenting future occupancy.
As with any complex financial move, research the details fully upfront and consult professionals. Know the eligibility and entitlement rules inside and out. And have a backup plan in case your first home takes longer to sell than expected. With proper planning, you can use your hard-earned VA benefits to own two homes.
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 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.
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
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.
Can a VA loan buy a second home?
Yes, you can use a VA loan to buy a second home, but you will need to follow certain requirements. In lending and in life, the main definition of second home is a vacation home that serves as a getaway from the everyday hustle and bustle.
Can I have two VA loans at once?
It is possible to have two VA loans at once for two separate primary residences. Having two VA loans at once typically applies to active service members who receive PCS orders. Rather than sell the home, you could look to rent it out and buy again at the new duty station using your remaining VA loan entitlement.
Can you buy a home with a VA loan that doesn’t occupy?
Because VA loans are intended to help people purchase or refinance a primary residence, you will have to follow the VA loan occupancy requirements. This means you can’t legally purchase a home with a VA loan that you don’t intend to occupy for most of the year.