Did you know the VA allows certain veterans to hold two VA loans at once? While it’s not the norm, it is possible if you meet specific requirements. Essentially, the VA loan is for owner-occupied properties only. It’s a program that helps veterans secure home financing without needing a lot of money for a down payment. But, there are ways you can have two VA loans and be within the VA’s parameters.
The VA Rules
The VA rules state that a borrower must live in the home after closing on a VA loan. The program is not for investment or vacation homes. Remember, the VA guarantees these loans. If the borrower defaults, the VA pays the lender back 25% of the money they lost. The VA has a lot on the line. This is why the program is only for owner-occupied properties. The VA puts their neck on the line in order for veterans to have a place to live. It’s not a program to help anyone invest in real estate or have a second home.
The Exception to the Rule
There are exceptions to the rule. The VA recognizes that circumstances change. A veteran may not be able to live in the home he bought with the VA funds forever. What happens if he gets relocated or outgrows the home? He needs another home. If the veteran wants to keep his original home, though, he can and still get another VA loan for his next home.
Of course, there’s a catch. You may not be able to get as large of a loan the second time around. There are two reasons:
- The amount of entitlement you have left
- The loan amount you qualify for and can afford while still holding the original mortgage
Each qualified veteran gets the same entitlement. There’s basic and then bonus entitlement. Basic entitlement is $36,000. It entitles veterans to a $144,000 loan ($36,000 x 4). Not everyone can buy a home for $144,000 though. That’s where the bonus entitlement happens. Veterans can secure a loan up to the maximum conforming amount. Today, this means $453,100. Veterans get a bonus entitlement of $77,275, for an additional loan amount of $309,100.
If you qualify to buy another home with your VA benefits, you can only use the benefits you have left. Here’s an example:
You bought a home with your VA benefits for $200,000. You used up $50,000 of your entitlement. You still have:
$113,275 – $50,000 = $63,275 left
This means you can secure a $253,100 loan ($63,275 x 4) without putting any money down.
But, just because you are entitled to a loan of this size, doesn’t mean you qualify for it. You must prove that you can afford the loan alongside your original VA loan if you are not selling your current home and paying off the VA loan.
Eligibility for Two VA Loans
So how does the VA differentiate who can have two VA loans and who cannot? It’s on a case-by-case basis, but they look at the reason you are buying another home.
If your job relocated you or your station of duty changed, you must prove you cannot commute there daily. Generally, if it’s more than a 50-mile commute, you qualify. You must prove to the VA that this is the case, though. They will not just take your word for it.
If you outgrew your home, you may qualify to keep your current home and buy a bigger one. Let’s say you bought a 3-bedroom home initially, but you only had one child then. Today, you have 4 children and cannot live comfortably in the 3-bedroom home. The VA would likely grant you the exception to use your remaining entitlement towards your new home.
Before you take on two loans, make sure you can comfortably afford them. Not only do you have to cover the principal and interest on both loans, but also the taxes and insurance for each home. The lender will take into consideration these loans, plus your other monthly expenses. They must make sure you have enough disposable income each month to comfortably afford the cost of daily living.
If you qualify, you can have two VA loans at once. Once you use up your entitlement, though, that’s it. You’ll have to pay off one loan and sell the home that has the entitlement tied to it before you can reuse any portion of your entitlement again.Click to See the Latest Mortgage Rates»