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How to get a second VA home loan

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You already bought a home using a VA loan. Now, you might be asking yourself whether you can get a second VA home loan. The answer is yes, but before you apply, it’s important to understand how your entitlement benefit works, what you’ll pay for a funding fee and a range of other considerations.

How many VA loans can you have?

So long as you have remaining entitlement (more on that below), access to a VA loan is a lifelong benefit. There are different scenarios that typically involve an additional VA loan:

  1. You’ve already purchased a home with a VA loan, then sell that property, restore your entitlement and buy your next home with a new VA loan. In this scenario, you can ultimately have as many VA loans as you want throughout the course of your life, provided you sell each home and move.
  2. You refinance from one VA loan into another.
  3. You have two or more VA loans for different homes at the same time.

There are several ways you can capitalize on a VA loan more than once. If you sell your current home, you can restore your VA entitlement to purchase your next home.

You don’t always have to sell your house or move to take advantage of another VA loan, though. You can refinance into a new VA loan to lower your interest rate and monthly payment, which can be done with a VA streamline refinance, also known as a VA IRRRL. Another option is a VA cash-out refinance loan, which involves more paperwork but can help you tap your home equity.

The third way is to carry two VA loans for two different homes at the same time. This is possible — it often happens when an active service member receives Permanent Change of Station orders — but it’s important to remember that a VA lender will need to approve you having multiple loans. Essentially, you’ll need to show that you have the means to pay both of the loans back at the same time.

VA mortgage entitlement explained

VA loan entitlement is the amount of money the VA will guarantee on a home loan. This helps determine how much you’re allowed to borrow before needing a down payment. Entitlement protection encourages lenders to offer VA loans with lower rates, no down payment and easier guidelines to qualify.

If you have full entitlement, you are no longer subject to loan limits, a cap the Department of Veterans Affairs (VA) did away with in 2020.

However, if you have partial entitlement, your situation is a bit trickier. The basic entitlement amount is usually either $36,000 or 25 percent of the loan amount up to the conforming loan limit. Currently, $647,200 is the limit in most areas of the country, but it’s higher in some markets, up to $970,800. Then, you have a bonus entitlement, which is 25 percent of the $647,200 cap.

Let’s say you currently have a $200,000 loan, which means that $50,000 (25 percent) of your entitlement is being used. Now, you want to carry two VA loans. You’re already using $50,000 of entitlement. Now, you have a bonus entitlement of $161,800 (25 percent of the conforming limit), but you’ll have to subtract the $50,000 first. This leaves you with $111,800 in entitlement for the second loan.

That doesn’t mean you can only borrow $111,800, though. It means you could get a loan of $447,200, because the VA guarantees to pay 25 percent back to the lender if you default.

Determining your remaining entitlement can be confusing, but the main takeaway is this: If you have full entitlement, there’s no limit to the VA loan amount, and you won’t need to make a down payment provided you qualify with the lender. If you have remaining entitlement questions, you can call the VA at 877-827-702 to talk to a home loan representative. The customer service center is open Monday through Friday from 8:00 a.m. to 6:00 p.m. Eastern Time.

How to get second VA loan

Getting a second VA loan will likely feel quite similar to your first VA loan. Here’s a rundown of the key steps involved:

  1. Request your certificate of eligibility. This will prove to lenders that you’re qualified to receive a VA loan, and it’ll also help you understand how much of your entitlement benefit is available for use. You can get it online through your benefits portal or by reaching out to your regional service center. You might also need your discharge papers.
  2. Determine if you want to restore your full entitlement. If you’re planning to buy a new home, you might want to think about selling your current home to get your full entitlement benefit.
  3. If it’s a refinance, figure out what’s more important: more money or less work. If you’re simply thinking about refinancing your mortgage, consider which loan is better for you: a cash-out refinance or a VA IRRRL.
  4. Get your finances in order. While the VA doesn’t have a minimum credit score requirement, VA lenders typically do. So, if you’re planning to apply for a second loan, be sure to review your credit report, pay off credit cards and take other steps to demonstrate you’re equipped to pay your new monthly mortgage payments.

Buying vs. renting using entitlement

What about renting your home while you’re trying to buy another one with a VA loan?

“This might occur if, for example, you are stationed at a different location but don’t want to sell your existing home. In this case, you decide to rent out your existing property and buy another one,” says David Reischer, an attorney in New York City.

There’s a catch: You can’t convert your primary residence into a rental and buy a similar-sized home in the same location. The second home would have to be a larger residence for a growing family, or would have to be in a different area.

“You would not be able to use any of that rental income to reduce your debt-to-income ratio when applying for the second VA loan,” says Yvette Clermont, mortgage consultant with Pewaukee, Wisconsin-based Inlanta Mortgage. “But that rental income may help offset your mortgage payment, helping you qualify for the second VA loan.”

Second VA loan impact on funding fees

The funding fee is an inescapable expense on VA loans, and you could wind up paying more for it on your second loan. If you make a down payment less than 5 percent of the purchase price the second time you take out a VA loan (and any other time after), the funding fee will be 3.6 percent. If you can make a down payment of more than 5 percent or more than 10 percent, though, the funding fee comes down to more affordable levels of 1.65 percent and 1.4 percent, respectively.

Restoring your VA mortgage entitlement

Remember: You have an entitlement limit, but you can get your entitlement restored by selling your home and paying off the VA loan in full. If your loan is merely paid off or refinanced and you still own the home, the entitlement amount remains tied up in the home.

Fortunately, there’s an exception: You can request a one-time restoration of entitlement benefit, even if you’ve not met the VA’s must-sell rule.

Say the buyer of your home for sale is a veteran who takes over your existing VA mortgage (called an “assumption”).

“You can ask this person to substitute his or her entitlement for the same amount of entitlement you originally used. If they agree, your original entitlement will be restored,” says Clermont.

If the buyer doesn’t agree, the entitlement you used to buy the home will remain tied up in the property until the new owner fully repays the loan.

Forfeiting your VA loan entitlement forever

It’s possible for you to lose your VA loan entitlement permanently. This can happen if you default on your VA loan, the lender forecloses and sells your home for less than you owe and the VA has to reimburse the lender. In this scenario, the VA’s payment to the lender is deducted from your entitlement, and you can’t get it back.

This is also true of a short sale, in which your home is sold at a loss. Unfortunately, you can’t use your one-time restoration of entitlement benefit in the case of a short sale or foreclosure.

Written by
David McMillin
Contributing writer
David McMillin is a contributing writer for Bankrate and covers topics like credit cards, mortgages, banking, taxes and travel. David's goal is to help readers figure out how to save more and stress less.
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