Tuesday, July 9, 2024

How To Reuse Va Loan

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The Va Loan Does Not Have Any Requirement For A Minimum Credit Score

VA Loan Entitlement: How to Reuse Your VA Loan Benefit

Yes, you heard me correctlythe VA loan program does not care what your credit score is!

Unfortunately, you cant get money straight from the VA. As a result, most private lenders will have their own minimum credit score requirements.

The minimum required is usually around 580-620.

As with any lending opportunities, the better your credit score is, the better your rates and terms generally will be.

Low credit doesnt necessarily prevent you from getting a VA loan, but a higher score will mean better opportunities and terms.

Do Va Loans Require A Home Appraisal To Qualify

Yes, the property you purchase must also meet certain qualifications in order for you to obtain a VA loan. A VA loan appraisal is performed by an appraiser certified by the U.S. Department of Veterans Affairs.

The appraisal process is done to evaluate the value of the home and to ensure the house meets safety and living standards for a veteran homeowner. Foreclosures or fixer-uppers, for example, may not meet the minimum requirements for VA loan benefits.

An exception to this appraisal rule is VA Streamline loans, also known as Interest Rate Reduction Refinance Loans . These dont require an appraisal

Section : Va Loans & Separating Service Members

For service members transitioning back to civilian life, getting another VA loan can require additional planning.

The big question for lenders is: How will you pay the bills once youre no longer in the military?

But its also not just a matter of having sufficient income post-separation. Lenders also want to feel confident that your income stream is stable, reliable and likely to continue. Theyll take a long, hard look at the type of work youve got lined up and how it relates to your MOS, your previous work history and your education.

This idea of employment continuity is key to using your VA loan when youre separating from the service.

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What If My Coe Says My Entitlement Is $0

If you have an existing VA loan worth more than $144,000, youll have used up all your entitlement. Your new COE will show your entitlement as $0. Dont worry. You can reinstate your full entitlement by selling your home and using the proceeds to redeem your mortgage .

This is common. And lenders are used to it.

You dont have to wait until youve redeemed your mortgage before you apply for a new one, no matter what your COE says. You can usually close on your purchase on the same day you close on your sale. So moving with a VA loan is as straightforward as doing so with any other mortgage.

Example Of When Youd Have More Than One Loan At A Time

How to Reuse Your VA Home Loan Benefits

Lets consider a hypothetical: Alex received PCS orders and now has to move herself and her family across the county.

She has a VA loan on her current home and plans to buy a second home using a VA loan as well. In the process of moving, Alex has a hard time selling her home. Or maybe she just doesnt want to sell her home and would prefer to hold onto it and rent it out.

In this situation, as long as her credit and finances qualify her for a loan, shed be able to get a VA loan for her new primary residence while retaining her current home. If shes earning rental income on that home, she may also be able to use that income to offset the cost of the mortgage for her current home when she applies for a new, second VA loan.

However, Alex might be limited in how much she can borrow without having to make a down payment on that second VA loan, depending on how much of her entitlement is left.

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A Va Loan Is Reusable

Once you completely pay off a VA loan, you regain your full VA eligibility and can reuse it for another VA loan.

You can reuse a VA loan as many times as you want, as long as the previous loan is paid off.

And like I mentioned before, you can also have two VA loans at a time, if you have enough entitlement available.

How To Use Remaining Va Entitlement For Additional Loans

The VA loan program is intended to help military service members buy primary residences, so its very unusual that youll be able to take out two VA loans for two homes at once.

But there are some limited circumstances under which you might be allowed to do this. The main one is when someone is posted through a permanent change of station . If that happens to you, you might be able to buy a home near the base to which youre posted and keep your original one, both with VA loans.

If you have enough remaining entitlement leftover after your first VA loan, then you may be able to get a second VA loan for the second home purchase.

Suppose you bought a modest home 10 years ago for $72,000. Thats half of the $144,000 that the $36,000 guarantee on your COE entitles you to. And you could use the other half now.

Of course, its harder today though certainly not impossible to find decent homes in that price bracket. But you can bridge the difference between the home price and your maximum VA loan using savings.

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Second Va Home Loan Scenarios

There are several ways you can capitalize on a VA loan more than once.

First, you could sell your current home that has a VA mortgage and purchase another home with a VA mortgage, says Atapour. Because your first house was sold or is selling at the same time you buy a new home, your VA entitlement can be restored for the purchase of home number two.

The second way is to refinance your existing VA loan into a new VA loan. This can be a good option if you want to lower your interest rate and monthly payment and/or tap into your home equity. You can choose a VA streamline refinance or a VA cash-out refinance loan.

The third way is to carry two VA loans for two different homes at the same time.

Understanding Your Certificate Of Eligibility

Overview of VA home loans and how to apply | VA.gov

The Department of Veterans Affairs guarantees 25% of your loan value. That means, if you default on your mortgage, the lender can recoup a quarter of the loan amount from the VA and this is what enables lenders to offer zero down payment loans with great interest rates and no mortgage insurance.

Before VA loan limits were abolished, most VA loans were capped at $144,000. A quarter of $144,000 is $36,000, which is why most COEs indicate a basic entitlement of $36,000. But VA loan limits no longer exist and if you are able to qualify, your lender can issue you a much larger loan amount.

So that $36,000 is more like a starting point.

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Your Closing Costs Could Be Covered By The Seller

With a VA loan, the seller can pay an unlimited amount of your closing costs and prepaids , including up to two discount points to buy down your interest rate. And they could also pay up to 4% towards your discretion, such as paying off your debts, appliances, etc. All of these terms, however, must be negotiated in your contract with the seller.Some loan options wont allow closing cost assistance, meaning the buyer would be responsible for these up-front expenses. And no other program will allow the seller to pay discretionary costs, which makes VA loans very unique.

Section : Reusing Your Va Loan Benefit

One of the biggest misconceptions about VA loans is that you can use them only once. The reality is this is a lifetime benefit you can use over and over again. Its even possible to have more than one VA loan at the same time.

Something called VA loan entitlement is the key to understanding how this works.

The VA basically insures a portion of every loan it makes. That insurance is reflected in a dollar amount known as entitlement.

How much entitlement you have depends in part on where in the country youre buying. Every time you buy a home with your VA loan benefit, youre using part of your entitlement.

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Why You Can Trust Bankrate

Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. Weve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.

Bankrate follows a strict editorial policy, so you can trust that were putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.

Our mortgage reporters and editors focus on the points consumers care about most the latest rates, the best lenders, navigating the homebuying process, refinancing your mortgage and more so you can feel confident when you make decisions as a homebuyer and a homeowner.

What Is The Va Funding Fee

Can I Use A Va Home Loan More Than Once

This funding fee is one of the few downsides to purchasing with the VA loan.

Luckily, it is minuscule.

The funding fee is 2.3% of the purchase price for first-time homebuyers and 3.6% for any subsequent VA loans.

For a first-time homebuyer purchasing a $200,000 property, this fee is only $4,600!

When added to the loan, this equates to roughly $21.96/month added to your paymentassuming a 4% interest rate.

Im okay paying an extra $10.98/month for every $100,000 I spend on a house if it means I avoid having to pay a 20% down payment!

Also, the dreaded funding fee is waived for any service member with a 10% service-connected disability rating!

Ironically, this means an active-duty service member who is missing a limb will pay a funding fee because they havent received their service-connected disability rating yet. I found a flaw in the system!

Luckily, the 20200101 update for the VA loan states that active duty service members with a Purple Heart will pay 0% funding fee too!

VA Loan Calculator

Take advantage of free VA loan calculators in order to see what your mortgage payment will look like. Most of these will show how much your funding fee will be, too.

There are many VA loan calculators out there, and we are currently building our own which will hopefully be live soon!

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Simple Va Loan Eligibility Explainer

The first step in getting another VA mortgage loan is learning about VA loan eligibility.

Eligible borrowers receive a VA loan entitlement, which allows the veteran to purchase a home up to any price with zero down.

Because of various guidelines, if your home prices is less than $144,000, a portion of your entitlement will be left over. This sometimes makes it possible to keep and rent out your current home and purchase another one. Active military personnel often do this after buying a house in one location and receiving PCS orders for another area.

You can also use the remaining entitlement to buy incomegenerating property of up to four units, as long as you occupy one of them.

Buying a second home or vacation home with remaining entitlement is not permitted. You or your spouse must certify that you will occupy the property as your primary home.

Now heres where it gets interesting.

If you use all of your entitlement to purchase a property, you dont automatically get a second entitlement. But, the moment you sell the property or pay off the mortgage, you can apply to have the full entitlement restored.

Reusing Your Va Benefit

Where the real exception to the rule comes in is if you want to reuse your VA benefit. Normally, once you use your VA benefit, you cannot reuse the entitlement until you sell the home and pay off the loan. If you dont pay it off, and rather keep the original VA loan, but move out of the home, you may be able to reuse your remaining entitlement.

Every veteran starts with $36,000 in entitlement, which entitles you to a $144,000 loan. The VA guarantees 25% of the loan. Since the average home price in many areas is above $144,000, the VA also provides bonus entitlement to help you buy the home you want. The bonus entitlement gives you access to a loan up to $453,100.

If you used some of your entitlement on the original loan, it remains with that home, even if you refinance with the VA IRRRL. Because you refinanced with the IRRRL, though, you may be able to buy another home with your remaining benefit. Lets say you bought a home for $253,100 originally. That leaves you with $200,000 in entitlement for another home after refinancing with the IRRRL program.

If you want to sell your VA home or you want to refinance it and move out, but keep the home, you can do so as long as you qualify for the loan. The VA doesnt require you to occupy the home for a certain length of time. This gives you a little more leeway than you thought with your VA loan benefit.

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About The Va Loan History

The VA loan was created in 1944 as part of the Servicemens Readjustment Act . The intent was to level the playing field for service members who had been away at war while their civilian counterparts were settling down and purchasing homes.

This loan is like the ultimate That you for your military service from the Government!

There are several ways to utilize the VA loan for military real estate investing!

Eligibility requirements for the VA loan are straightforward, but yet often misunderstood.

You may be eligible for a VA home loan if you meet one or more of the following conditions:

  • You have served 90 consecutive days of active service during wartime,
  • Or you have served 181 days of active service during peacetime,
  • Have you racked up more than six years of service in the National Guard or Reserves, or 90 days on active duty during wartime?
  • Or if youre the un-remarried spouse of a service member who died either in the line of duty or as a result of a service-related disability.
  • You are also eligible if youre the spouse of a service-member that is in a missing-in-action or a prisoner-of-war status.

Now, obviously, there are stipulations such as needing to have received a general discharge or better.

If you received a bad conduct discharge or other-than-honorable discharge, it can be reviewedbut this process may take monthsso dont get in trouble!


Are Surviving Spouses Eligible For Va Loans

VA Home Loan Credit Requirements

Surviving spouses of veterans and military personnel can be eligible for a VA loan. To be eligible, at least one of these conditions should be true:

  • The veteran is missing in action
  • The veteran is a prisoner of war
  • The veteran died while in service or from a service-connected disability and the spouse didn’t remarry
  • The veteran died while in service or from a service-connected disability and the spouse didn’t remarry before they were 57 years old or before December 16, 2003
  • The veteran had been totally disabled and then died, but their disability may not have been the cause of death

To buy or refinance a house, the surviving spouse will need a Certificate of Eligibility . The Department of Veterans Affairs website has more information on how to get a COE.

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What Are The Rules For Va Loans

What are VA loan eligibility requirements?

  • Youre currently on active military duty, or youre a veteran who was honorably discharged and met the minimum service requirements.
  • You served at least 90 consecutive active days during wartime or at least 181 consecutive days of active service during peacetime.

Requirements For A Va Home Loan

Essentially, anyone who has served in the U.S. armed forces and was not dishonorably discharged may be eligible for a VA loan, although the specific requirements depend on when you served and what branch of the military you served in.

Heres a quick look at how VA loan requirements compare to typical conventional loan requirements:

Even though the VA will guarantee up to 25% of your loan, the lender is still taking on most of the risk. As a result, lenders often have tighter borrowing requirements than the minimums allowed by the VA.

For example, even though the VA doesnt have a , you shouldnt expect to qualify with a rock-bottom credit score.

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How To Restore Your Entitlement

Homeowners and lenders will need some documentation about the home’s sale in order to get your full entitlement restored.

What typically happens is that lenders will ask for a copy of the Closing Disclosure from your home sale. That settlement statement will have details about your sale price and payoff information for the original VA loan.

With that documentation, a lender like Veterans United can submit a formal application to restore your entitlement through the VA’s online loan portal. Homeowners without a copy of their Closing Disclosure may be able to satisfy the VA with a copy of the home’s warranty deed or even tax records.

That kind of documentation is important because the other key to getting your full VA loan entitlement restored is that you aren’t holding onto the property. In nearly all instances, veterans can’t keep the home for themselves and still fully restore their entitlement.

A common example is when a veteran buys a home with a VA loan but later refinances with another loan type. That conventional or FHA refinance repays the original VA loan in full.

But because the veteran isn’t disposing of the property, they would need to invoke the VA’s one-time restoration of entitlement option in order to fully restore that entitlement. That’s a limited opportunity that comes with some big considerations.

In most cases, veterans will be selling and disposing of their property in order to fully restore their entitlement.

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