Can I Use a VA Home Loan More Than Once?
If you're a veteran or active-duty service member, you might already know about the benefits of VA home loans. They offer great perks like no down payment, no private mortgage insurance (PMI), and competitive interest rates. But one question that often comes up is, "Can I use a VA home loan more than one time?" The simple answer is yes, you can. Let's dive deeper into the details to understand how it works.
"The true soldier fights not because he hates what is in front of him, but because he loves what is behind him." - G.K. Chesterton, English writer, philosopher, and theologian
Understanding VA Loan Entitlement
Before we get into the specifics of using a VA loan multiple times, it's essential to understand what "VA loan entitlement" means. Your entitlement is the amount the VA is willing to guarantee on your behalf to the lender. There are two types of entitlement: basic and bonus (or second-tier) entitlement.
Basic Entitlement
The basic entitlement is $36,000. Most lenders will loan up to four times that amount without requiring a down payment, so $144,000 is the magic number here. However, given today’s home prices, this is often not enough to buy a home, which is where the bonus entitlement comes in.
Bonus Entitlement
The bonus entitlement, sometimes referred to as second-tier entitlement, kicks in for loan amounts over $144,000. This is particularly useful in higher-cost areas where home prices exceed the basic entitlement limits.
How to Use Your VA Loan Entitlement More Than Once
You can use your VA loan benefits multiple times, and there are a few scenarios where this might come into play:
Paying Off the Original Loan
If you pay off your original VA loan, you can restore your full entitlement and use it again for a new home. This can happen if you sell the house and pay off the loan in full.
Refinancing the VA Loan
You can also use a VA loan to refinance an existing VA loan through the Interest Rate Reduction Refinance Loan (IRRRL) program. This doesn't restore your entitlement, but it does allow you to benefit from potentially lower interest rates or better terms.
Using Remaining Entitlement
If you’ve only used part of your entitlement, you can use the remaining balance to purchase another property. This is particularly helpful if you’re buying a less expensive second home or investment property.
Using Bonus Entitlement
If you have already used your basic entitlement but need to purchase a home in a high-cost area, you can still buy a home using your bonus entitlement. You are now able to go over the $144,000 cap that the basic entitlement sets.
Steps to Reusing Your VA Loan Entitlement
If you’re considering using your VA loan benefits again, here’s a step-by-step guide to help you through the process:
Step 1: Determine Your Entitlement
Check your remaining entitlement by obtaining your Certificate of Eligibility (COE) from the VA. This document will show how much of your entitlement is available.
Step 2: Find a VA-Approved Lender
Work with a lender who is experienced with VA home loans. They can help you navigate the process and ensure you get the best terms possible. The VA Mortgage Vet team has spent nearly three decades serving active-duty military, veterans, and Realtors to help them accomplish their homeownership dreams.
Step 3: Apply for Loan Restoration (if applicable)
If you’ve paid off your previous VA loan and sold the home, you’ll need to apply for a restoration of entitlement. This can be done through the VA’s website or with the help of your lender.
Step 4: Go House Hunting
With your entitlement in place, you can start looking for your new home. Make sure to get pre-approved so you know your budget and can act quickly when you find the right property. Most importantly, work with a Realtor who specializes in working with the military community. It will save you thousands of dollars, in my opinion.
Step 5: Close on Your New Home
Once you’ve found your home and your loan is approved, you’ll go through the closing process. Your lender and real estate agent will guide you through the final steps to get you into your new home.
Real-Life Examples of Using VA Loans Multiple Times
To give you a clearer picture, here are a couple of examples of how veterans have used their VA loan benefits more than once:
Example 1: Moving to a New Duty Station
John, an active-duty service member, used his VA loan to buy a home near his base in Florida. A few years later, he was relocated to Tennessee. John sold his Florida home, paid off the loan, and used his restored entitlement to buy a new home in Tennessee using a VA loan.
Example 2: Buying an Investment Property
Sarah, a veteran, bought her first home using a Kentucky VA loan. After a few years, she wanted to purchase a second property as an investment. She used the remaining balance of her entitlement to buy a smaller, less expensive property without needing to sell her first home.
Common Misconceptions About VA Loans
There are a few myths surrounding the reuse of VA loans that need to be addressed:
Myth 1: You Can Only Use a VA Loan Once
This is not true. As we’ve discussed, you can use your VA loan benefits multiple times, provided you have enough entitlement available.
Myth 2: You Can Only Have One VA Loan at a Time
You can actually have more than one VA loan at a time under certain circumstances. For example, if you have sufficient entitlement and meet the lender's requirements, you can take out a second VA loan.
Myth 3: Reusing a VA Loan is Complicated
While there are steps to follow, reusing your VA loan benefits is not overly complicated, especially if you work with a knowledgeable lender who can guide you through the process.
Conclusion
In summary, yes, you can use a VA home loan more than one time. Understanding your entitlement and how to restore or reuse it is key. Whether you’re relocating, refinancing, or buying an additional property, your VA loan benefits can help you achieve your homeownership goals. The process is manageable with the right information and support, allowing you to make the most of your VA loan benefits throughout your life.
FAQs (Frequently Asked Questions)
Can I use a VA loan to buy a second home?
Yes, you can use your remaining entitlement to buy a second home, provided you meet the lender's requirements and have sufficient entitlement left. Remember, however, that you must live in the second home as your primary residence.
How do I restore my VA loan entitlement?
To restore your entitlement, you need to pay off your previous VA loan in full and sell the property. You can then apply for a restoration of entitlement through the VA or work with your lender to expedite this process.
Can I have two VA loans at the same time?
Yes, it is possible to have two VA loans at the same time if you have enough entitlement available and meet the lender's credit and income requirements.
What happens if I default on a VA loan?
If you default on a VA loan, the VA will pay the lender a portion of the loan balance. However, this can affect your ability to obtain another VA loan in the future unless you repay the VA for the loss. A foreclosure or short sale does not eliminate your eligibility for a new loan, but it might reduce a portion of it.
Do I need to be a first-time homebuyer to use a VA loan?
No, you do not need to be a first-time homebuyer to use a VA loan. Eligible veterans and service members can use their VA loan benefits multiple times throughout their lives.
