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For veterans, military members, and eligible family members, taking out more than one Veterans Affairs (VA) loan can be a good option for financing a home after selling another or if you’re posted to a new base. military and you need to move.
Whatever the reason, here’s what to know when considering borrowing more than one VA loan.
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What are VA loans and who is eligible?
VA loans are home loans for eligible veterans, military members, and surviving spouses to buy a home with no down payment, no private mortgage insurance (PMI), and low credit score requirements. Being a member of the armed forces by itself is not enough – other requirements include active duty or honorable discharge status.
How many times can I take out a VA loan?
You can take out a VA loan a seemingly unlimited number of times. However, VA financing fees — fees charged by the VA to secure the loan — may be higher after the first home loan, depending on the amount of your down payment.
For example, if you deposit less than 5% of your loan amount, you will pay 2.3% on the first use versus 3.6% for the second time and beyond. However, if you pay 5% or more of the loan amount, you will pay the same VA financing fee whether it is your first or seventh loan.
However, you may be exempt from paying VA financing fees if any of the following conditions apply:
- You are eligible (but instead receive retirement or active duty compensation) or receive compensation for service-related disability.
- You are the surviving spouse of a veteran who died while serving, or from a service-related disability or totally disabled. You must be receiving Dependency and Indemnity Benefit (DIC) to qualify.
- You are a service member with an ongoing assessment or compensation eligibility memorandum due to a pre-release request prior to the loan closing date.
In addition, you may seek reimbursement of VA funding costs if you receive VA compensation for a service-related disability after the closing date if awarded retroactively.
Related: VA Loan Closing Costs: Everything You Need to Know
How many VA loans can I have at a time?
Generally, you cannot take out more than two VA home loans at a time, as you are expected to reside or have resided in a house to take out a VA mortgage. This can happen when selling a house to buy another, or if you keep a house and then buy a house when it is assigned to another military base. However, you cannot borrow VA loans for investment properties in which you do not live.
When you borrow money to buy the second home, your VA eligibility is reduced by the amount owed on the first mortgage. For example, in Phoenix, the limit is $647,200. So if your current mortgage is $400,000, you could potentially borrow up to $247,200 (the difference) on your second home.
When it comes to a second VA loan, there is always a maximum amount you can borrow in total between the two homes. If you need more than the VA home loan limit, you may want to consider refinancing the first home mortgage into a conventional loan and then using the VA loan for the second loan. You can get a seemingly unlimited number of VA loans if you pay off a VA loan and sell the house before taking out the next mortgage.
How to get a second VA loan
You can use a VA loan to buy a new home or refinance your old mortgage. If you have paid off a previous loan on a property that you still own or have sold, you will need to complete and submit an Application for Certificate of Eligibility (COE). If you still own the home, you can only have your full eligibility restored once.
You will need to include proof that the VA loan is repaid. You should also include proof that the house has been sold if it was to expedite the process. Once your eligibility is restored, you will need to bring the COE to the VA lenders you are considering.
Can someone take over my original VA loan?
Someone can only take responsibility for your VA home loan if the other person is also a VA-eligible veteran, service member, or surviving spouse. Assuming liability is normally done when you sell your home, but on the condition that someone continues to pay your mortgage.
Keep in mind that if the person assuming your loan defaults, you won’t have to repay the loan, but you lose eligibility for a new VA loan unless it’s repaid.
When a VA loan is a good idea and when it’s not
If you qualify, a VA home loan is a good idea for most. Among other benefits, VA loans do not require a down payment and may have lower interest rates.
But there are times when it might not be the right choice if:
- You have excellent credit and can find a loan with a lower interest rate that is not a VA loan, like a conventional home loan.
- You do not have enough VA loan eligibility remaining for the new home you are buying. You may want to refinance your first VA loan to a conventional loan to re-establish your eligibility for a new VA home loan.
If you can qualify for a VA loan with a good interest rate, this may be the right choice. But you need to weigh your options carefully before deciding on the best loan for your situation.