Your status as a member of the military grants you a wide range of benefits from the Veterans Administration, including the ability to take out a VA loan to purchase a home. VA loan benefits allow you to buy property without a down payment, as the government guarantees a portion of the loan. However, many wonder, “Can you use a VA loan more than once?”
As Houston’s top mortgage broker, we frequently hear this question. In most cases, the answer is “yes,” and you can take out multiple VA loans. This simple guide will help you understand how this works and how to maximize your earned benefits.
What Is a VA Home Loan?
A VA loan is a mortgage loan backed by the government. It’s only available to qualifying members of the armed services and, in some cases, their surviving spouses. The loan program eliminates barriers to homeownership, especially coming up with a down payment.
The benefits of a VA loan include a 0% down payment and no requirement to purchase private mortgage insurance. The government doesn’t make the loan to the home buyer but rather guarantees the loan to the bank. In other words, the VA agrees to repay the loan if the buyer defaults.
Because the VA guarantees the bank won’t lose money on the loan, most lenders offer more favorable terms for a VA loan than they might on a conventional or FHA mortgage, including a lower interest rate. Most borrowers must pay a one-time VA funding fee of 2.15% of the loan amount. Making a down payment of at least 5% eliminates this fee.
Using VA Loan Benefits Multiple Times
It’s rare for anyone to purchase one home and live there for the rest of their lives. Most people eventually end up moving, whether they need more space to accommodate a growing family, want to downsize, need to move to a new city for a job, or any other reasons. When this happens, homeowners using their loan benefits come to us asking, “Can you use a VA loan more than once?”
Although it’s technically possible to use VA loan benefits as often as needed, there are some important caveats. Each service member has a VA loan limit or entitlement. You can take out multiple VA loans as long as you still qualify for the loan and have remaining entitlements.
VA Loan Entitlements
As mentioned, your entitlement is your VA loan limit. It’s not how much you can borrow but how much the VA will pay the lender if you default. The VA backs home mortgages for a quarter of the loan amount. In the case of a $400,000 loan, the VA will guarantee $100,000 of the loan if you default, assuming you have a $100,000 entitlement.
First-time home buyers or buyers who have never taken out a VA loan and anyone who repays a VA home loan in full qualify for an entitlement. The basic entitlement is 25% of loans up to $144,000, or $36,000. However, because most homes cost far more than $144,000, the VA also guarantees 25% of bigger loans as a tier two or bonus entitlement.
If you have a VA loan and want to borrow more money, you must have a remaining entitlement to cover the VA-backed portion of the loan. Selling your current home and repaying the remaining mortgage balance with the proceeds will replenish your entitlement and allow you to take out another VA loan for a new property. You’ll need to file paperwork to prove you paid off the mortgage, but once you do, you can take out a new VA loan without making a down payment.
Reduced Entitlements
Holding a VA-backed loan reduces your available entitlement. If you defaulted on a VA loan in the past, you also have limits on how much you can borrow. You may need to apply for a one-time restoration of your entitlement to purchase another property if you pay off a VA mortgage in full but continue to live in the home. You can also restore the entitlement by converting a VA loan into a conventional or FHA loan.
Applying for a second VA loan with a reduced entitlement is complex. The government will back your loan up to 25% of the loan limit for your county (currently up to $726,200) minus the entitlement you have already used. This could significantly reduce your purchasing power depending on how much you borrowed on the first loan.
If you choose to purchase a home that exceeds the 25% the VA will back, you must make a down payment equal to 25% of the difference. Because the calculation can be complex, it’s best to work with a knowledgeable mortgage advisor to determine your options.
Taking Out Multiple VA Loans
Because the answer to “Can you use a VA loan more than once?” is “yes,” some home buyers wonder whether they can take out multiple VA loans at once. This is slightly more complicated, as the answer depends on several factors.
First, to take out multiple VA loans simultaneously, you need enough entitlement remaining to cover a quarter of the second loan amount. Second, VA loans are for primary residences, so you must live in the home for at least 12 months. You can’t use VA loan benefits to purchase a second or vacation home you won’t live in full-time.
The major exception is for active military members who receive orders to relocate. In these cases, it may be possible to take out two VA loans at once and keep both properties.
Get Help From Champions Mortgage
Managing VA loan benefits can be confusing, and if you wonder, “Can you use a VA loan more than once?” or need help with any other element of home purchase financing, we’re here to help. Call Champions Mortgage in Houston, TX, at (281) 727-2500 to talk with an advisor about minimum mortgage requirements and get started on the path to home ownership.
