You can use VA Loans as many times as you want, but you can only have one active (or maybe two in special circumstances) at any one time. The US military offers excellent benefits as an incentive to recruit people into the armed services and make it their career. These benefits stay with them when they leave the service. If you are on active service or a veteran of the US military, the VA home loan program is an excellent VA benefit enabling you to buy your primary residence with no down payment.
The Department of Veterans Affairs, better known as the VA provides these benefits. The VA loan benefit allows an active duty service member veteran to buy their primary residence without needing to make a down payment. There are government guarantees. Private mortgage insurance isn’t required.
Benefits also come with restrictions to prevent people from abusing the system. The program is designed for primary residences only, although it’s possible to extend the VA loan benefit to cover two properties.
How many times can you use a VA loan?
How long do you have to wait between VA loans?
There is a 210 day minimum period between the time you start making payments on your first loan and the day you can close on the second loan. (5) The industry term for this “timeout” is seasoning.
Is it possible to buy a house with no money down? It’s not only possible, it’s encouraged if you are on active service or retired from the US military. They even make it easy!
The Veterans Administration offers the VA home loan program as an opportunity to use a VA loan to buy a primary residence with no down payment. Buyers pay a VA funding fee to utilize these VA loan benefits.
This benefit isn’t a one-time opportunity or one that disappears. It’s a benefit that can be used over and over. You can have multiple VA loans throughout your lifetime. You can have two VA loans at the same time if you are in the process of buying one house and selling another.
Get other people to pay your mortgage
House hacking is the concept of renting out space to other people who pay you rent to live there. One easy approach is to buy a primary residence that is a duplex or triplex. Another strategy is to buy a house with extra bedrooms and take on roommates who pay rent to live in your extra space. You will need to check on the legality of this arrangement in the town where you live.
What’s the logic behind a VA Loan?
People in the US military are often paid less than people working in the private sector. The years leading up to their discharge or retirement from military service haven’t given them many high-earning years to build up substantial savings. Put another way, they often don’t have the money for a down payment on a house.
Many people would not take a job paying less when they could earn much more in the private sector. Therefore, the military needed to add perks and incentives to encourage people to choose to earn less now with the promise of getting significant benefits in the future. Education is one benefit area. Financing your first home purchase is another.
What about mortgage lenders? Do they want to make a conventional loan with no money down? Banks want to lend money to people who can pay it back. They prefer to lend against hard assets, something they can sell if the borrower defaults. Home mortgages are secured by the house on the property.
The Veterans Administration has a program allowing people in active service and veterans to buy their primary residence with no down payment. Everything the bank lends is a loan, yet the Veterans Administration guarantees about 25% of the loan. This puts the bank in a much better position.
You want to work with a bank or institution that is a VA-approved lender. These are an equal housing lender that follows the rules of the VA loan program.
The VA puts limits on the program. It is to be used for primary residences only. There are caps on the size of the mortgage. These are determined through county by county limits, depending on the local cost of living. You can own two houses, but the VA loan benefits have caps too. These caps are not meant to prevent anyone from buying a house, they simply act as a threshold beyond which the homeowner will need to come up with cash for a down payment.
What costs are associated with a VA loan?
The real estate industry has plenty of costs built into loan origination and closing. When active service personnel and veterans apply for a mortgage, they have the huge benefit of not needing a down payment in many cases. However, they do have costs.
Using the VA loan benefit involves paying a funding fee. This helps pay for the operation of the program. The first time you use VA loan benefits, the cost is 2.3% of the home’s purchase price. If you use the VA loan benefits more than once, the charge is now 3.6%.
Who can get a VA loan?
The Veteran’s Administration loan program was a benefit contained within the Servicemen’s Readjustment Act of 1944, which is commonly known as the GI Bill. (1) It was designed to assist military veterans returning home after World War II.
The loan program benefit is intended for people who served or who are currently serving in the US military. This covers people who served on active duty, but also can include people who served in the Army (and other branches) Reserves and the National Guard. You need to qualify under one of these four criteria: 24 months of continuous service or 90 or more days on active duty or 90+ days if you were discharged (for honorable reasons) or if you were disabled during service, regardless if it was under 90 days.
How many VA loans can you have?
The VA loan program is a benefit you can use over and over again. Because of the transitory nature of military assignments, you might be moved from miliary base to military base over your career in the armed forces. You can’t have more than two primary residences at a time, but you can use the benefit over and over. Put another way, it’s possible to own your own home at each base assignment, taking advantage of the VA home loan benefit.
Are there different types of VA loans?
It might sound like only one loan program is needed, something simple to help people buy their first house. However, there are different needs which are supported by multiple variations of the loan program.
Here are a few examples:
- Home purchase loans. This is what most people think of when they hear about VA mortgages. It’s a mortgage that doesn’t require a down payment and provides special rates and terms to service members.
- Cash out refinance loan option. This is useful for borrowers who own a house long enough that they have paid to own some principal and the property has increased in value. They can refinance their house with a larger VA mortgage and take out cash. You can refinance your current mortgage to take advantage of lower interest rates.
- Interest Rate Reduction Refinance Loan. The fee is 0.5%. It might be as simple as going from a fixed mortgage on your previous loan with a higher rate to another at a lower rate. In a rising interest rate environment you might switch from a variable rate to a fixed rate mortgage.
- Native American Direct Loan. If you’re a Veteran, and either you or your spouse is Native American, the Native American Direct Loan (NADL) program can help you get a loan to buy, build, or improve a home on federal trust land.
The most widely used VA Loan is the Interest Rate Reduction Refinance Loan (831,824 IRRRL loans issued in 2021). However, home purchase loans had the largest average balance $344,274.
Why would I have two loans?
Why would a person in the service have more than one primary residence? The military expects people to immediately go where they are needed. You have a home outside a military base. Then you get reassigned to a different base in another state. You need to report immediately. You plan to relocate your family. The real estate market doesn’t work as fast. It may take time to sell your current house. The real estate market might be in going through a rough time. Maybe you really like the house and the area. You plan to retire there someday. You can retain that house and buy another outside your new base, making use of your VA loan benefit a second time.
What is a VA loan entitlement?
The VA loan benefit is not unlimited. It has restrictions. The government is giving a guarantee, but it’s not unlimited. The limit is called the VA loan entitlement.
What is the full entitlement? The key numbers to know are $ 144,000, $36,000 and 25%. This is the full or basic entitlement. If you took out a loan up to $ 144,000 the government guarantees up to $ 36,000. This comes out to 25%. You may wonder where you are going to find a $144,000 home. If you are taking out a loan beyond the $144,000 threshold, they guarantee 25% of the overage. That’s called Tier 2 or bonus entitlement. (2) This only goes up to the conforming loan limit. More on that in the next section.
Perhaps you have an existing VA loan. Now we get into loan limits. This becomes an issue if you are buying that primary residence outside your new base while still owning that other primary home you haven’t sold yet or want to keep. The Veterans Administration has set loan limits aligned county by county. This is called the county loan limit. In 2022 the number used is often $ 647,200. (3) Where does this number come from? It’s the upper level of conforming loan limits for the Federal Home Loan Mortgage Corporation (Freddie Mac) and Federal National Mortgage Association (Fannie Mae) for 2022.
You can look at buying that second primary residence, you need to subtract the amount of your entitlement that is already currently in use securing the loan on that other property. However, you might have owned that property for several years. You have been paying down the principal balance. The size of the loan the VA is guaranteeing has been getting smaller and smaller.
How to take out a second VA loan
One loan at a time: restore your full entitlement
Maybe you have a previous VA loan. The VA loan program recognizes a service member might need to buy their next home before selling their current home. There are three ways you can restore your full entitlement. The first way is to finally sell your first home, That’s how VA loans were intended to be used, because they assume active duty service members would own only one home at a time, the one where they currently live. That’s the traditional way to restore the full entitlement
The second way is to pay off your VA loan on the first house. You no longer owe any money. You can prove it.
The third way is to refinance the mortgage outside the VA loan guarantee structure. You’ve gone to a bank and gotten a conventional mortgage, a non va loan. The VA doesn’t automatically know this has happened. You need to take the initiative, notify the VA and apply to have the full entitlement restored. The restoration described in the second and third examples can only be done once. The VA expects people to sell one house before buying another.
Having more than one VA loan at a time: figure out your reduced entitlement amount
The first thing to bear in mind is the VA doesn’t prevent you from buying a second house if you still own your first house. They simply set a limit on what they guarantee and what you can buy without making a down payment with your own money. There is a maximum loan amount, above that you are making that doen payment.
Here’s how it works: You start with the maximum loan limit amount, which is set county by county. The 2022 number mentioned above was the 2022 limit of $ 647,200. Multiply by 25%. That’s $ 161,800. Now subtract what you have already used on the loan securing the first house, which you still own. Hold that thought.
Now do a second calculation, taking 25% of the loan you are intending to take out. Keep that number.
Compare the two numbers. The lower of these two numbers is your remaining entitlement.
Can a veteran get a second VA loan?
Yes. Anyone eligible within the VA loan program can get a second loan. It must be for their primary residence and meet the full and remaining entitlement criteria. It cannot be an investment property.
How many VA loans can you get in a lifetime?
There is no limit. It’s a benefit that can be used over and over.
Can I use my VA benefits to buy a second home?
No. The VA loans are meant to be used for your primary residence. You might own two homes because of the lag time involved in selling your previous property. The exception to the rule is holding onto your first home as your intended retirement home, which is allowed within the rules. You could then treat the home you chose to keep as your second home.
Who pays for VA loan closing costs?
The buyer pays the VA loan closing costs since they are the borrower. One that is specific to the program is the VA funding fee. Some of them can be added into the loan, increasing the amount of the mortgage. Others cannot.
Can I buy a vacation home with a VA loan?
No. The VA loan program is meant to finance primary residences only. It is possible to own a second primary residence, but not a vacation home funded by a VA loan.
Have you considered house hacking?
Owning your own home is the American Dream. The VA has made this easier through the ability to buy your primary residence with no down payment. There are VA guarantees on the loan, but you are still expected to make timely mortgage payments. Where will you get the extra cash? Consider rental property.
House hacking is the concept of renting out space to other people who pay you rent to live there. One easy approach is to buy a primary residence that is a duplex or triplex, also known as a two or three-family house. You rent out these two units. You are now a landlord. Their current monthly rent payment help you cover your mortgage payments.
Another strategy is to buy a house with extra bedrooms and take on roommates who pay rent to live in your spare bedrooms. You are sharing the kitchen and bathrooms. You will need to check on the legality of this arrangement in the town where you live.
- The Veterans Administration provides a spectacular benefit to help active and retired service members buy their primary residence with no money down.
- The program has an upfront fee but doesn’t require personal mortgage insurance.
- You can own more than one home if the second is also counted as a primary residence.
- You can have multiple VA loans. They can cover that second property or be used over and over to buy your next house and the one after that.
View Article Sources
- VA Eligibility – Veteran Affairs
- Eligibility Requirements for VA Home Loan Programs – Veteran Affairs
- VA Home Loans – Veteran Affairs
- VA Overview – FDIC
- Lender Statistics – Veteran Affairs
Bryce Sanders is president of Perceptive Business Solutions Inc. He provides HNW client acquisition training for the financial services industry. His book, “Captivating the Wealthy Investor” is available on Amazon. Bryce spent twenty years with a major financial services firm as a successful financial advisor. He has been published in 40+ metro market editions of American City Business Journals, Accountingweb, NAIFA’s Advisor Today, The Register, LifeHealthPro, Round the Table, the Financial Times site Financial Advisor IQ and Horsesmouth.com.