Can You Use a VA Loan to Buy a Second Home?

The U.S. Department of Veterans Affairs (VA) offers significant benefits to veterans, active-duty service members, and certain eligible individuals through the VA loan program.

This program is widely known for providing an opportunity to purchase a home with zero down payment and favorable terms. But when it comes to buying a second home, many veterans wonder if they can take advantage of a VA loan again.

The short answer is yes, you can use a VA loan to purchase a second home, but there are specific rules and conditions that must be met. In this article, we’ll explore the possibilities, limitations, and steps you need to take to buy a second home with a VA loan.

Can You Use a VA Loan to Buy a Second Home?

Yes, you can use a VA loan to purchase a second home, but there are specific requirements that need to be met:

Occupancy Requirement

You must plan to live in the home as your primary residence for the majority of the year. Typically, you’ll need to move in within 60 days of closing, though exceptions may apply in certain situations.

Eligibility Criteria

You need to meet the VA loan eligibility guidelines, and your income should be sufficient to cover the mortgage payments for both your current home and the new property.

Loan Entitlement

Your eligibility for a second VA loan may be limited if you’ve already used part of your VA loan entitlement. The amount you can borrow for a second home could be lower based on your remaining entitlement.

Down Payment Requirement

If your loan exceeds your available entitlement, you might be required to make a down payment to cover the difference.

A common scenario where a VA loan is used for a second home is when a service member is transferred to a new duty station. The spouse may buy a home in the new location to move into when the service member returns.

So, while you can buy multiple homes with VA loans over time, each must be your primary residence at the time of purchase, and the amount you can borrow depends on your remaining entitlement.

Understanding VA Loan Entitlement

The VA loan entitlement is the amount of the loan that the VA will guarantee on behalf of the borrower. There are two levels of entitlement:

• Basic Entitlement: Typically covers loans up to $144,000.
• Bonus or Second-Tier Entitlement: Provides additional guarantee for larger loans.

The basic entitlement is $36,000, but most borrowers won’t encounter that limit because VA loans now allow for higher borrowing amounts based on home prices in specific areas. The second-tier entitlement comes into play if you have already used your VA loan benefits but want to use them again for a second home.

Full vs. Partial Entitlement

• Full Entitlement: If you’ve paid off your previous VA loan and sold the home, you will have your full entitlement restored, allowing you to buy another home with a VA loan without any loan limits.
• Partial Entitlement: If you still own a home financed with a VA loan, your remaining entitlement will determine how much you can borrow without a down payment.

Let’s break this down with an example.

Using Your Remaining Entitlement to Buy a Second Home

Even with partial entitlement, you can still use a VA loan to purchase a second home, though you may face limits on the loan amount. Here’s how it works:

• Loan Limits: If your remaining entitlement is less than the full loan guarantee amount, you may need to make a down payment to cover the difference.
• Entitlement Reuse: As long as you haven’t defaulted on your VA loan, you can reuse your VA loan benefits to buy a second home, provided that you meet the eligibility requirements.

VA loans typically don’t have limits for those with full entitlement. Veterans can borrow without a cap on the loan amount, but lenders may impose their own limits based on credit and income.

If you have remaining entitlement (partial entitlement), your loan limit depends on the county loan limits set by the Federal Housing Finance Agency (FHFA), which vary by location.

For 2024, the conforming loan limits (the general limit VA loans follow) are typically around:

• $726,200 in most counties (this is the conforming loan limit).
• Higher in high-cost areas, like Los Angeles or San Francisco, where the limits can exceed $1,000,000.

VA Loan Entitlement Calculation

To calculate your remaining entitlement, you will need to check the conforming loan limit for your county, which varies depending on local housing prices.

The VA guarantees up to 25% of the loan amount, so knowing the conforming loan limits can help you determine how much you can borrow.

Can You Use a VA Loan for an Investment Property?

One of the key limitations of the VA loan program is that it cannot be used to purchase investment properties or vacation homes. The VA loan is strictly for the purchase of a primary residence.

This means you cannot use a VA loan to buy a second home for rental income or as a vacation getaway unless you plan to occupy the home yourself. However, if you already own a home financed with a VA loan and want to rent it out, you may do so under certain circumstances, such as when you are relocating or your family’s housing needs change.

In these cases, you can use your VA loan to purchase a new primary residence while renting out your original home.

Situations Where You Can Use a VA Loan for a Second Home

Here are some common scenarios where you might be able to use a VA loan to buy a second home:

• Relocation for Work or Military Duty: If you are moving due to a job change or a new military assignment, you can use your VA loan to purchase a home in your new location while maintaining ownership of your original home.
• Growing Family Needs: If your family has outgrown your current home and you need to purchase a larger residence, you may use your VA loan to buy a second home.
• Upgrading Your Living Situation: You may want to upgrade to a newer or larger home. In this case, you can keep your original VA-financed home and use your remaining entitlement to buy a second home.

How to Get Approved for a VA Loan on a Second Home

If you’re considering using your VA loan benefits to buy a second home, there are a few key steps to follow:

1. Check Your Remaining Entitlement
   Contact the VA or your lender to verify your remaining VA loan entitlement. This will help you determine how much home you can afford without needing a down payment.
2. Get Pre-Approved
   Before shopping for your second home, work with a VA-approved lender to get pre-approved for your loan. Pre-approval will give you an idea of your loan limit and the type of homes you can purchase.
3. Submit Your Documents
   To apply for a VA loan, you’ll need to submit the necessary documents, including your Certificate of Eligibility (COE), proof of income, and details about your existing VA loan.
4. Occupancy Requirements
   Ensure that you meet the VA’s occupancy requirements. You must intend to use the second home as your primary residence within a reasonable time after purchase.

Frequently Asked Questions (FAQs)

Can I use a VA loan to buy a second home?

Yes, you can use a VA loan to buy a second home, but certain conditions must be met. The second home must be your primary residence, and you need to have remaining entitlement to qualify for another VA loan.

Can I rent out my current home and get another VA loan?

Yes, you can rent out your current VA-financed home and use your remaining entitlement to get another VA loan, provided you meet the eligibility requirements and plan to occupy the new home as your primary residence.

Do I need to sell my first home to get another VA loan?

No, you do not need to sell your first home. As long as you have remaining VA loan entitlement, you can keep your first home and use your VA loan benefits to purchase another property.

How much VA loan entitlement do I need for a second home?

The amount of entitlement you need depends on the loan amount and whether you have full or partial entitlement. You can check your remaining entitlement by contacting your lender or the VA.

Can I use a VA loan for a second home in a different state?

Yes, you can use a VA loan to purchase a second home in a different state, as long as you meet the VA’s occupancy requirements and intend to use the second home as your primary residence.

Is there a limit to how many times I can use a VA loan?

There is no limit to how many times you can use your VA loan benefit. As long as you have remaining entitlement and meet the eligibility criteria, you can continue to use VA loans for future purchases.

The Bottom Line

Using a VA loan to buy a second home is possible under the right conditions, especially if you have remaining entitlement or are relocating for work or military service. By understanding how VA loan entitlements work and ensuring you meet the VA’s occupancy requirements, you can take advantage of the VA loan benefits more than once.

Always consult with a VA-approved lender to explore your options and ensure that you are fully aware of your entitlement status and loan limits.