How Does A Va Loan Second
Most eligible military personnel and veterans are aware of the multiple benefits afforded by the VA home loan program including the ability to buy a home with no down payment, lower mortgage rates and no monthly mortgage insurance. What you may not realize is that you may be able to use your second-tier VA entitlement to own more than one home simultaneously or to qualify for another mortgage even after you defaulted on your original VA loan.
For example, if you already own a home with a VA loan and you are transferred to a different city, you may be able to use the VA program to buy a new home in your new city while maintaining ownership of your current home. You could decide to rent out your current home to offset your housing costs including your mortgage payment, property tax and insurance.
To understand how to use the VA program to buy multiple homes, you need to know how the VA entitlement works. In short, all eligible applicants receive an entitlement that equals how much of your mortgage the VA insures in the event you cannot repay your mortgage.
Calculating your entitlement is a little tricky because it is made up of two parts. The primary, also known as basic, entitlement is $36,000, and the secondary entitlement varies by location and the number of units in the property. The secondary entitlement may also change on an annual basis if property values change.
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Va Loan Eligibility Requirements
How do you know if you are eligible to get this benefit? If you are an Active Duty Service Member, Veteran or a former or current member of the National Guard/Reserves, you are most likely eligible for a VA home loan. Each military category has a set of minimum service requirements which change based on which years were served.
For the Gulf War , service requirements are as follows:
- 24 months of continuous active-duty with other than dishonourable discharge
- 90 days or completed full term that was ordered to active duty with other than dishonourable discharge
- 90 days active duty, but discharged for hardship, convenience of the Government, early out, a RIF , or a compensable service-connected disability
- Less than 90 days active duty is allowable if you were discharged for a service-connected disability Service During Peace Time
If you were separated from service after September 7, 1980 :
- 24 months of continuous active duty with other than dishonorable discharge
- At least 181 days or completed full term of active duty with other than dishonorable discharge
- 9At least 181 days of active duty and discharged for hardship, convenience of the Government, early out, a RIF , or a compensable service-connected disability
- Less than 181 days active duty is allowable if discharged for a service-connected disability
How Many Times Can You Take Out A Va Loan
Qualifying active-duty service members, veterans and surviving spouses can use their VA loan benefit as many times as theyd like throughout their lifetime. As long as youre still eligible for a VA loan and are able to qualify with a lender, theres no limit to how many of these mortgages you can take out over the course of your life.
In fact, its even possible to have more than one VA loan at the same time in certain circumstances.
VA mortgage loans are available to those who have served our country in the armed forces and, in some cases, their surviving spouses. They come with many benefits, chief among them being that you dont need to make a down payment to purchase a home. Because the down payment is often the biggest hurdle to homeownership for borrowers, especially those who are first-time home buyers, VA loans can make homeownership much more accessible for those who qualify.
These loans are backed by the Department of Veterans Affairs . The VA doesnt issue these loans itself, but rather insures mortgages given by lenders. This reduces the risk to the lender, meaning that VA loans often come with more attractive terms than what youd get with other loan types, such as conventional loans or FHA loans.
The VA has different eligibility requirements for VA loans depending on when and for how long you served. You can learn more at VA.gov.
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Can I Restore My Entitlement
If you have used all or part of your entitlement, you can get that entitlement back to purchase another home if the following conditions are met:
- You sell the property and pay the loan in full, or
- A qualified Veteran assumes the outstanding balance and agrees to substitute their VA entitlement for yours.
- You utilize the VA’s one-time restoration of entitlement. This is a one-time use where you’ve paid off the VA loan but decided to keep the property.
One-time restoration of entitlement is not automatic. You must apply for it by completing and returning VA Form 26-1880 to any VA regional office or center.
Previously Used Entitlement Restoration
Veterans that have used their entitlement in the past, but are looking to buy another home are offered the ability to restore their entitlement. An entitlement restoration can only occur in certain circumstances. The veteran must meet current income, occupancy, and credit requirements. In order to restore a previously used entitlement, the previous VA-guaranteed loan must be paid in full. The veteran must also agree to pay the outstanding balance left on the VA loan.
There are special cases, in which a past entitlement can be restored without meeting the basic criteria. A veteran may receive entitlement restoration if the past VA loan has been paid in full or if the loan will be paid off at closing. Another special case for entitlement restoration is when the veteran has paid the prior VA loan but has not disposed of the property securing the loan. In this case, they can use tier two entitlement.
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Va Entitlement For A Second Va Home Loan
The VA loan program entitles qualified military homebuyers to a 25% guaranteeessentially backing the $0 down loan to reduce the risk for VA lenders. This guarantee means that even in the event of a default, lenders will retain 25% of the original loan amount.
The funds provided for this guarantee are called entitlement. The basic VA loan entitlement is $36,000 and a second tier of entitlement is also available, generally set at $91,600. For most VA homebuyers, that means a total of $127,600 is available to cover the 25% guarantee. Buyers in high-cost counties will see higher limits.
Let’s take a look at how VA entitlement comes into play when you’re hoping to get a second VA home loan.
What Is Va Second
People that serve in the military are accustomed to moving to a new location and changing homes on a rather frequent basis. This kind of constant change can play havoc on a persons financial plans. For this reason, the Veterans Administration provided the VA Second-Tier Entitlement in order to alleviate some of the problems that come with moving from house to house in a short period of time.
Definition of VA Second-tier Entitlement
In plain terms, the VA second-tier entitlement allows a qualifying veteran to have two VA mortgage loans at the same time. Normally, this is not allowed by the VA guidelines for lending. However, a second loan is allowed in specific situations.
Most Common Scenario
In the case of a qualifying veteran or currently enlisted military member, if the person has a VA mortgage for their primary home and they receive word that they are being transferred to a new post, the most simple thing to do would be to sell the existing home and then buy a different property at their new post.
But the veteran may choose to keep their current home and rent it out. They could then use the VA mortgage to buy a 2nd home at their new primary residence.
Understanding How the Math Works
Throughout America, veterans that qualify for a VA loan based on their service receive $36,000 for the primary entitlement. They also receive $91,600 as a secondary entitlement. Those two numbers combined equal $127,600 in total entitlement.
Full Example
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Va Loan Assumed Entitlement May Or May Not Be Restored
if you sell your house before it is paid off the buyer can assume the VA loan. The buyer may use your entitlement to assume the mortgage. If this happens you can’t get another VA loan until your first one is paid off.
If you sell your house to a veteran they can use their entitlement to get a VA loan, if this is the case you are free to use your VA loan again.
Example Of When Youd Have More Than One Loan At A Time
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 her new 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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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 cant or just dont 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 isnt automatic. You need to formally submit an application for a Substitution of Entitlement to the Department of Veterans Affairs.
How Do You Have Got Two Va Loans Simultaneously
It is not an occurrence that is everyday. But you will find circumstances that enable veterans to own several VA loans in the time that is same. a typical situation involves a VA home owner who has got to relocate to a different responsibility place but desires to keep and book his / her main residence. But homebuyers that are veteran turn to try this, too.
A couple years later for example, lets say you bought a $200,000 home at your current duty station and get PCS orders. As opposed to offer your home, you need to rent it away and buy once more during the brand new responsibility place utilizing your staying entitlement.
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Can You Use A Va Loan More Than Once
Yes, you can use a VA loan more than once. You can use it twice, three times, four or even more. The VA loan is a lifetime benefit, and you can use it as many times as you need, as long as you have remaining VA entitlement.
VA entitlement can be a confusing subject but know it’s possible to restore some or all of your VA loan entitlement. And in some cases, it’s even possible to take a second VA loan without selling your home.
What Is A Va Loan Entitlement
Every Veteran and active service member who meets the VA’s service requirements has something called a VA loan entitlement.
Entitlement can be a bit confusing, even for those working in the mortgage industry, but the most common definition is that its a specific amount the Department of Veterans Affairs will repay a mortgage lender if the borrower fails to make their payments . This protection is called the VA loan guaranty.
Eligible Veterans in most parts of the country enjoy the following:
- Primary entitlement: $36,000
- Secondary entitlement: $68,250, available when buying a home for more than $144,000.
In more expensive housing markets, there are usually higher entitlement amounts.
Let VAMortgageCenter connect you with a home loan specialist to guide you through your entitlement questions and calculate your remaining entitlement.
When a qualified borrower purchases a home through the VA loan program, they use some or all of their entitlement. The VA typically guarantees a quarter of the loan amount, so borrowers usually utilize a quarter of their entitlement when purchasing.
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My Bank Says I Have Zero Eligibility
From my experience many banks do not understand how to calculate eligibility for a second VA loan. Additionally, when banks try to look up your VA certificate it will sometimes appear that you have zero eligibility remaining.
I initially tried to get a second loan with Pentagon Federal and they were adamant that I had already used my VA loan. I even talked to a supervisor and could not convince them of the process for a second VA loan. I finally cut my losses and went with Navy Federal who understood it completely.
How Can You Have Two Va Loans At Once
It’s not an everyday occurrence. But there are circumstances that allow veterans to have two or more VA loans at the same time. A common scenario involves a VA homeowner who has to relocate to a new duty station but wants to keep and rent out his or her primary residence. But veteran homebuyers can look to do this, too.
For example, let’s say you bought a $200,000 home at your current duty station and get PCS orders a couple years later. Rather than sell the home, you want to rent it out and buy again at the new duty station using your remaining entitlement.
Here’s how the math works, assuming you’re buying in another county with the standard VA loan limit:
$548,250 x 25% = $137,062 Maximum Guaranty
$137,062 – $50,000 = $87,062 Entitlement Available
$87,062 x 4 = $348,248 Maximum Loan Amount With No Down Payment
So, in this example, you could look to borrow up to $348,248 before needing to factor in a down payment. Anything above that amount would require a down payment of 25 percent of the excess.
Having a renter locked into a lease who will cover those old monthly payments can go a long way toward making this work.
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Va Loan Bonus Entitlement
Bonus entitlement picks up where basic entitlement leaves off. For example, if you purchase a home for $500,000, you’ll use $125,000 in VA loan entitlement. Of the $125,000, $36,000 is basic entitlement and $89,000 is bonus entitlement.
Those dollars figures may not mean a lot to first-time homebuyers, but those subsequently purchasing a home may need to pay closer attention.
One Loan At A Time: Restore Your Full Entitlement
If youve previously had a VA loan that youve already paid off, youll typically also have to sell the home to have your full entitlement restored.
However, the VA allows for a one-time restoration of full entitlement for homeowners who have paid off their VA loan but still own the property they used the loan to purchase. This can be used in circumstances where youve either finished paying off your VA loan and now own your home outright or youve refinanced your VA loan into a different loan type, such as a conventional loan.
Youll have to apply for entitlement restoration through the VA. You can only use this type of restoration once in the future, youll have to follow the standard rule of selling the property before you can have your entitlement restored.
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Compare Top Va Purchase Lenders
Take the guesswork out of finding a VA Loan provider. Veterans United Home Loans created this site to educate and empower military homebuyers. Regardless of what lender you pick, it’s always a good idea to compare and know your options.
- NMLS # Loading Reviewsâ¦
- ranks No. 1 in Customer Ratings for VA purchase lenders, according to ratings and reviews collected by TrustPilot.
- In , closed 0 VA Purchase Loans, which was 9% of all VA Purchase Loans closed nationwide last year.
Other Considerations For Using A Va Loan To Buy A Second Home
For your first VA loan residence that youre renting out, most lenders will require you to have a lease signed and a security deposit to cover the first VA loan mortgage payment. Even though having that renter helps, you cannot use the additional income to help qualify for the second VA Loan.
Remember, you cant use the second VA loan as an investment property. You must meet the VA occupancy requirement, which will require you to occupy the home within 60 days of purchase.
What if youve previously experienced a short sale or a foreclosure? The second tier entitlement makes it possible to purchase after theseprovided the loss has been repaid and you still have entitlement left over after that purchase.
Even if you cant use the second VA loan for a vacation property or an immediate rental property, there are still loads of benefits to being able to use your VA loan more than once. Having the ability to purchase homes at multiple bases can set you up for awesome success. Be sure to talk to your favorite lender and take advantage of this wonderful benefit!
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