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A Quick Guide to Utilizing Your VA Loan Multiple Times

How Many Times Can You Use A VA Loan :

If you have previously taken advantage of a VA loan to buy a house, you are likely familiar with its numerous advantages: competitive interest rates, the absence of mortgage insurance, and no requirement for a down payment. Additionally, veterans who meet certain criteria might be eligible for property tax exemptions from local and state governments.

Are you contemplating purchasing another home soon and curious if you can secure another VA loan, especially if you’ve utilized this benefit before? You may be wondering whether there’s a restriction on the number of times a VA loan can be used. Let’s explore the possibility of obtaining a VA loan more than once.

Is There a Limit to How Often You Can Obtain a VA Loan? 

Eligible veterans, active military personnel, and their widowed spouses have the privilege of accessing their VA loan benefits multiple times. Provided you meet the eligibility criteria for a VA loan and qualify according to a lender’s requirements, there is no cap on the number of VA loans you can obtain throughout your lifetime.

Interestingly, under specific conditions, it is even feasible to hold more than one VA loan concurrently. Details on this will be discussed further in the article.

Exploring VA Home Loans

VA home loans offer a variety of options and carry several benefits, notably eliminating the need for a down payment when purchasing a home.

This absence of a down payment requirement is particularly beneficial for borrowers, especially those buying a home for the first time, as it significantly lowers the barrier to homeownership for eligible individuals.

These loans are guaranteed by the Department of Veterans Affairs (VA), which, while not directly issuing the loans, insures the mortgages provided by lenders. This guarantee reduces the lenders’ risk, often resulting in more lenient terms compared to other mortgage types, such as conventional or FHA loans.

Eligibility for VA Loans 

The VA sets specific eligibility requirements for VA loans based on service duration and periods. Eligibility requires meeting one of the following criteria:

  • A minimum of 181 days of active service during peacetime.
  • At least 90 consecutive days of active service during wartime.
  • Over 6 years in the National Guard or Reserves, or 90 days under Title 32 with at least 30 days consecutively.
  • Being the spouse of a service member who died in the line of duty or due to a service-related disability. Remarriage may affect eligibility, though exceptions exist.

Considerations for a 0% Down Payment 

Opting for a mortgage with a 0% down payment means incurring a higher VA funding fee, a mandatory charge for all VA loans aimed at supporting the loan program’s costs.

First-time VA loan recipients who do not make a down payment are charged a fee of 2.15% of the loan’s value. For subsequent uses without a down payment, the fee increases to 3.3%. Larger down payments result in lower fees. This fee can either be paid at closing or rolled into the loan amount.

Multiple VA Loans 

VA loans are strictly for primary residences and include occupancy rules to ensure compliance.

However, under certain circumstances, it’s feasible to have two VA loans simultaneously for different primary residences. This situation might arise if a service member is reassigned to a new location.

Scenarios for Multiple VA Loans

Imagine receiving reassignment orders requiring you to relocate.

You currently have a VA loan for your home but need another VA loan for a new residence due to the move. If selling your current home proves difficult, or you choose to keep it as a rental property, securing another VA loan for the new primary residence is possible, assuming you meet the credit and financial qualifications. Rental income from the first property might even offset the mortgage costs for the new home, although the amount you can borrow for the second VA loan without a down payment may be limited by your remaining entitlement.

Understanding VA Loan Entitlement 

VA loan entitlement is essentially the portion of your loan that the VA promises to repay your lender if you fail to meet your mortgage obligations.

The VA guarantees loans up to a specific limit, known as your VA loan entitlement. This guarantee comes in two forms: full entitlement and reduced entitlement. Let’s delve into these two categories and how they influence your ability to secure VA loans throughout your lifetime.

Full Entitlement 

You’re eligible for “full entitlement” if you’ve never utilized a VA loan or if you’ve repaid a previous VA loan in full and had your entitlement restored, typically through selling the property and settling the mortgage.

For loans under $144,000, the VA guarantees a maximum of $36,000, also referred to as basic entitlement. Given the housing market prices, homes at this price are rare, so for loans above $144,000, the VA extends its guarantee to 25% of the loan amount. This additional guarantee is often called bonus entitlement or tier 2 entitlement.

Reduced Entitlement 

Your entitlement is considered “reduced” if it’s currently allocated to an existing VA loan or if you have defaulted on a VA loan in the past. This reduction limits the loan amount you can secure without making a personal down payment.

Reduced entitlement may also occur if you’ve repaid a VA loan but still own the home financed by that loan. In such cases, you might be eligible for a one-time restoration of your full entitlement.

Calculating Reduced Entitlement 

For a subsequent VA loan with reduced entitlement, your entitlement is calculated based on the maximum VA loan limit in your area (typically $766,550 in 2024), subtracting any entitlement already used.

Since the VA guarantees up to 25% of the loan, with a reduced entitlement, you could be eligible for up to $181,550 in most areas ($766,550 × 0.25 = $191,637.50) minus any entitlement you’re currently utilizing.

Should the home’s price exceed the VA’s 25% guarantee limit, you’d need to cover 25% of the excess with a down payment.

Example of Reduced Entitlement 1 

Consider you’ve bought a home for $300,000, with the VA guaranteeing 25% ($62,500). Upon applying for a second VA loan, this amount is deducted from your potential maximum entitlement.

With a standard loan limit of $766,550, your maximum entitlement would be $181,550, reduced by the $75,000 used for your current home, leaving you with $119,050 in entitlement. To determine the maximum loan you can obtain without a down payment, this figure is multiplied by four, resulting in a loan limit of $516,550.

Example of Reduced Entitlement 2 

If you’re eyeing a home priced at $600,000, which surpasses your remaining entitlement, you’d need to fund 25% of the shortfall. The gap between the home’s cost and the maximum loan covered by your entitlement is $83,450, requiring a down payment of $20,862.50 (25% of $83,450) to proceed with the purchase.

Securing a Second VA Loan

If your entitlement is not fully available, there are specific conditions under which you can have it fully reinstated. If reinstatement isn’t an option, the remaining entitlement will dictate the maximum loan amount you can secure without a down payment.

“Limitation” in this context does not imply an inability to secure a larger mortgage than what your entitlement supports. It simply means that to obtain a VA loan exceeding your entitlement coverage, a down payment will be necessary. Lenders generally require that 25% of the mortgage amount is guaranteed through your entitlement, a down payment, or both.

Acquiring Another VA Loan Individually 

For those who have repaid a previous VA loan, full entitlement restoration typically necessitates selling the financed property.

Nonetheless, the VA offers a one-time entitlement restoration for individuals who have settled their VA loan but retain ownership of the associated property. This provision applies whether you’ve fully paid off the VA loan and own your home outright or if you’ve refinanced the VA loan into a different mortgage type, such as a conventional loan.

To pursue entitlement restoration, you must apply through the VA. This restoration option can only be utilized once; subsequent entitlement restorations adhere to the standard requirement of selling the property.

Managing Multiple VA Loans 

Receiving Permanent Change of Station (PCS) orders may necessitate maintaining your current VA loan while securing another for a new residence in your relocation area, allowing for simultaneous possession of multiple VA loans.

Your available entitlement is determined by subtracting the entitlement used by your existing loan from your maximum entitlement (calculated as 25% of your county’s loan limit).

To ascertain the maximum loan amount you can secure without a down payment, multiply the remaining entitlement figure by four. For loans exceeding this amount, a down payment equal to 25% of the surplus will be required.

Key Takeaways: Unlimited VA Loan Accessibility with Entitlement Consideration 

Eligible veterans with the capacity to qualify for a VA loan face no restrictions on the number of VA loans they can secure throughout their lifetime.

Nonetheless, specific scenarios may impose limits on the loan amount that can be obtained without a down payment. These include attempting to acquire another VA loan without settling the current one or having repaid a previous VA loan without selling the associated property. In such cases, you might encounter reduced entitlement or need to apply for a one-time entitlement restoration.

If you’re contemplating a VA loan application, initiating the process involves obtaining your certificate of eligibility (COE). We offer assistance in securing your COE and advancing the home buying journey when you apply online today.

 

Reed Letson

Reed Letson

Reed offers two decades of expertise as a mortgage broker, focusing on veterans and first-time home buyers. With a strong grasp of real estate and mortgage markets, he empowers clients with practical insights. Reed's passion is guiding clients to build wealth through real estate investments and financing solutions.

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