VA loans offer great benefits like no down payment and flexible credit requirements for eligible borrowers. This makes them ideal for military members who move frequently. With a VA loan you can buy multiple homes over your lifetime. But can you use a VA loan to buy a second home while still owning your first?
The short answer is yes, you can use a VA loan for a second home purchase in certain situations. However, there are occupancy requirements, entitlement limits, and other guidelines to follow. Let’s explore when and how you can buy a second house with VA financing.
Overview of Using a VA Loan for a Second Home
The key to purchasing a second property with VA financing is understanding the occupancy rules. VA loans are intended for your primary residence that you live in most of the year.
So you cannot legally buy a second vacation home just to use occasionally. However, there are cases where you can convert or transition a current VA home into a second residence. Some scenarios where this is possible:
- You move for a new duty station and rent out the old VA home
- You transition into retirement and buy the second home you plan to move into
- Your spouse occupies the new purchase while you are on active duty
You must qualify with both mortgage payments, And available entitlements may impact your ability to buy with zero down
What is VA Entitlement?
VA entitlement refers to the amount the VA guarantees your lender in case of default. For full entitlement, this is a minimum of 25% of the loan amount.
Every veteran gets a basic entitlement of $36,000. You may also get “bonus” entitlement above $144,000 based on the loan size.
If your entitlement is used on an existing VA loan, you may need a down payment on the second home purchase. We’ll explain more below.
Buying a Second Home if Current VA Loan is Paid Off
If you’ve paid off your original VA mortgage, the easiest option is getting your entitlement restored. You can request a one-time restoration to reinstate full entitlement for another VA purchase.
Buying While Keeping Current VA Home
If you wish to keep your current VA home, there are a couple options:
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Convert to second home – Transition your VA loan to a second residence you keep long term. But available entitlement could require a down payment.
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Sell under assumption – An assumable VA loan allows the buyer to take over your loan. If they are eligible for VA financing, your entitlement transfers to them freeing you up to use your VA benefit again.
Impact of Partial Entitlement on Down Payment
When your entitlement is tied up in an existing VA loan, the VA only guarantees the leftover amount towards a second home. Most lenders require 25% coverage between your down payment and the VA entitlement.
So if your remaining entitlement is less than 25% of the new loan, you’ll need to pay the difference out of pocket.
Using VA Entitlement for Vacation Homes
You cannot initially buy a vacation home that won’t be your primary residence with a VA loan. However, there are some options if you want to convert a property later:
- Change previous VA home to second home after moving
- Occupy and buy retirement home before officially moving in
Tips for Purchasing Second Home with VA Loan
If you want to buy a second house while keeping your current VA-financed property, consider these tips:
- Check entitlement status and restore if possible
- Calculate any down payment needed based on partial entitlement
- Ensure you qualify with both mortgage payments
- Consult lender early about second home financing options
- Plan timing for selling, converting, or occupying first VA property
While second homes are limited with VA loans, you can purchase another primary residence in certain situations if you understand the requirements.
Can a VA Loan be Used for an Investment Property?
VA loans must be used to purchase a primary residence you move into within 60 days. However, you may convert a former VA property into a rental after moving out.
Other guidelines on investment properties:
- Rental income can help qualify you for new home but with a 25% vacancy deduction
- Lease agreements and additional reserves often required
- Can’t initially purchase purely as investment property or vacation home
Overall, investment properties are tricky with VA loans. Converting a former primary residence into a rental is the easiest way to generate income.
Using a VA Loan to Buy a Multi-Unit Primary Home
An alternative is to purchase a multi-unit home and occupy one unit as your primary residence. You can rent out other units right away without converting the property.
Lenders will want to see lease agreements for proposed rental income. And you may need several months of reserves to cover the mortgage should vacant units arise.
Understanding Bonus Entitlement for VA Loans
Bonus entitlement refers to the amount guaranteed above the $36,000 base entitlement. This is 25% of any loan amount above $144,000.
If your entitlement is partially used, the VA only covers the lower of:
- 25% of the loan amount
- 25% of county limit minus used entitlement
So with partial entitlement, you may need a down payment even on your primary home.
Key Takeaways on Buying Second Home with VA Loan
While VA financing is primarily for primary residences, you can purchase a second home in certain situations:
- Convert first VA property into rental or second home
- Restore entitlement if paid off initial VA loan
- Buy new primary if selling or renting out existing VA home
- Calculate any down payment needed from partial entitlement
- Consider multi-unit option to occupy and rent out units
Discuss your specific scenario with a lender early on. While secondary homes are limited, VA loans can provide a path to buying another primary residence when needed.
Bottom Line
Purchasing a second home while keeping your current VA loan is possible but requires some strategic planning. Understanding occupancy rules, entitlements, down payments and conversions will help you navigate the process. Consulting a lender early on can clarify the options and requirements when buying another home with VA financing.
If You Are Selling Your Home
Selling your home is the easiest way to get a second VA loan. That is because you are simultaneously meeting two VA requirements:
- Paying off the first VA loan, therefore restoring your entitlement
- Giving your first home away, which suggests you intend to occupy your new home as a primary residence
As long as you were able to pay off your first VA loan through the sale–meaning you did not have a short sale–you should have no issue getting another VA loan.
After you have completed the home sale, you must request an update to your Certificate of Eligibility so that your 0% down with no loan limit benefit can be applied to your new VA mortgage.
If You Are Keeping Your Home
While its true that VA loans have occupancy rules that restrict buyers from buying with the intent to use the property for income-producing purposes, its possible to buy with a VA loan, live in the property for a while, and then rent it out to others upon relocating.
You must rely on second-tier entitlement (aka bonus entitlement) for your new VA loan unless you paid off your previous VA mortgage or invoked what is known as a one-time restoration of entitlement. Most VA lenders only offer a $0 down payment if 25% of the loan is guaranteed. Unless you have your full entitlement, the amount you can borrow with 0% down is subject to loan limits.
For example, if you had $70,000 of remaining entitlement after your first VA loan, a VA lender would only approve a maximum loan amount of $280,000 (4 times $70,000) without a down payment. But say you wanted a home that was $350,000. Most VA lenders would require you to pay $17,500 out of pocket to meet the $87,500 so that a quarter of the loan amount is covered.
If you plan on keeping your home and buying again, you will still need to update your COE. After that, your lender can walk you the rest of the way.
Your VA lender can also help you determine how your remaining entitlement affects your new VA terms, or you can calculate it here.
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
FAQ
Does VA allow 2nd home purchase?
What is the VA funding fee for a second home?
Can a veteran have two VA home loans at the same time?
Can I use my VA loan to buy a multi family home?
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 borrower get a second VA loan?
There are different scenarios in which a borrower may be eligible for another VA loan.For instance, if you are an active military member and have to PCS to a new duty station, you may keep your current
How do I get a second VA loan?
But, you can also apply for a one-time restoration of your entitlement. This process won’t require you to sell your home, though you will need to repay the loan in full before you can get a second loan through the VA. To kick off this process, you’ll submit VA Form 26-1880. An experienced VA loan officer can help you get started.
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.