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 new home is an exciting milestone in life. For veterans and active military, VA home loans offer huge benefits like no down payment and flexible credit requirements. But what if you want to buy a vacation property or convert your current home into a rental? Can you buy a second home with a VA loan?
The short answer is yes, you can use a VA loan for a second home under certain conditions. Let’s take a closer look at the details.
VA Loan Basics
First, let’s review some VA loan basics. VA loans are backed by the Department of Veterans Affairs and offered by private lenders like banks and credit unions.
To qualify, you need to:
- Be an active duty service member, veteran, reservist, or surviving spouse
- Have sufficient income and credit score
- Intend to use the home as your primary residence
- Occupy the home within 60 days of closing
VA loans offer big advantages like:
- No down payment required
- No mortgage insurance
- Flexible credit guidelines
- Ability to finance closing costs into loan
One key thing to note is that VA loans must be used to finance your primary residence where you live most of the year.
Using a VA Loan for a Second Home
While VA loans are meant for primary residences, you can use a VA loan for a second property under certain scenarios:
1. Convert your Current Home to a Second Home
If you have an existing VA loan and want to keep that house, you can purchase a new primary residence with another VA loan Your old home then becomes your second home
You’ll need to qualify with both mortgage payments to ensure you can afford both properties And you’ll need enough remaining VA entitlement to cover the new loan
2. Buy a Two-Unit Property
If you buy a duplex or two-unit property as your primary residence, you can live in one unit and rent out the other. The rental income can help you qualify for the mortgage.
3. Plan to Move to Second Home Later
Active duty service members who will retire within 12 months can provide a future occupancy date on their VA loan. So you may be able to buy a second home now if you plan to move there upon retirement.
4. Convert to Rental Property Later
If you move out of a home financed with a VA loan, you can convert it to a rental property later. Make sure to check with your lender first about rental income qualifications.
VA Entitlement
When you use a VA loan, the VA guarantees a portion of the loan in case of default. This guarantee is called VA entitlement.
Every veteran has a basic entitlement of $36,000. This covers 25% of a $144,000 loan. If you borrow above $144,000, you get a bonus entitlement of 25% of the amount over $144,000.
If you want to buy a second home with a VA loan, you typically need enough entitlement left to cover 25% of the new loan amount. Otherwise, you may need a down payment to cover the gap.
Make sure your entitlement is fully restored before buying another home with a VA loan. And know how much entitlement you have available, as that affects your loan amount and down payment requirements.
Using a VA Loan for a Vacation Home
Since VA loans are for primary residences, you cannot immediately buy a vacation home with a VA loan. However, here are a couple ways it can work:
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Convert an existing VA-funded home into a vacation home later if you move and no longer occupy that house full time.
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Active duty service members can provide a future occupancy date for a second home they plan to move into upon retirement.
The key is that you need to intend to occupy the home full time when you first buy it with a VA loan.
Buy an Investment Property with a VA Loan?
You cannot use a VA loan to immediately buy a rental property or house you don’t occupy. However, you can convert a home bought with a VA loan into a rental later if your circumstances change.
If you move out, you could potentially rent out the property rather than selling it. Make sure to check program rules with your lender first.
The easiest way to get rental income with a VA loan is to buy a multi-unit primary residence. You live in one unit and rent the other(s). The rental income can help you qualify for the mortgage.
The Bottom Line
While VA loans are designed for primary residences, there are ways to buy a second home or vacation property using your VA benefits. The key is that you must intend to occupy the home as your primary residence when you first buy it. Later on, you can potentially convert it into a second home, vacation property, or rental.
If you want to purchase a second property, make sure you understand VA entitlement requirements. And consult a lender to ensure you structure the transaction properly and according to program guidelines. With the right approach, VA loans offer flexibility and benefits for primary homes and beyond.
COE and Your Entitlement
In a straightforward VA Loan guarantee, your entitlement only comes into play if you are buying a property with a significant price tag. But when you start looking at a VA loan for second home, and start juggling multiple properties and multiple loans, your entitlement comes into play fairly quickly.
The VA Certificate of Eligibility is the one of the first things you will encounter when you start investigating the VA home loan benefit. The COE is exactly what it sounds like: it verifies to the VA Loan processors that you meet eligibility requirements for the program.
The COE, once you get it, also lists your VA benefits entitlement, meaning it lists how much of a loan (or loans) they will insure. For example, if you have the full VA entitlement– $647,000 – your mortgage loan can’t be over that amount to stay under your entitlement. If you are looking to get two VA loans, the two added together can’t exceed your entitlement. In this case, you could have a first VA loan for $300,000 and then a second VA loan for $346,000.
One warning: If you get your COE, or your lender gets it for you, it might say that your entitlement is $36,000. The VA insures 25% of the total of your mortgage, so you need to multiply that amount by four. That guarantee will cover a $144,000 mortgage loan. If that seems low, it is. Most single family homes in the U.S. cost quite a bit more than that (the median price for a home in the United States is about $374,000).
The VA knew it needed to change the basic total entitlement to keep up with the market. It made some adjustments to its policies and regulations and came up with a secondary entitlement that covered home loans up to $647,000. If the entitlement looks a little funky on your COE, it’s because they are working with two entitlements – basic and secondary.
If you hit the upper limit of your remaining entitlement, which is likely with two mortgages and two properties, all is not lost. You will, however, need to make a down payment if you go over. One of the primary reasons to pursue a VA loan guarantee is to avoid the down payment, so pay close attention to how much of your entitlement you have used, how much you have left, and how much the next home will cost.
You might have heard, or read about, VA loan limits. Some folks say they don’t exist. Others say there are loan limits. It’s confusing. The loan limits most websites talk about are really just the entitlement limits, i.e. what the VA will insure for your loan. In practice, the VA doesn’t limit you to the size of the loan you can get, just the amount it will insure.
So if you have a home that’s worth 300,000 and you need to get another home, say in Hawaii, and that one tops $700,000, you’re probably going to be going over your entitlement because full entitlements cover about $647,000. What does that mean? It means the VA still insures part of your mortgage, but not all of it. In that case, you will need to pay a down payment and private mortgage insurance on the remainder of the total loan amount, i.e. everything that is over your entitlement.
The VA does not limit how much you can borrow, only what it will insure. Real loan limits come from banks or mortgage lenders, and they will be very specific about how much you can borrow from them based on your income and your ability to pay them back.
For most people, having a second home may seem like an extravagance, but for active duty military it is reality they may wrestle with repeatedly. Like few other professions, military personnel move around a lot, going from base to base, often for only a few years. These change of station situations can result in a soldier owning one home, needing to find another home on another base before they can find a buyer for their previous home.
The way the VA loan program is set up, this can be facilitated. You can have two mortgages under the VA loan guarantee at the same time. You just need to keep an eye on your entitlement to make sure you don’t go over. Or, if you do go over, understand that there will be some extra costs involved that you don’t typically pay when you are working with the VA.
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
Can I buy a second home on my VA loan?
How long do you have to wait to get a 2nd VA loan?
Can I get another VA loan if I already have one?
Do I have to sell my house to get another VA 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 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 I buy a second home with remaining VA entitlement?
If you do plan to buy a second home with remaining VA entitlement. It’s very important to make sure you understand how your remaining entitlement and local conforming loan limits interact. If you have any doubt, you can always speak to us. If you’re ready to get started, you can apply online or give us a call at (833) 326-6018.
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.
What happens if I apply for a second VA loan?
If you have an active VA loan and you’re applying for a second, you have partial entitlement. Your remaining entitlement depends on the percentage of the allowed entitlement you’ve already used with an active loan. Remember: You have an entitlement limit, but you can restore your entitlement by selling your home and paying off the VA loan in full.
Can I buy a house with a new VA loan?
If your plan is to buy a house with a new VA loan and sell the original property, you can pay off your first mortgage and regain your full entitlement to take out a second loan. The process gets a little trickier if you’re planning to keep your first home and use a VA loan on the second one.