Moving around is a fact of life for many military families. You get settled into one place for a few years, and then your new orders come and you’re off to a new city.
That can be a great way to see the country — but it can make homeownership challenging, especially if you’re only a few years into your VA mortgage.
Fortunately, the U.S. Department of Veterans Affairs (VA), which insures VA loans, makes provisions for that.
In some cases, you can take out a VA loan for a second home as you move to your new base. Here’s how.
What's in this Article?
What types of homes can I buy with a second VA loan?
The number one rule when it comes to VA-acceptable properties is that the home must be your primary residence, not a vacation home.
As we refer to a “second home” in this article, we mean “additional primary residence” not “vacation home.”
If you’re in the market for a second VA loan, you must plan to live in your new home full-time, meaning at least six months out of the year.
As long as you meet that criteria, you can use a second VA home loan to purchase several different types of properties:
- Single-family houses
- Manufactured homes
- Multifamily properties with up to four units
You can’t buy an investment property with a VA loan, either. But you can purchase a multifamily property as long as you’ll live in one of the units. You can rent out the other units for extra income.
If you keep your first home after you move to the new house, you can turn the first into a rental property as well.
There are any number of reasons you might need a new house: new orders, a divorce, even relocating during retirement.
How do I qualify for a second VA loan?
To qualify for a second VA loan, you’ll need your Certificate of Eligibility (COE) from the VA.
The COE verifies your VA eligibility: whether you meet the minimum service requirements for VA borrowers and how much entitlement you have remaining.
There are a four ways you can buy an additional home with a VA loan.
Option 1: Use your remaining entitlement
VA entitlement is the dollar amount the Department of Veterans Affairs will guarantee on each VA home loan. It helps determine how much a veteran can borrower without a down payment.
VA entitlement is typically the greater of $36,000 or 25% of the loan amount.
If you used your VA loan entitlement to buy your first home and the loan is still open, you might have remaining entitlement.
With partial entitlement, also known as “bonus entitlement,” you may be able to buy an additional house with no down payment, depending on:
- The original purchase price of the current home
- The county loan limit where the current home is located
- Price of the new home
- The county loan limit where the new home is located
Here’s the math, based on examples provided by the VA.
Things to know before we start:
- Your available entitlement drops by 25% of the home price when you buy a home
- You don’t lose the unused portion of entitlement
- You can use remaining entitlement for the second home
- VA loans don’t have loan limits, but they do use conforming county loan limits for entitlement calculations
With all that said, here we go with our example!
|First home purchase price||$200,000|
|Entitlement used for first home||$50,000 (25% of the purchase price)|
|Current home’s county loan limit||$600,000|
|Maximum entitlement that was available for the first home||$150,000 (25% of the county loan limit)|
|Remaining entitlement for this veteran||$100,000 (The $150,000 available entitlement minus the $50,000 used)|
Before we go on, let’s revisit what we know:
- The veteran did not use all the entitlement available to her
- She can buy a home that is four times her remaining entitlement amount (more on that later)
|Second (additional) home purchase price||$300,000|
|County loan limit where second home is located||$600,000|
|Full entitlement||$150,000 (25% of the county loan limit)|
|Entitlement used on the first home||$50,000|
|Entitlement available for the second home||$100,000 ($150,000 – $50,000 already used)|
|Maximum new purchase price with zero down||$400,000 (4 X $100,000)|
The veteran has enough entitlement to buy the $300,000 second home with a zero-down VA loan. That’s because her home price can be up to four times the remaining entitlement amount.
As a shortcut, just know that if you bought a low-priced home in a high-limit county, you may have enough remaining entitlement to buy again. Check your COE and talk to your lender to find out your exact remaining entitlement amount.
Option 2: Make a down payment
If you don’t have enough entitlement remaining, you’ll have to put some money down.
Remember that the VA “guarantees” 25% of the loan amount. This means it will pay the lender up to 25% of the loan amount if the borrower defaults.
As such, lenders require 25% “coverage” for zero-down VA loans.
It can get that coverage from VA, or it can get it from you in the form of a down payment.
Let’s say you had $50,000 entitlement remaining. You could buy a $200,000 house – four times the entitlement amount.
But you want to buy a $250,000 house. You can’t do it with zero down in this case. But you could come up with a down payment.
Home price: $250,000
Maximum loan amount with remaining entitlement: $200,000
Down payment required: 25% of $50,000, or $12,500
So if you have some remaining entitlement, but not quite enough, consider making a down payment for 25% of the difference.
You may be able to use gift funds or down payment assistance to cover the difference.
Option 3: Refinance the existing VA loan into a non-VA loan, or pay it off
If you have no entitlement available, you won’t be able to take out another VA loan until the current mortgage is paid off. Once it’s paid off by your own funds or refinanced into a non-VA loan, you can request a restoration of entitlement from the VA. Keep in mind that you can only do this once if you plan to keep the first home.
Option 4: Sell the home
If none of the above options work for you, you can always sell the home. If the loan is paid off in full with the sale, you can request an entitlement restoration. You can request entitlement restoration as many times as you like as long as you sell the home each time.
How can I find out how much entitlement I have left?
The COE shows how much entitlement you have left. You can request your COE through the VA’s ebenefits portal.
If you have remaining entitlement, the COE will update to reflect the left over amount. It will have two lines, the entitlement amount and what was charged previously.
Want a faster way to get your COE? Ask your loan officer to pull it when you apply for the loan. They can access it within a few minutes and save you the extra step.
I paid off my current home, but my COE doesn’t show full entitlement. What can I do?
If you bought a home with a VA loan and it’s paid off in full, your COE may not show full entitlement. That’s because the VA doesn’t automatically restore your entitlement when you pay off a VA loan and keep the home. You need to apply for a one-time restoration of entitlement.
To apply, fill out VA Form 26-1880 here.
Although there’s no limit to how many times you can use your VA entitlement, you can only apply for a restoration of entitlement to buy a second home once. (This is why it’s called a “one-time restoration.”) You also must have paid off the loan in full, which typically happens by refinancing the VA loan into another loan type, such as a conventional mortgage.
How many times can I use a VA loan?
You can use a VA loan as many times as you want. However, If you want to buy a third home using a VA loan, you will need to have sold the previous properties. The VA does not want you building a real estate portfolio using VA loans, but is okay with veterans moving and selling the home they are leaving.
VA loan for a second home FAQs
Yes, you can use a VA loan to buy a second home, as long as it will be used for your primary residence.
This sometimes happens because you bought a home near a post or base, but your duty station is changing.
Your COE needs to show that you are qualified and have full or partial entitlement to purchase a second home.
If the COE shows no entitlement, it could be because you purchased a home with a VA mortgage and haven’t paid it off yet. Once you do pay it off, you will have entitlement again.
The VA home loan program is one of the best mortgages around, because it offers advantages other mortgages don’t. You can get a VA loan with a 0% down payment, for instance, while conventional mortgages require a minimum of 3% down, but up to 20% down for the most advantageous terms.
Other VA home loan benefits: There are no loan limits if you have full entitlement, and you may be able to get a loan with competitive interest rates and terms if you have a less-than-stellar credit score.
Finally, VA loans don’t require monthly mortgage insurance. Conventional loans require private mortgage insurance (PMI) if you don’t pay 20% down. That could mean hundreds of dollars per month in extra cost.
Yes. It depends on how much of the first loan you’ve paid off and your remaining entitlement on your COE.
If your COE indicates no entitlement, you may have to pay off your first VA loan before getting another one.
Make your move
If you’re ready to buy your next home, and you’re an eligible veteran, active-duty servicemember or surviving spouse, you may be able to use a second VA loan for the new mortgage.
A down payment is required if the borrower does not have full VA entitlement or when the loan amount exceeds the VA county limits. VA loans subject to individual VA Entitlement amounts and eligibility, qualifying factors such as income and credit guidelines, and property limits. Fairway is not affiliated with any government agencies. These materials are not from VA, HUD or FHA, and were not approved by VA, HUD or FHA, or any other government agency.
Some references sourced within this article have not been prepared by Fairway and are distributed for educational purposes only. The information is not guaranteed to be accurate and may not entirely represent the opinions of Fairway.