How Many Times Can You Use a VA Loan
Have you ever wondered how many times can you use a VA loan? Here at National VA Loans we get that question a lot. Many veteran borrowers who have purchased a home in the past think that they can only use there VA home loan benefit ounce. It’s a common myth that you can only use it once. The good news is that is not the case. It’s true that the benefits might make it seem like a once in a lifetime opportunity. After all, you don’t have to save up for down payment, and don’t have Private Mortgage Insurance to worry about. Add to that the ability to finance 100% of your home’s value and it’s much easier to purchase the home of your dreams. The good news is you are absolutely allowed to use your VA home loan benefit more than once. You may even be eligible to have two VA loans at the same time. What it all depends on is your Entitlement.
How Many VA Loans can I Have at Once?
Another common question we here is how many VA loans can I have at once? Is it possible to have multiple VA loans at one time? The answer is yes in the right situation. For example it is very common when an active duty service member has to move to a new service station or base. They often might have a tough time selling the old home and decide to use it as a rental property. Now that being said there are few things to keep in mind. In order to keep the current home and purchase a new home with no down payment you must have enough in your VA entitlement. It is also important to remember that anytime you purchase a new home with a VA loan that property must be the primary residence. So in the example above this is a situation where the Veteran could possibly keep the older home for an investment property and purchase a new home using his or her VA loan benefits. If you are considering or have questions about purchasing a second home with your VA loan benefits call 855 -956 -4040 to speak with a VA mortgage professional.
WHAT IS MY ENTITLEMENT?
Your Entitlement is the amount of money the VA is willing to guarantee on your behalf to a private mortgage lender. The VA offers a basic entitlement of $36,000 to each Veteran. A lender is usually willing to loan you up to four times that amount – or $144,000. If something happens and you are unable to pay back the loan, the VA will pay 25% of your loan to the lender as a guarantee. However, in many places across the country, it’s difficult to find a suitable home for $144,000. To ease this problem, the VA decided to link the amount it guarantees to the conforming loan limit for conventional financing as stated by the Federal Housing Agency (FHA). Doing that increased the amount available to veterans looking to buy a home. In most counties across the country, the VA will back 25% of your home loan, up to a maximum loan amount of $484,350 (and more in certain high-cost areas). In other words, if you finance a $250,000 home in a county with a limit of $484,350, you are only using a little over 50% of your entitlement.
The VA loan entitlement is yours for the duration of your life. It never expires, and you can use all of it or just some of it. You can even borrow more than the loan limit of $484,350, but most lenders will require some sort of down payment since the VA only backs 25% of the loan limit. Being able to use your benefit over and over is based on how much of your entitlement is available to you, and the reasons behind your wanting to use it again.
ADDITIONAL VA LOANS
How many VA loans can you have in a lifetime? The short answer is as many as you need. However, there are some guidelines set by the VA for those looking to use their entitlement again. The easiest way to think about this is to remember that the entitlement is tied to the mortgage. Keeping that in mind, here are three scenarios where you can re-use your entitlement:
- Sell the property and pay off your current loan in full
- Have your current loan assumed by another veteran
- Obtain a second loan using your remaining entitlement
The easiest and most straightforward way to re-use your entitlement is to sell your home and pay off the first loan. Let’s say you live in a county where the maximum loan limit is $483,350, and you used the entire amount on your first home. If you decide to move, and you want to use your VA benefit again, you’ll need to pay off the entire amount of the first mortgage before you are eligible to use your entitlement again. This makes sense if you remember that the entitlement is tied to the loan. Until that first loan is paid off, the entitlement is not available to use. It sounds easy enough, however the timing could be a problem for some. You can’t overlap the use of the entitlement, so planning the sale of your first home and the purchase of the new home can be challenging. In most cases, you will have a gap between closing on the sale of your first house, waiting for the loan to be paid off, and then applying for a new mortgage. However, for most people the benefits of the VA loan make it worth the extra planning.
Another way you can re-use your entitlement is to have another veteran assume your current mortgage. We’ll continue with the assumption that your current mortgage is at the loan limit of $484, 350. If you put your house on the market and another veteran with their entitlement intact decides to buy it, they can use it to assume your mortgage. This frees up your entitlement to buy another home. But what if someone comes along wanting to assume your mortgage and they aren’t a veteran? You can still choose to do this; however, your entitlement will remain with the original mortgage. For example, say you are 5 years into a 30-year term, and you decide to let your brother, who is not a veteran, assume the mortgage. The loan may move into your brother’s name, but your entitlement is still tied up until the loan is paid off. The prior loan must always be paid off in order to release the entitlement to be used again.
What if you are looking to buy a second home? Can you have two VA loans at once? You can, in certain situations. There is a good chance that when you used your entitlement the first time, you did not use the whole thing. If the loan limit in your county is $484, 350 and you buy a house and finance $250,000 – you still have $234,350 available to you in your entitlement. The VA allows you to buy a second home using the remaining amount of your entitlement and rent out the first home. The most common situation where this arises is with PCS (Permanent Change of Station) orders. The catch here is that you still have to satisfy the VA occupancy rule of primary residency.
The VA states that any property you purchase using your VA loan benefit must be your primary residence. You must be able to show that you will be living in the home full time, and you can’t use your benefit toward an investment property or a vacation home. That being said, what if you bought your first home, used 50% of your entitlement, and 4 months later receive a PCS order to move? The VA knows that military personnel relocate much more than civilians. Because of this, they provide the option to keep the first home and buy a second home to be used as a primary residence in your new location. In the scenario used in the previous paragraph, you used $250,000 of your entitlement leaving $234,350 available to buy a second home. You can do so, and then rent out the first house as needed.
There is one last way you can re-use your entitlement. It’s an exception, and that’s why we did not include it in the three more common scenarios above. If you pay off the loan on your primary residence, the VA will allow you a one-time restoration of entitlement and allow you to keep the house that is paid off. That first property that is paid off has no restrictions – you can keep it as a vacation home, rent it out or keep it vacant. The house that you buy with the one-time only restoration of entitlement must conform to all occupancy requirements, including the one stating that it will be your primary residence.
Restoring Your Entitlement
It’s important to note that the VA does not automatically know that you are entitled to restoration of your entitlement. Your COE (Certificate of Eligibility) will state the amount of entitlement available to you. Be sure to check it, because sometimes it’s not accurate. To bring your COE up to date, fill out VA Form 26-1880 to update the Veteran’s Administration that you have fulfilled the promise of repaying the prior loan. This is the same form that you used to get your original Certificate of Eligibility. If you are seeking a restoration, your lender can help you complete the form. The VA may need to see the final HUD from your previous sale as proof the loan is paid, so be sure to keep all information from the closing of your previous loan someplace safe.
What if the unthinkable happens and you wind up in a foreclosure situation with a VA loan? What does that do to your entitlement? The good news is that historically speaking, the VA does such a good job with eligibility requirements that foreclosure rates on VA loans are extremely low. But anyone can end up in an unforeseen situation. So it’s important to know that there are three situations where you will not be eligible to restore your entitlement: foreclosure, deed-in-lieu of foreclosure, or a short sale. The whole point of the VA home loan benefit is that the government guarantees to the lender you will fulfill your financial obligation. If you fail to do so, you permanently lose your right to any entitlement that was used to back the loan. The only way to restore that portion of your entitlement is to repay that money to the government.
You may have noticed that we said “that portion”. Only the portion of your entitlement that was used to back the loan is lost. Going back to our previous example, if you live in a county with a loan limit of $484,350 and you only financed $250,000 on the foreclosed property, you would still have $234,350 of entitlement available for you to use going forward. Once your credit has recovered from the foreclosure, you are free to buy another home using the remaining amount of your entitlement.
Understanding the VA Funding Fee
The VA funding fee goes directly to the VA to eliminate the cost of the program to taxpayers. It does not come from the lender. It’s thought of as a sort of convenience fee to make up for the fact that there is no down payment or Private Mortgage Insurance (PMI) associated with the VA loan programs. Having the funding fee in place protects the borrowing rights of future service members and veterans. The fee is charged to almost every VA loan that is approved and processed (there are some exceptions), and is calculated using a percentage of the total amount of the loan. If you do decide to use your entitlement more than once, you will pay a slightly higher Funding Fee. You can click here to read about the VA Funding Fee in detail, but for now take a look at the table below:
|Type of Veteran||Down Payment||Percentage for First Time Use||Percentage for Subsequent Use|
|5% or more||1.50%||1.50%|
|10% or more||1.25%||1.25%|
|5% or more||1.75%||1.75%|
|10% or more||1.50%||1.50%|
As you can see, the fee increases by a little over 1% when using your entitlement for a second time. Most veterans still consider the other benefits of the program well worth this additional cost.
VA Refinancing Options
The Veteran’s Administration offers two options if you are interested in pursuing a refinance of your home, but only one of them will affect your entitlement. The IRRRL program (Interest Rate Reduction Refinance Loan) is also known as a VA to VA loan because you are simply reusing the entitlement you have already used. There is no cash out option for this loan, so you can use this program as many times as deemed appropriate with no lasting implications. A Cash-Out Refinance is a different story. A cash out refinance means you replace your current mortgage with a new one that is for more than your existing loan. When you close on the loan, you would get the difference in cash. This is not an additional loan or a second mortgage. It’s a new mortgage with a brand new, higher balance. This type of refinance will be held to all the same guidelines as the original purchase loan, so you will need to have entitlement left to take advantage.
So How Many Times Can You Use a VA loan?
Eligible veterans and military service members are able to use there VA home loan benefits over and over again. There is no limit on how many times you can use your VA loan benefit. This is a benefit you have earned for serving our country, and once you have earned it, it is a life long benefit you can use over and over again. You can restore your entitlement as often as you need as long as you sell the previous property and pay the prior loan in full. In some cases you can even keep your first home and buy a second primary residence if you are required to move for a job or a PCS situation. Everyone’s circumstances are unique, so give one of our VA home loan specialists a call at 855-956-4040 to find out more. We are here to serve you!