If you’re considering using a VA loan for a second home, there are several factors to take into account. In truth, there are more than just a few considerations. On the positive side, obtaining a second home with a VA loan guarantee is feasible. However, on the downside, the process is not as straightforward as one might anticipate. This is because the VA loan program is primarily designed to assist active military service members and veterans in purchasing a home, which it excels at – being one of the most effective government programs for housing. However, if you wish to utilize it for acquiring multiple properties, clarity is somewhat lacking. Nevertheless, with some research and diligence, navigating this aspect should be manageable.
You can cautiously utilize your VA benefits to buy two homes. While not prohibited by law, it’s crucial to acknowledge and follow the policies set by the VA. This involves understanding regulations regarding occupancy, entitlement, and eligibility. Additionally, it’s recommended to keep a calculator nearby as you may need to perform calculations.
Timing plays a crucial role in meeting the occupancy requirement.
Meeting the occupancy requirement presents the initial hurdle. According to the U.S. Department of Veterans Affairs, when applying for a VA loan guarantee, it’s required that the property be designated as the primary residence. As a result, acquiring a second property with a VA loan effectively establishes the new property as your primary residence, while your previous home assumes the role of a “second home.” To clarify, your former residence now serves as the secondary dwelling, with the new property being the primary residence. This arrangement is completely valid, emphasizing the significance of timing. If you plan to utilize your benefit for a second VA loan guarantee, it’s essential to reside in the second home acquired with the loan.
It’s crucial to remember that although the VA guarantees the loan, it doesn’t directly provide the funds. VA-approved lenders or private mortgage brokers provide the funding. However, the VA’s insurance provides a significant advantage by signaling to lenders that the loan is backed by the VA, which lenders highly value. Lenders are typically cautious about risks, and having the VA endorse your loan reduces perceived risks.
Your ability to effectively manage mortgage payments for both properties determines the feasibility of using a VA loan for a second home.
Occupancy Requirements and Exceptions for VA Home Loans
Regarding occupancy, moving into the new house within 60 days is required. However, exceptions to the occupancy rules exist to address situations like deployments or retirements, where new owners might face difficulties in immediate relocation or might be absent from the residence. These exceptions are as follows:
- Retirement: Purchasing a home well ahead of your retirement date allows up to a year for relocation.
- Fixer Upper: If the house necessitates repairs or renovations exceeding the 60-day timeframe, an exception can be requested.
- Spouses: Your spouse moving into the home while you’re deployed satisfies the occupancy requirement.
- Work Away from Home: If your job entails being away from home, requesting an intermittent occupancy exception is possible.
- Unusual Circumstances: Discuss any other obstacles to your occupancy directly with your loan officer.
Understanding Your COE (Certificate of Eligibility) and Entitlement Limits
In a typical VA loan guarantee, your entitlement only comes into play when buying a property of considerable value. However, if you’re exploring the option of a VA loan for a second home and managing multiple properties and loans, your entitlement promptly becomes a crucial consideration.
When exploring the VA home loan benefit, one of the initial documents you’ll encounter is the VA Certificate of Eligibility (COE). The COE serves as validation to VA loan processors that you satisfy the program’s eligibility criteria.
Upon receiving the COE, it also outlines your VA benefits entitlement, indicating the amount of loan(s) the VA will guarantee. For example, if you have the full VA entitlement—$647,000—your mortgage loan cannot exceed that amount. o stay within your entitlement limit. If seeking two VA loans, their combined total cannot surpass your entitlement. For instance, you might obtain a first VA loan for $300,000. A second VA loan for $346,000, remains within your entitlement.
Things to consider
Upon receiving your COE, either directly or through your lender’s assistance. You may find that your entitlement is listed as $36,000. Considering that the VA guarantees 25% of the total mortgage amount. Multiplying this entitlement by four reveals coverage of up to $144,000 for your mortgage loan. However, this amount may appear insufficient, especially when compared to the median price of single-family homes in the U.S. Which stands at approximately $374,000.
Recognizing the need to adjust to market conditions, the VA implemented revisions to its policies and regulations. As a result, a secondary entitlement was introduced, expanding coverage for home loans up to $647,000. Therefore, if your COE displays two entitlements—basic and secondary—it is because the VA has adapted to accommodate varying loan amounts in response to market demands.
Loan limits
Discussions about VA loan limits may have left you confused, with conflicting opinions adding to the complexity. While some argue against the existence of loan limits, others firmly assert their presence. However, the loan limits frequently cited on websites primarily pertain to entitlement limits. Delineating the extent of insurance coverage provided by the VA for your loan. Contrary to common belief, the VA doesn’t place restrictions on the loan size. You can secure, but rather on the amount it will insure.
For instance, if you own a $300,000 home and contemplate purchasing another property, such as one in Hawaii valued at over $700,000. You’re likely to surpass your entitlement, as full entitlements typically cover approximately $647,000. Consequently, although the VA continues to offer insurance coverage for a portion of your mortgage. It doesn’t encompass the entire amount. In such cases, you’d need to provide a down payment and acquire private mortgage insurance for the portion of the loan exceeding your entitlement.
It’s crucial to grasp that the VA doesn’t limit the borrowing amount. Instead, it defines the scope of its insurance coverage. Actual loan limits are determined by banks or mortgage lenders, who evaluate various factors, including your income and repayment capacity.To ascertain the loan amount they are willing to extend.
Change of Station
For numerous individuals, the notion of owning a second residence might seem lavish, yet for active duty military personnel. Unlike many other occupations, members of the military frequently relocate, shifting from one base to another every few years. These relocations can create situations where a servicemember owns one property but requires another residence on a different base before selling their current home.
Fortunately, the VA loan program is structured to accommodate such circumstances. Through the VA loan guarantee, individuals can hold two mortgages simultaneously. However, it’s crucial to monitor your entitlement to ensure you remain within the permissible limit. Should you surpass the entitlement, anticipate additional costs that are not typically encountered when dealing with the VA.
VA Loan for Second Home as Investment Property
If faced with a change of station, you may decide against selling your previous home and instead opt to rent it out, leveraging the rental income to cover mortgage expenses. This approach is fully supported by the VA program. Moreover, the decision to retain the previous property need not be limited to change of station. Circumstances; you may simply desire to keep it as an investment property. However, if you plan to use the former residence as a rental property. The VA will mandate proof of rental management experience. This may entail demonstrating your ability to manage previous rental units independently or through a property management firm.
It’s essential to remain vigilant regarding occupancy requirements and ensure that your entitlement is sufficient.
Can You Use the VA Loan to Buy a Vacation Home?
The typical answer is no, but it depends on the timing. Buying a new home with the purpose of using it as a vacation home is generally not allowed. However, if you purchase a new property and designate your previous home as the vacation destination. It’s crucial to establish the new property as your current primary residence. Moreover, if military retirement is nearing, acquiring a property in a vacation spot might be considered. In such cases, you have a 12-month period to move in, but upon retirement, it must become your primary residence.
How to Restore Your Entitlement
Managing multiple VA-guaranteed loans necessitates careful attention to understanding and overseeing your entitlement. The VA loan program allows for multiple applications throughout one’s lifetime. It’s crucial to ensure the restoration of entitlement upon mortgage repayment. Providing official notification to the VA upon mortgage completion facilitates the maximization of your entitlement. Whether for securing a VA loan for a second home or pursuing additional VA-guaranteed loans down the line.
Save Money on a VA Loan for Second Home
How does reaching out to Homes for Heroes benefit you? Collaborating with a private lender who comprehends the intricate policies of the VA can significantly aid you. Homes for Heroes provides access to a network of mortgage specialists who possess extensive knowledge of the VA loan program. Moreover, they are dedicated to supporting military members and veterans as a gesture of gratitude for their service.
