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.
Buying a home is an exciting milestone in life. For veterans and service members, VA loans offer great benefits like no down payment and flexible credit requirements to purchase a primary residence. But what if you want to buy a second home or keep your current one while purchasing another? Can you use a VA loan for a second home? Let’s find out.
Overview of VA Loans
VA loans are mortgage loans guaranteed by the Department of Veterans Affairs (VA) to help eligible borrowers buy, build, repair, retain or adapt a home for their own personal occupancy. Some key features of VA loans include:
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No Down Payment: VA loans do not require any down payment in most cases. This makes homebuying more accessible.
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No Mortgage Insurance VA loans don’t charge private mortgage insurance (PMI) which can save borrowers a lot of money
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Flexible Credit Guidelines VA has more lenient credit standards than conventional loans. You can qualify with lower credit scores around 580-620
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No Prepayment Penalties: Borrowers can pay off VA loans early without any penalty charges.
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Entitlement: This refers to the amount of VA loan funding you can access based on service. It can be restored after paying off the loan.
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Funding Fee: This is a one-time fee charged by VA to help provide the loan guaranty. It can be financed into the loan.
VA loans are an amazing deal but do come with occupancy requirements. Let’s look at how this affects buying a second home.
Can You Buy a Second Home With a VA Loan?
Yes, you can buy a second home with a VA loan if you meet the VA occupancy rules. Here are some common scenarios:
You Already Paid Off Your First VA Mortgage
If you paid off the loan on your original VA-backed property, you can request a one-time restoration of your full VA entitlement. This allows you to purchase another primary residence or second home with a new VA loan.
You Still Have an Existing VA Mortgage
In this case, your first home with the VA loan becomes your second home or rental property. You can use your remaining VA entitlement for the new purchase. But you must qualify with both mortgage payments.
You’re Selling the First Home
When selling a home with an existing VA loan, the buyer can assume your mortgage. If they aren’t eligible for VA financing, your entitlement is lost. But if the buyer is VA-approved, their entitlement replaces yours so you can buy again.
You Already Have a Non-VA Mortgage
If your first home loan isn’t a VA mortgage, you can still qualify for a VA loan on a new primary or second residence. Your full VA entitlement is available to help buy the second property.
Using a VA Loan for a Vacation Home
Since VA loans are for primary residences, can you buy a vacation home? There are a couple scenarios where this is possible:
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You convert your previous primary VA residence into a second home after moving. As long as you can afford both mortgages, this is allowed.
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Active duty service members about to retire can provide the date they’ll move into the purchased property full-time. Spouses can also act as the initial occupant.
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You buy a multi-unit VA property using rental income from other units to qualify. You must live in one of the units as your primary home.
So while VA loans can’t directly finance vacation properties, there are still paths to making it happen within the rules.
Using a VA Loan for an Investment Property
Pure investment properties don’t meet VA occupancy standards for primary residence loans. However, there are two options for financing investment properties with a VA loan:
1. Convert a Former Primary Residence
If you move, you can convert your previous primary VA home into a rental property. Lenders may request lease agreements and appraisals to use projected rental income.
2. House Hacking
You can buy a multi-unit VA property and live in one unit while renting out the others. A lease and reserves are needed to use rental income to qualify.
While direct investment property financing isn’t allowed, VA loans provide options to get rental income and investment properties down the road.
Understanding VA Entitlement
VA entitlement plays a key role in financing multiple properties with a VA loan. Here are some key points:
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Entitlement refers to the amount of VA home loan funding you can access based on your military service.
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The basic entitlement is $36,000. Bonus entitlement covers 25% of loan amounts above $144,000.
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If buying a second home while keeping the first, remaining entitlement must cover 25% of the new loan amount.
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Any shortfall in entitlement compared to 25% of the loan must be paid as a down payment.
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Fully restoring entitlement requires paying off the prior VA loan.
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Total entitlement available can be limited by county loan limits when purchasing a second home with a VA loan.
Understanding your exact VA entitlement amount is crucial when buying additional properties on a VA loan.
Tips for Buying a Second Home With VA Loan
If you want to buy a second property while keeping your current VA home, consider these tips:
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Sell to restore full entitlement – Selling the first home and paying off the loan restores your full VA entitlement to purchase again.
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Avoid down payment – Make sure your remaining entitlement covers 25% of the new loan amount to avoid a down payment.
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Check entitlement – Get a clear statement from VA on remaining entitlement and county loan limits.
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Qualify for both mortgages – Ensure your income and credit support payments on both properties.
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Consider bridge loan – A short-term second mortgage can help buy and sell sequentially.
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Get VA approval for rental – Request VA approval to rent out your prior primary home if needed.
With proper planning, you can successfully use VA financing even when buying a second home.
The Bottom Line
VA loans provide veterans, service members and surviving spouses with an affordable method to buy and finance homes. While designed for primary residences, VA loans can also be used for second homes and investment properties in certain situations.
The keys are understanding VA occupancy rules, entitlement, selling your prior home, qualifying with multiple mortgages, and converting properties when you move. With the right approach, VA loans offer the flexibility to own multiple properties over time.
For any questions or to get started, don’t hesitate to reach out. We can help you buy a second home, vacation property or investment real estate using your VA benefits and entitlement. Let us guide you through the process from start to finish!
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.
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
Does VA allow 2nd home purchase?
Can I get a VA home loan if I already have one?
How long do you have to wait to get a 2nd VA loan?
Can I use my VA loan to buy a multi family home?
Can I get a second VA loan?
VA loans are designed to help eligible borrowers purchase or refinance a primary residence. But in some cases, you can buy a home using a VA loan, then refinance or buy another home with a separate VA loan. So, can you get a second VA home loan? Yes, but only in certain situations. Here are a few scenarios which may require an additional VA loan:
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 is a second home in a VA loan?
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. Because VA loans are intended to help people purchase or refinance a primary residence, you will have to follow the VA loan occupancy requirements.
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.