For veterans and active-duty service members, the VA loan benefit offers an excellent opportunity to purchase a home without a down payment, enjoy competitive interest rates, and avoid private mortgage insurance (PMI).
However, many may not realize that this benefit can be used multiple times throughout their lives. Whether you’re buying a second home, refinancing an existing VA loan, or even holding multiple VA loans simultaneously, the VA loan benefit provides flexibility for veterans and service members.
In this guide, we’ll explore how you can reuse your VA loan benefit, restore your entitlement, calculate down payments when entitlement is limited, and manage multiple VA loans.
Table of Contents
Can You Use a VA Loan More Than Once?
Yes, you can use your VA loan benefit more than once. The VA loan benefit is not a one-time opportunity. Veterans and active-duty service members can take advantage of the benefit multiple times, provided they have remaining entitlement or restore their entitlement after selling or paying off a home.
The key factor in using your VA loan benefit multiple times is understanding VA loan entitlement, which determines how much of the loan benefit is available for future home purchases.
What is VA Loan Entitlement?
VA loan entitlement is the amount that the Department of Veterans Affairs guarantees to the lender in the event of a default. Entitlement is a crucial part of the VA loan process because it dictates how much you can borrow without making a down payment. There are two types of entitlement:
VA Loan Entitlement
| Type | Entitlement Amount | Home Price Range |
|---|---|---|
| Basic | Up to $36,000 | Up to $144,000 |
| Bonus | Over $144,000 | More than $144,000 |
Note: Bonus entitlement allows borrowing without a down payment on higher-priced homes, even with an existing VA loan.
Understanding Second-Tier Entitlement and Real-Life Example
Second-tier entitlement is particularly useful when a veteran has already used their basic entitlement and still wants to take out another VA loan. It allows eligible veterans to have two VA loans at the same time for two different homes, provided they meet the entitlement and occupancy requirements.
Real-Life Example:
John, a Navy veteran, bought his first home using his basic entitlement. He receives Permanent Change of Station (PCS) orders and needs to relocate to another duty station. John wants to purchase a new home in his new location while keeping his first home as a rental property. By using second-tier entitlement, John is able to purchase his second home without needing a down payment.
However, if John’s remaining entitlement is insufficient, he would need to make a down payment. Here’s how to calculate it.
Financial Implications of Multiple VA Loans
When a veteran has remaining entitlement, they can use it to purchase another home with a VA loan. However, if the remaining entitlement is not sufficient to cover 25% of the loan amount, a down payment will be required. Here’s how to calculate the required down payment.
Calculating the Required Down Payment:
- Determine Remaining Entitlement: Find out how much entitlement you have left by checking your Certificate of Eligibility (COE).
- Calculate 25% of the Loan Amount: Multiply the loan amount by 25%.
- Subtract Remaining Entitlement: Subtract your remaining entitlement from 25% of the loan amount.
- The Result is the Down Payment: The result is how much you’ll need to put down.
Example Calculation:
- Loan Amount: $400,000
- Required 25%: $400,000 × 0.25 = $100,000
- Remaining Entitlement: $50,000
- Down Payment: $100,000 – $50,000 = $50,000
In this scenario, the veteran would need to make a $50,000 down payment because their remaining entitlement only covers half of the required 25%.
How to Restore Your VA Loan Entitlement
Restoring your VA loan entitlement is crucial if you want to reuse your VA loan benefit for future home purchases. There are several ways to restore entitlement, each depending on your current situation.
Methods for Restoring Entitlement:
| Restoration Method | Process |
|---|---|
| Sell the Home | Sell the home, pay off the loan, and apply for full entitlement restoration. |
| Pay Off the Loan | Pay off the loan and apply for a one-time restoration while keeping the home. |
| Foreclosure or Short Sale | Resolve outstanding debts and apply for entitlement restoration. |
1. Sell Your Home
The most common way to restore your entitlement is by selling the home you purchased using your VA loan. Once the loan is fully paid off through the sale, your entitlement can be restored. After the sale, you will need to submit VA Form 26-1880 to apply for full entitlement restoration.
2. Pay Off the Loan
If you wish to keep the home but pay off the loan, you can apply for a one-time restoration. This option allows you to use your VA loan benefit for another home purchase without selling the first property. This method is commonly used when a veteran wants to keep their original home as an investment or rental property.
3. Foreclosure or Short Sale
In cases of foreclosure or short sale, you may still be able to restore your entitlement. However, you will likely need to repay any remaining balance on the loan before your entitlement is fully restored. While foreclosure and short sale may temporarily affect your ability to use your VA loan benefit, they don’t permanently disqualify you from obtaining future VA loans.
Bankruptcy and Entitlement Restoration
How Bankruptcy Affects Your VA Loan Eligibility:
If you’ve gone through Chapter 7 or Chapter 13 bankruptcy, you may wonder how this impacts your VA loan eligibility. While bankruptcy can affect your credit score and ability to obtain financing, it does not permanently bar you from using your VA loan benefit.
- Chapter 7 Bankruptcy: Veterans must wait two years after a Chapter 7 discharge before becoming eligible for a VA loan again.
- Chapter 13 Bankruptcy: Veterans may be eligible for a VA loan one year after making timely payments under a Chapter 13 repayment plan, provided they receive approval from the bankruptcy trustee.
Impact on Entitlement:
In some cases, veterans may have used their VA loan benefit before declaring bankruptcy. While bankruptcy itself does not eliminate the entitlement, any outstanding debt on the previous VA loan must be resolved before entitlement restoration can occur.
VA Funding Fee: What You Need to Know
The VA funding fee is a one-time payment required when you use a VA loan. The fee helps fund the VA loan program and ensures that future veterans and service members can access the benefit. The funding fee varies depending on whether it’s your first time using the loan or a subsequent use, and whether you make a down payment.
Funding Fee Breakdown:
| Usage | Down Payment | First-Time Use Funding Fee | Subsequent Use Funding Fee |
|---|---|---|---|
| No Down Payment | 0% | 2.15% | 3.6% |
| 5% Down Payment | 5% or more | 1.5% | 1.5% |
| Exemptions | Any | Veterans with disabilities are exempt |
The funding fee can be paid upfront or rolled into the loan amount, allowing you to spread the cost over the life of the loan. Veterans with service-connected disabilities are exempt from paying the funding fee, which can result in significant savings.
Refinancing with a VA Loan
Another way to use your VA loan benefit more than once is by refinancing an existing VA loan. The VA offers two primary refinancing options:
1. VA Streamline Refinance (IRRRL)
Also known as an Interest Rate Reduction Refinance Loan (IRRRL), this option allows you to refinance your current VA loan to lower your interest rate and monthly payments. The IRRRL is a simple process that requires minimal paperwork and no appraisal, making it an attractive option for veterans who want to reduce their mortgage payments.
Who Should Use IRRRL?
Veterans looking to lower their interest rates or monthly payments without significant upfront costs should consider the IRRRL option. It is especially useful when interest rates drop significantly, allowing veterans to save money over the life of the loan.
2. VA Cash-Out Refinance
A VA Cash-Out Refinance allows veterans to refinance their current mortgage (whether it’s a VA loan or not) and take out equity from their home. The cash can be used for home improvements, paying off debt, or other financial needs. The VA Cash-Out Refinance is a popular option for veterans looking to leverage the equity in their homes for financial flexibility.
Who Should Use VA Cash-Out Refinance?
Veterans who need to access cash for large expenses, such as home repairs or debt consolidation, should consider a VA Cash-Out Refinance. It’s also a good option for veterans who want to refinance out of a non-VA loan into a VA loan to take advantage of better terms.
Loan Limits and Entitlement Restoration
| Category | Details |
|---|---|
| Full Entitlement | No loan limits; borrow without a down payment. |
| Partial Entitlement | Loan limits vary by county (e.g., $765,600 in 2024). |
| Restoring Entitlement | Sell the home or pay off the loan to restore full entitlement. |
| Foreclosure/Short Sale | Repay any remaining loan balance for restoration. |
| One-Time Restoration | Pay off the loan but keep the home to use your VA loan again. |
Frequently Asked Questions (FAQs)
1. Can I use my VA loan more than once?
Yes, veterans and service members can use their VA loan benefit multiple times as long as they have entitlement available or can restore their entitlement.
2. Can I have multiple VA loans at once?
Yes, it’s possible to hold multiple VA loans at once if you have remaining entitlement or use second-tier entitlement. The second home must be your primary residence.
3. Do I have to sell my home to reuse my VA loan benefit?
No, you don’t need to sell your home. You can pay off the loan and apply for a one-time restoration of your entitlement, allowing you to keep the home and buy another.
4. What is the VA funding fee for subsequent uses?
The VA funding fee for subsequent uses is 3.6% of the loan amount with no down payment required. Veterans with service-connected disabilities may be exempt.
5. Can I refinance my VA loan more than once?
Yes, you can refinance your VA loan multiple times, either through a VA Streamline Refinance (IRRRL) or a VA Cash-Out Refinance.
6. What happens if I go through a foreclosure or short sale?
Even if you experience a foreclosure or short sale, you can still use your VA loan benefit in the future. You may need to restore your entitlement by repaying any outstanding loan balances.
The Bottom Line
The VA loan benefit is a powerful tool that veterans and active-duty service members can use repeatedly to finance home purchases, refinance existing loans, and even hold multiple VA loans. By understanding how entitlement works, how to restore it, and how the VA funding fee applies, you can maximize the value of this benefit throughout your life.
