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.
For eligible borrowers, VA loans offer many advantages for financing a home, such as no down payment and no monthly mortgage insurance With perks like these, using a VA loan more than once to purchase multiple properties can be appealing. But can you buy a second home with a VA loan if you still have an existing VA mortgage?
The short answer is yes, you can use a VA loan to purchase a second residence under certain conditions. However, there are VA occupancy requirements and entitlement rules you need to follow.
Let’s take a closer look at the specifics of buying a second home with a VA mortgage.
Overview of VA Loans
First a quick refresher on what VA loans are and how they work. VA loans are mortgage products guaranteed by the Department of Veterans Affairs to help eligible borrowers finance and purchase a primary residence.
Key features include:
- Requires no down payment
- No ongoing mortgage insurance
- Competitive interest rates
- Can be used for new construction
- Funds can be used for renovations
To qualify, you must be an eligible veteran, active duty service member, or surviving spouse. The property itself must meet VA minimum property requirements related to safety, soundness, and functionality.
Instead of a home inspection, VA appraisers verify the property meets requirements. The funding fee, which can be financed into the loan, substitutes for mortgage insurance.
Occupancy and Entitlement Requirements
When buying a second home with a VA loan, there are two key requirements to understand:
Occupancy – The property must be used as your primary residence. VA loans can’t directly finance second homes used solely for vacationing or investment purposes.
Entitlement – Your available VA entitlement must be adequate to guarantee the new loan amount. Entitlement refers to the amount the VA provides in coverage if you were to default.
As long as you follow these two requirements, buying a second home is possible. Let’s look at some examples.
Buying and Keeping Your First Home
If you want to purchase a new primary residence but keep your existing VA-backed home, you can do so by converting the first home to a second home or rental. However, you must qualify for both mortgage payments.
The VA will guarantee 25% of the new loan amount, up to your available entitlement. If your remaining entitlement doesn’t cover 25%, you may need a down payment to make up the difference.
Selling the First Home
When selling your original VA home, the buyer may be able to assume your loan. This transfers the loan to them while preserving your entitlement for a new VA purchase.
If you sell via a VA assumption to another eligible buyer, your full entitlement is restored. If not sold via an assumption, your entitlement remains tied to the first home.
Buying Then Making into a Second Home
While the VA requires primary residency, you can convert a property into a second home or rental after living there for a time. For example, you could move to a new duty station then turn your property into a vacation home.
As long as you meet occupancy rules initially, converting later on is allowed, similar to a conventional loan.
Using VA Entitlement
In most cases, the VA guarantees 25% of the total loan amount, up to the available entitlement. For first-time users, the basic entitlement is $36,000. You also get a bonus entitlement that varies.
If your entitlement has been partially restored or exhausted, you may need a down payment on the second home to make up for lower guarantee amounts from the VA.
Vacation Homes
The VA requires primary occupancy, but there are some exceptions. For example, active duty service members about to retire can provide a future occupancy date.
Spouses can also satisfy the occupancy requirement in place of a service member who is deployed or on assignment elsewhere.
So while directly financing a vacation home isn’t allowed, there are some workarounds.
Key Takeaways
The main points about buying a second home with a VA loan:
- Allowed as long as it will be your new primary residence
- Must meet occupancy and entitlement requirements
- First home can be converted into a second home
- Entitlement may impact need for down payment
Overall, yes you can buy a second home with a VA loan by following VA guidelines. As with any mortgage, consult a lender to discuss your specific situation.
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 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)
FAQ
Can I buy a second home on my VA loan?
Can I get another VA loan if I already have one?
What is the VA funding fee for a second home?
Can I use my VA loan to buy a multi family home?
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 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.