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If you’re an active duty service member, veteran, or surviving spouse who has purchased your dream home in the past using a VA loan program, you’ve enjoyed the many VA loan benefits, including no down payment, low-interest rate, and no mortgage insurance.
What if you want to buy another house? Can you use a VA loan for a second home? Yes, you can.
Eligible active duty members, veterans, and surviving spouses can use a VA loan as many times as they want throughout their lifetime. How many times can you use a VA loan? There’s no limit as long as you meet the requirements for VA loans and the criteria set by the lending company. In some cases, you may even be allowed to take out more than one loan at the same time.
What is a VA loan entitlement?
Before discussing multiple VA loans, you should know what a VA loan entitlement is. It’s the amount that the Department of Veteran Affairs will guarantee when you take out a VA loan. Lending companies also use this figure to determine the maximum amount you can borrow without the need for a down payment.
There are two types of entitlement: full and reduced entitlement.
You have a full entitlement if you never filed for a VA loan. You can also restore your full entitlement after purchasing a home by selling the house or paying the mortgage in full.
In most parts of the country, the VA guarantees a basic entitlement of up to $36,000 for a loan that is less than $144,000. You can check your certificate of eligibility (COE) to know the exact amount of your basic entitlement.
If the loan amount exceeds that figure, the VA could guarantee up to 25% of the loan amount, also referred to as tier 2 entitlement. In most parts of the country, the VA can guarantee up to $137,062 or 25% of $548,250 without having to pay a down payment.
You have a reduced entitlement if you’ve used up a part of your entitlement in a VA loan that you’re currently paying off, you’ve defaulted on a past loan, or you’ve paid off the loan but still use the property. So when you apply for another VA loan, the amount you’ll get will be based on the maximum loan amount in your county minus the entitlement that you’ve used up already.
When can you use your VA loan again?
When You Sell Your Existing Home
There are different ways to let you use your VA loan again if you’ve already taken out a loan before and you’re still paying it off. You can restore your entitlement and use your loan again after selling your home and using the proceeds to pay your existing loan in full. Doing so will help you restore your full entitlement.
You have to secure a new Certificate of Eligibility (COE) so that you can show the lender that none of your loan benefits are tied to a loan. But, you may not need to restore your entitlement if you have enough remaining VA loan restoration to cover the new loan that you’re trying to apply for.
When You Pay Off Your Existing Loan
If you had a VA loan before but you’ve managed to pay it off, you’re expected to sell the house if you want to restore your entitlement. But there’s a way to keep the property and still get your entitlement fully restored. You can apply for a one-time restoration of your entitlement through the VA.
But you can only do this once. The next time this happens, you need to follow the standard rule, which is to pay the loan in full and sell the property before your entitlement can be restored.
Can you refinance your VA loan so you can tap into VA loan entitlement again?
You can refinance your VA loan into a non-VA loan, such as an FHA loan or traditional loan. Since you will not be selling the property, you’ll have limited options when it comes to restoring your entitlement. If you decide to refinance your loan, you can file a one-time entitlement restoration request.
As its name suggests, you can only do this once. After you finalize and complete the refinance, you can apply for a one-time entitlement restoration. If approved, the VA will then restore 100% of your original entitlement and you’ll get to keep your original home.
Can you let a qualified veteran assume your current VA so you can use your VA loan entitlement again?
Yes, you can let a qualified veteran take over your VA loan and its interest through a process called VA loan assumption. If for some reason you can’t or just don’t want to sell your home, a VA loan assumption is a good alternative.
In this scenario, the veteran who assumes the loan will use his VA entitlement to replace yours and that means your entitlement will be restored. Keep in mind that this process isn’t automatic. You need to formally submit an application for a Substitution of Entitlement to the Department of Veterans Affairs.
Can you have more than one VA loan at one time?
As previously mentioned, the VA can guarantee a loan of up to $548,250 without making a down payment. If you got your first VA loan for less than that amount, you will have a remaining entitlement that you can use on your second loan. And that means you can have more than one VA loan at one time.
When you use only a portion of your entitlement, that amount will be tied up to your mortgage. As you may recall, the VA can guarantee up to 25% of the VA loan amount. So if you purchase a house that’s worth $200,000, the entitlement that will be tied to the mortgage is $50,000.
But as discussed earlier, the VA’s total guaranteed entitlement is up to $137,062. If you used only $50,000 of your entitlement, then you have $87,062 worth of remaining entitlement.
If you multiply your remaining entitlement of $87,062 by four, you’ll get an estimate of the total VA loan amount that you can borrow without worrying about a down payment.
But bear in mind that you still need to meet the lender’s requirements, such as your income and credit score. Therefore, having a remaining entitlement is not a guarantee that you can get another VA loan while you are still paying for an existing one.
What is a second-tier entitlement VA loan?
A second-tier entitlement permits an eligible veteran, active duty service member, or surviving spouse to have two mortgage loans at the same time. This is only allowed in certain situations.
Also referred to as bonus entitlement, a second-tier entitlement offers a qualified veteran a borrowing power of more than $144,000, which is the basic entitlement limit.
In the past, a VA loan program needed to follow the conforming loan limit of up to $510,400, which is set by the Federal Housing Finance Agency (FHFA). In 2021, the FHFA raised the loan limit from $510,400 to $548,250. It could even reach as much as $822,375 in high-cost areas, so be sure to check the loan limit in your county.
1. How much will I pay in Funding Fees?
One of the perks of a VA loan is that you don’t have to pay for mortgage insurance. However, you’re required to pay a VA loan funding fee. It can be paid upfront or added to the mortgage. The fee is applied to every VA new purchase or refinance loan and is paid directly to the Department of Veterans Affairs. The funding fee helps the VA cover the losses and continue to offer loans to future borrowers.
How much you have to pay for the funding fee will depend on the down payment and if you have taken out a VA loan.
VA Funding Fee for First Time Users:
|Down payment||% of the amount borrowed using a VA loan|
|0% – 4.9%||2.3%|
|10% and above||1.4%|
VA Funding Fee for Subsequent Users (those who have taken out a VA loan benefit before):
|Down payment||% of the amount borrowed using a VA loan|
|0% – 4.9%||3.6%|
|10% and above||1.4%|
You’re exempted from paying the funding fee if:
- You’re entitled to or receiving compensation for disability incurred during service
- You’re a surviving spouse of a veteran who died in service or after incurring a service-connected disability
- You’re an active duty service member who was given the Purple Heart
2. What if you default on the mortgage?
If you default on your mortgage, there’s a required waiting period of two years before you can apply for another VA home loan. Borrowers who have defaulted and lost their loan to foreclosure will see their entitlement reduced. The reduction will limit the amount they can borrow without a down payment. Not only that, their credit score may drop by as much as 160 points if they default on their mortgage and lose their VA loan benefit to foreclosure.
Their previous default or foreclosure will not automatically prevent them from using their loan benefit once the two-year waiting period has passed. Some borrowers may still have a portion of their basic entitlement available while others may still be able to purchase a house using their second-tier entitlement.
Additionally, lenders will check your certificate of eligibility (COE) to determine your remaining loan benefit. Aside from that, lenders will take into account the county you’re in to calculate how much you can afford to borrow without needing a down payment.
But in a less-than-ideal scenario, you may lose your entitlement permanently if you default on your VA loan or if the lender forecloses and sells the house you used the loan to purchase for a price that’s lower than the amount you borrowed.
The VA will then have to reimburse the lender and they will deduct the amount they pay from your VA loan benefit. You can’t use the one-time restoration benefit to get back your full entitlement. But you may regain your entitlement if you repay the VA.
3. How do you calculate VA entitlement?
A VA home loan entitlement has two layers – the basic entitlement and the second-tier entitlement. In most parts of the country, qualified veterans have a basic benefit of $36,000 and a second-tier entitlement of $101, 062, which sums up to $137,062.
So if you buy a home with a VA home loan, a part or all of your VA entitlement. Remember, the VA guarantees 25% of the loan amount and the VA entitlement that you use is generally a quarter of the loan amount as well.
For instance, if you have a $300,000 loan, you’re using $75,000 of your VA entitlement. Therefore, your remaining VA entitlement is $62,062. In costlier areas, the maximum entitlement could reach up to $822,375. The remaining VA entitlement allows VA buyers to have two loans at once.
4. Can you have two VA loans in different cities?
Yes, you can have two VA loans in different cities but only in certain scenarios. Always remember that VA loans are intended to help eligible borrowers buy a home that will be used as a primary residence. You can’t use a VA loan to purchase a vacation home, an investment property, or a second home that you won’t be living in.
But there are exceptions. If you’re living in a house that’s financed by a VA loan and you received a permanent change of station to a different city or state, you can take out a second VA loan. Of course, you need to factor in your remaining VA entitlement and you still need to meet the lender’s eligibility criteria.
5. Is there any limit to the number of times you can use a VA loan?
There’s no limit. You can use a VA home loan as many times as you want as long as you meet the eligibility requirements for every home purchase using VA loans.
How many VA loans can I have in a lifetime? There’s no limit as to who many times you can take out VA loans as long as you meet the requirements and are considered qualified by the lending company. Of course, you also need to secure your certificate of eligibility before anything else.
However, in some scenarios, the amount you can borrow without making a down payment could be limited. If you plan to get a second VA loan without paying the current loan in full or if you’ve paid off the previous loan but decided to keep the house, your loan benefits may be reduced. If you want to get back your full entitlement, you may submit a one-time entitlement restoration request.