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.
A VA loan can be a great way for eligible veterans and service members to buy a home with no down payment. But can you use a VA-backed mortgage to purchase a vacation property or second home?
The short answer is yes, you can buy a vacation home with a VA loan under certain conditions. However, there are occupancy requirements and other guidelines to follow that differ from financing a primary residence.
This guide covers everything you need to know about purchasing a vacation home with a VA mortgage from eligibility rules to strategies for meeting occupancy requirements.
Overview of VA Loans
First, a quick refresher on VA loans and their key benefits:
-
No down payment required – 100% financing available for qualified borrowers No need for a down payment or private mortgage insurance,
-
Lenient credit guidelines – VA loans allow credit scores as low as 580-620 and higher debt-to-income ratios, Past bankruptcy or foreclosure is OK in some cases
-
No prepayment penalties – The flexibility to pay off your loan early without penalty.
-
Funding fee can be financed – Roll the VA funding fee right into the loan amount rather than paying upfront.
-
Assumable mortgages – Future buyers can assume your existing VA loan rather than getting a new mortgage.
These features make VA loans popular for primary residences. But certain guidelines must be followed to use a VA loan for a vacation property.
VA Loan Occupancy and Use Requirements
VA mortgages are intended for the purchase of a primary home residence. As a result, there are occupancy requirements borrowers must meet:
-
You must occupy the home within 60 days of closing and intend to live there for most of the year.
-
Vacation homes and investment properties don’t qualify for VA loans under standard guidelines.
-
VA loans can only be used to buy a primary residence where you’ll live at least part of the year.
These occupancy rules prevent buyers from using VA financing for homes that will serve solely as vacation properties or rental investments. So you can’t buy a vacation home outright with a VA loan.
However, there are ways to meet VA requirements when purchasing a vacation property, as we’ll cover.
Strategies for Buying a Vacation Home with a VA Loan
While the VA has occupancy stipulations, their guidelines still provide options for financing second homes or vacation properties in certain situations:
1. Purchase then convert your primary residence
The most straightforward approach is to buy a home as your primary residence using a VA loan. Live there for at least a year, then convert it to a vacation home when you move.
Since you occupied the property initially, you satisfied the VA’s principal residence requirements.
2. Buy a two-unit property and rent the other unit
If purchasing a duplex, townhome, or property with an accessory dwelling unit, you can live in one unit and rent the other. The VA allows this scenario since you’re occupying part of the home.
3. Use a spouse or dependent as the occupant
If you can’t personally live in the home full time, an immediate family member like a spouse or dependent child can satisfy occupancy requirements.
For example, a spouse could move into the vacation home while you’re stationed elsewhere. As long as they plan to live in the property for most of the year, it meets VA guidelines.
4. Provide future occupancy documentation
For active duty service members, the VA allows providing documentation that you or a dependent will move into the property within a year.
So you could buy a vacation home now and move into it when you leave the military. The key is providing evidence like PCS orders or a retirement date.
5. Purchase in an area where you have another primary residence
If you already own a primary residence in a vacation area, you may be able to use a VA loan to buy a second home there that you’ll also use part time.
For example, you own a VA home in Hawaii but want a second property on a different island. Some lenders may allow this, but talk to the lender first.
The key with these strategies is you or a family member must plan to occupy the home part of the year.
How Using a VA Loan for a Vacation Home Impacts Your VA Entitlement
When you get a VA mortgage, the VA provides a guarantee that covers a portion of the loan amount if you were to default. This guarantee is called your VA entitlement.
The basic VA entitlement is $36,000. But for loans exceeding $144,000, you also receive a bonus entitlement equal to 25% of the loan amount over $144,000.
If you’ve previously used your full entitlement on another VA loan, buying a second home with a VA mortgage impacts your remaining bonus entitlement amount.
Since the VA guarantee only applies once, lenders require you to make a down payment if your current bonus entitlement no longer covers 25% of the new loan amount.
Carefully check your current entitlement and eligibility before applying for another VA loan on a vacation property.
Tips for Buying a Vacation Home with a VA Mortgage
Follow these tips when seeking a VA loan for a vacation property:
-
Verify your exact entitlement amount by obtaining your VA Certificate of Eligibility before applying.
-
Research lenders willing to do VA loans on second homes – not all will.
-
Provide documentation like PCS orders if using future occupancy rather than immediate.
-
Add a spouse or family member as a co-borrower if they’ll live in the home per VA requirements.
-
Be ready to make a down payment if your bonus entitlement falls short of 25% of the loan amount.
-
Consider a higher credit score and solid income and assets to increase approval chances.
-
Work with a real estate agent experienced with VA home loans and second home purchases.
While buying a pure vacation property with a VA loan isn’t possible, strategies exist to meet the VA’s occupancy rules. This lets eligible veterans enjoy the benefits of a VA mortgage along with the perks of having a vacation getaway.
Alternatives if a VA Loan Isn’t Feasible for Your Vacation Home
What if you can’t occupy the vacation home within 60 days or provide acceptable future occupancy documentation? A VA loan may not work, but here are some alternative financing options:
Conventional Conforming Loans
Conventional loans backed by Fannie Mae or Freddie Mac allow second homes and have more flexible occupancy requirements. You’ll likely need a down payment of at least 10-20% though.
FHA Loans
FHA loans permit financing second homes if you can put down at least 10%. But FHA mortgage insurance and upfront MIP apply.
USDA Loans
In eligible rural areas, USDA loans can finance second homes with no down payment if used as your primary residence for least 6 months per year.
Portfolio Loans
A portfolio loan offered directly through a bank provides customizable terms. However, 20% down is typically required on a second home.
Home Equity Loan
A home equity or cash-out refinance on your current primary home provides funds to buy a vacation property for cash.
Compared to a VA loan, these options either require more cash upfront or higher rates and costs. But they present alternatives if VA financing for a vacation property doesn’t align with your situation.
Finding the Right Vacation Home Property
Narrowing down the ideal location and property for your vacation home is an exciting part of the process. Here are key factors to consider in your vacation home search:
-
Proximity to your primary residence – Closer proximity reduces travel time and costs for more frequent trips. Being within driving distance can also help satisfy VA occupancy requirements.
-
Nearby attractions and amenities – Ensure the location offers plenty of dining, entertainment, recreation and sightseeing opportunities to enjoy.
-
Property type – Consider single-family homes, condos, cabins, beach houses or other property types based on your lifestyle needs.
-
Size and number of bedrooms – Choose enough space to comfortably accommodate your family and any visitors you plan to host.
-
Budget – Carefully consider carrying costs like taxes, HOA fees, utilities, maintenance, and furnishings at vacation home locations.
-
Rental potential – Even if you won’t rent your property most of the year, many opt to rent occasionally to vacationers to offset expenses.
Finding a second home in an area you’ll enjoy often takes extensive searching and comparison. Partnering with an experienced real estate agent can help you identify properties that perfectly match your wish list.
Consulting a VA Mortgage Specialist
Rules for using VA loans on second homes can be nuanced. To fully understand your options and eligibility, it helps to speak with a VA mortgage specialist.
Here are key questions to ask:
-
Do you approve VA loans for second home purchases? What are your requirements?
-
What strategies can we use to meet VA occupancy rules for a vacation home?
-
How much entitlement have I previously used? Will I need a down payment?
-
What terms, rates, and costs will I qualify for based on my credit, income, and service history?
-
What steps do I need to take to provide sufficient occupancy documentation?
-
Do you have relationships with real estate agents experienced in VA vacation home purchases?
A loan officer knowledgeable about VA second home guidelines will walk you through your best approach. They’ll also clarify any misconceptions and help put an approval plan in place.
Achieving the Dream of Vacation Home Ownership
Qualifying service members and veterans can use their VA mortgage eligibility to buy that dream getaway or vacation property they’ve always wanted.
While some smart strategizing is required to meet the VA’s occupancy rules, solutions exist like having your spouse move in or providing future occupancy documentation.
Partner with a lender familiar with applying VA home loans to second homes. Take advantage of today’s low mortgage rates and your hard-earned VA entitlement to make your vacation property dreams come true.
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.
Can I Use a VA Loan to Purchase a Vacation Home
Can a VA loan be used as an Airbnb?
However, this is only allowed if you keep your home and then purchase a new primary residence. If you are looking to buy a home with a VA loan solely for the purpose of renting it out as an Airbnb, then no, it is not possible. The biggest issue with using your VA loan benefit for an Airbnb is that it violates the VA’s occupancy requirements.
Can a VA loan be used for a vacation home?
In order to be in compliance with VA loan occupancy requirements, the property you buy must be your primary residence within 60 days of purchase. You can’t use a VA loan for a vacation or investment property, but you can use it to buy a one- to four-family home if the eligible member uses it as a primary residence.
What is a VA home loan?
A VA home loan is a type of mortgage financing designed for veterans and active-duty service members. Learn more about using a VA loan with our complete guide.
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.