It’s possible to use a VA loan for a second home, but this process isn’t as easy as simply finding a lender and applying for another mortgage. There are quite a few different rules you’ll need to follow to ensure that you qualify. With that in mind, here’s a look at what you need to know before applying for a VA second home loan.
Purchasing a home is one of the most exciting and rewarding experiences in life. For many veterans and active military personnel, a VA home loan makes buying that first home possible. But what happens when you are ready to move on to home number two? Can you use a VA loan to purchase a second property?
The short answer is yes, you can use your VA home loan benefit more than once in your lifetime. However, there are some limitations and guidelines to understand. In this article, we will walk through everything you need to know about getting a second VA mortgage for a new home.
Overview of Using VA Loans for Multiple Properties
VA loans are an amazing program that allows eligible borrowers to purchase a home with no down payment. This key benefit makes VA loans extremely popular. As of October 2022, Veterans United provided more VA home loans by volume than any other lender.
However, VA loans do come with occupancy requirements. These state that you must intend to use the home as your primary residence. So you cannot immediately turn around and rent out a home bought with VA financing.
That said, there are no rules about how long you must live in a VA-financed property before renting it out. Most lenders cite a minimum 12 month occupancy period.
The most common scenarios for getting a second VA loan are:
- Active duty service members receive orders to relocate, so they opt to rent out their first VA home rather than sell.
- Veterans or retirees are ready to move up to a bigger home but choose to hold onto the first as a long-term rental property.
- A VA borrower has fully paid off their initial VA loan and is now looking to buy again.
As long as you qualify, it is perfectly fine to own two homes financed with VA loans. You just have to make sure you follow the guidelines.
Refresher on VA Entitlement
Before we get into the details on second VA loans, let’s review VA entitlement. This is a key concept for understanding the process.
VA entitlement refers to the amount of your loan that is guaranteed by the VA. This guarantee protects the lender in case you were to default. For most first-time VA loans, the entitlement guarantee is 25% of the total loan amount.
Every eligible person receives a basic VA entitlement of $36,000. This equates to a guarantee of 25% on a $144,000 loan. If you are buying a home that costs more than $144,000, you also receive a bonus entitlement. This covers 25% of any amount above the basic $144,000 cap.
When you purchase a second home with a VA loan, the amount of remaining entitlement you have impacts the process. There are also ways to restore your full entitlement if needed. We’ll explore those details next.
What Happens If You Sell the First Home
The simplest scenario is when you sell your original VA-financed home before buying a second property. As long as you are able to fully pay off the first VA loan through the sale, your full entitlement will be restored.
- After closing on the sale, be sure to request an updated Certificate of Eligibility from the VA. This will reflect your restored entitlement so you can take full advantage of the VA loan program again.
Some key points if you sell the first home prior to getting a second VA loan:
- You can purchase the second home with no down payment, no matter the price, since your full entitlement is restored.
- There are no limits on the loan amount, other than the maximum limits set in your local real estate market. VA loans do not have a nationwide cap.
- Your second VA loan will have the same favorable terms and conditions as the first loan.
If You Opt to Keep the First Home
Many VA loan borrowers choose to keep their first home for various reasons. Active duty service members may want to hold onto it as a rental rather than selling when they PCS. Or a veteran may opt to keep the property for long-term appreciation.
If you want to keep your original VA home, using your benefit again gets a little more complicated. You will need to tap into “second-tier” entitlement.
- Your lender will determine how much bonus entitlement you have remaining after the first loan. The remaining entitlement will impact the terms of the second loan.
For example, let’s say you had $70,000 of entitlement remaining after your first VA loan. Here is how it works:
- Since you have only $70,000 of remaining entitlement, a lender would cap your second loan amount at $280,000 (4 times the $70k entitlement). This is the max you could borrow with 0% down.
- If you needed a loan higher than $280,000, you would have to make a down payment. This compensates for the lack of full entitlement and guarantees 25% of the total loan amount.
- On a $350,000 home purchase, you would need to pay around $17,500 down with your limited $70k entitlement.
- Talk to your lender to determine exactly how your remaining VA entitlement will impact your next loan terms.
While keeping your first home adds steps, it is still possible to tap your VA benefits again. You just may need to factor in a down payment.
What if You Foreclosed on the First Home?
Unfortunately, foreclosure is a reality for some VA borrowers. The good news is a foreclosure does not necessarily mean you lose the chance at another VA loan. Here are some key facts if your first VA loan ended in foreclosure:
- Most lenders require a 2 year waiting period before they will approve you for another VA loan following a foreclosure.
- You likely used up some or all of your VA entitlement through the foreclosure. So your second loan may involve more out of pocket costs.
- Some lenders offer foreclosure forgiveness programs if it was due to extenuating circumstances like medical issues or a spouse’s death.
Bottom line – don’t assume you can never get a VA loan again if you had a foreclosure. Just be prepared that the process may look different the second time around.
One-Time Restoration of Entitlement
No matter why you still hold the first mortgage, there is one way you may be able to restore your full entitlement for a second VA loan.
The VA allows a “one-time restoration of entitlement.” This allows you to regain your full entitlement even if you still have an existing VA loan open.
However, you can only do this one time in your lifetime. If you eventually pay off that second loan, you cannot repeat the process down the road.
To take advantage of the one-time restoration:
- You must fully pay off the first VA loan. This cannot be a short sale or foreclosure.
- After paying off the loan, you can file VA form 26-1880 to request a restoration of your full entitlement.
- If approved, your eligibility is reset to the maximum amount as if no prior VA loan existed.
This one-time entitlement restoration lets you get a second VA loan with no restrictions or need for a down payment. You must choose carefully if this option makes sense for your situation.
How Occupancy and Sales Price Affect the Second Loan
When applying for a second VA loan, there are two key factors that come into play:
Occupancy – Lenders will require you to state whether you still own the first home. If you do, they will want details on whether you are renting it out already or still occupying the property.
Sales Price – The price you are paying for the second home also affects the process. In high cost real estate markets, VA loans do have limits on how much you can borrow with full entitlement.
Let’s look at some examples to illustrate:
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Veteran A sold his first VA home. He is purchasing a $400,000 second home.
- He has full restored entitlement and qualifies for 0% down up to $400,000 due to selling first home.
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Veteran B still owns her first VA home as a rental. She is buying a $300,000 second home.
- She has partial bonus entitlement but still qualifies for 0% down since loan amount is lower.
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Veteran C still occupies first VA home. He is purchasing a $760,000 second home.
- His partial entitlement won’t cover 0% down on $760,000 price. He needs 10% down.
As you can see, your exact scenario dictates what type of second VA loan you may qualify for. That’s why it’s crucial to talk to a lender upfront when planning to buy again.
How to Apply for a Second VA Home Loan
If you determine a second VA loan is right for you, here are some tips for getting the process started:
- Contact your lender – let them know you already have a VA home loan and want to purchase another primary residence.
- Be ready to provide details – be open about whether you still own the first home, rents received if renting, expected sale price if selling. This allows the lender to assess your entitlement situation.
- Get prequalified – this early approval helps set expectations for how much you can borrow for the second home with your remaining VA entitlement.
- Ask about one-time restoration – if you have the option
You can afford to manage two mortgage payments at the same time
If you still owe money on your mortgage and want to keep your existing property, it’s possible to transition your old home into a vacation home and use another VA loan to purchase a new primary residence.
In this case, you’ll need enough income to qualify to cover both mortgages at the same time. You’ll also be limited to partial entitlement (more on that later) on your new loan, which means you should be prepared to make a down payment.
Can you use a VA loan for a second home?
Yes, you technically can use a VA loan for a second home. However, the process isn’t as simple as you might think. You’ll have to meet certain eligibility criteria to make it work.
This is because VA loans are meant to help eligible service members purchase a primary residence or home they intend to live in full time. VA mortgages even come with specific occupancy requirements to help ensure that the homes they guarantee are inhabited for most of the year. Specifically, you’ll have 60 days — in most cases — to move into your new property and start living in it full time.
As a result, it’s not so easy to use a VA loan to buy a vacation home that’s only occupied on a part-time basis or an investment property that you don’t intend to occupy at all. Still, if you play your cards right, there are a few ways to work around the occupancy requirements and get a second VA home loan.
Let’s take a look at a few situations where it may be possible to get a second VA loan:
VA Loan Secrets: What Veterans MUST Know about Using Multiple VA Loans (updated 2023)
FAQ
Can I use my VA loan to buy a second property?
Can you use your VA benefits for a second home?
Can a buyer have 2 VA loans at the same time?
How long do I have to wait to use my VA loan again?
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.
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.
How much does it cost to buy a second VA home?
As with your first VA loan, you will need to pay a funding fee for the second home you purchase. Funding fees for second VA home loans are typically 3.3% —however, you may be able to lower the fee by making a down payment of at least 5%. Ads by Money. We may be compensated if you click this ad.