Last Updated on May 11, 2023 by Luke Feldbrugge
If you want to use a VA loan for second home, there are a few factors you will need to consider. To be honest, there are more than a few factors. On the plus side, it is possible to get a second home with a VA loan guarantee. On the minus side, it’s not as straightforward as you might hope. That’s because the VA loan program is designed primarily for one thing: to help active military service members and veterans afford a home. And it’s very, very good at that – one of the best government programs for housing. If you want it to do two things, such as purchasing multiple houses, it is less clear. That’s Ok if you don’t mind doing a little homework (pun intended).
If you are careful, you can buy two homes using your VA benefits. It’s not illegal, but you do need to acknowledge and abide by the VA’s policies. That means understanding rules about occupancy, entitlement, and eligibility. And have a calculator ready because you might need to do some math.
Timing is Everything: Occupancy Requirement
Occupancy is the first hurdle. The U.S. Department of Veterans Affairs requires that when you apply for a VA loan guarantee, it must be for the residence that will be your primary home. In terms of timing, buying a second property with a VA loan really means that you are buying a primary residence, leaving your previous home as your “second home.” Let’s say that again: your old house is now your second house and your new house is the one you will live in, i.e. your primary house. This is completely legit, but you can see where timing is critical. If you plan on using your benefit for a second VA loan guarantee, you can’t buy a second home and not live in it.
This is a good place to pause and remind ourselves that the VA guarantees the loan but doesn’t actually lend the money. That comes from VA-approved lenders or private mortgage brokers. The VA’s insurance, however, is a very strong card in your hand. It tells the lender that the VA is backing your loan, and lenders take that kind of insurance seriously. They don’t typically like risk, and you are a lot less risky with the VA on your side.
The whole idea of using the VA loan for second home is contingent on your ability to make the mortgage payments on both properties.
In terms of occupancy, you need to move into the new house within 60 days. The occupancy rules have some exceptions because sometimes, due to deployments or retirements, the new owners can’t move in right away or may be away from the residence. These exceptions are:
- Retirement – If you want to buy a home somewhere well in advance of your actual retirement day, you have up to a year to move in.
- Fixer Upper – If the house needs repairs or renovations that will take longer than 60 days, you can get an exception.
- Spouses – If your spouse moves into the home while you are deployed, that counts.
- Work Away from Home – If your job takes you away from home, you can ask for an intermittent occupancy exception.
- Unusual Circumstances – Talk to your loan officer about other obstacles to your occupancy.
COE and Your Entitlement
In a straightforward VA Loan guarantee, your entitlement only comes into play if you are buying a property with a significant price tag. But when you start looking at a VA loan for second home, and start juggling multiple properties and multiple loans, your entitlement comes into play fairly quickly.
The VA Certificate of Eligibility is the one of the first things you will encounter when you start investigating the VA home loan benefit. The COE is exactly what it sounds like: it verifies to the VA Loan processors that you meet eligibility requirements for the program.
The COE, once you get it, also lists your VA benefits entitlement, meaning it lists how much of a loan (or loans) they will insure. For example, if you have the full VA entitlement– $647,000 – your mortgage loan can’t be over that amount to stay under your entitlement. If you are looking to get two VA loans, the two added together can’t exceed your entitlement. In this case, you could have a first VA loan for $300,000 and then a second VA loan for $346,000.
One warning: If you get your COE, or your lender gets it for you, it might say that your entitlement is $36,000. The VA insures 25% of the total of your mortgage, so you need to multiply that amount by four. That guarantee will cover a $144,000 mortgage loan. If that seems low, it is. Most single family homes in the U.S. cost quite a bit more than that (the median price for a home in the United States is about $374,000).
The VA knew it needed to change the basic total entitlement to keep up with the market. It made some adjustments to its policies and regulations and came up with a secondary entitlement that covered home loans up to $647,000. If the entitlement looks a little funky on your COE, it’s because they are working with two entitlements – basic and secondary.
If you hit the upper limit of your remaining entitlement, which is likely with two mortgages and two properties, all is not lost. You will, however, need to make a down payment if you go over. One of the primary reasons to pursue a VA loan guarantee is to avoid the down payment, so pay close attention to how much of your entitlement you have used, how much you have left, and how much the next home will cost.
You might have heard, or read about, VA loan limits. Some folks say they don’t exist. Others say there are loan limits. It’s confusing. The loan limits most websites talk about are really just the entitlement limits, i.e. what the VA will insure for your loan. In practice, the VA doesn’t limit you to the size of the loan you can get, just the amount it will insure.
So if you have a home that’s worth 300,000 and you need to get another home, say in Hawaii, and that one tops $700,000, you’re probably going to be going over your entitlement because full entitlements cover about $647,000. What does that mean? It means the VA still insures part of your mortgage, but not all of it. In that case, you will need to pay a down payment and private mortgage insurance on the remainder of the total loan amount, i.e. everything that is over your entitlement.
The VA does not limit how much you can borrow, only what it will insure. Real loan limits come from banks or mortgage lenders, and they will be very specific about how much you can borrow from them based on your income and your ability to pay them back.
Change of Station
For most people, having a second home may seem like an extravagance, but for active duty military it is reality they may wrestle with repeatedly. Like few other professions, military personnel move around a lot, going from base to base, often for only a few years. These change of station situations can result in a soldier owning one home, needing to find another home on another base before they can find a buyer for their previous home.
The way the VA loan program is set up, this can be facilitated. You can have two mortgages under the VA loan guarantee at the same time. You just need to keep an eye on your entitlement to make sure you don’t go over. Or, if you do go over, understand that there will be some extra costs involved that you don’t typically pay when you are working with the VA.
VA Loan for Second Home as Investment Property
In the example of a change of station, you may decide not to sell your previous home and just rent it, using the income to help you pay for the mortgage. That too is within the scope of the VA program. In fact, it doesn’t even have to be a change of station situation. You may just want to keep the previous house as an investment property. The VA will, however, want you to prove you have rental management experience if you are going to use a previous residence as a rental property. If you have had a property management company working on previous rental units, that may also qualify.
As always in these situations, keep an eye on occupancy requirements and have enough entitlement.
Can You Use the VA Loan to Buy a Vacation Home?
The general answer is no, but again it’s a matter of timing. If you go out with the intention of buying a new home as a vacation home, that’s a no. But, if you buy a new home and you want to use your previous home as a vacation home, there’s nothing in the way of you doing that. You just need to make sure the new home is your current home, meaning your primary residence. Also if you are close to retiring from the military, you might want to purchase a home that would be in a vacation destination. In that case, you have 12 months to move in, but it will need to become your primary residence once you retire.
How to Restore Your Entitlement
When you are working with multiple VA guaranteed loans, figuring out and keeping track of your entitlement takes some effort. Because the VA loan program can be used multiple times throughout your life, it’s valuable to make sure you restore your entitlement when you pay off a mortgage. Officially communicating with the VA when one of your mortgages is done will let you use your full entitlement as you pursue a VA loan for second home, or even more VA guaranteed loans in the future.
Restoring your entitlement means changing your COE, and there’s a two-page tutorial that explains how to do that, as well as a downloadable form that you will need to access.
Save Money on a VA Loan for Second Home
How does connecting with Homes for Heroes help? Having a private lender on your side and helping you with the sometimes-complex policies of the VA is a step in the right direction. Homes for Heroes has a network of mortgage specialists who are well-versed in the VA loan program. They are also committed to helping military members and veterans as a way to thank them for their service.
“This program rocks. My real estate agent was amazing. As a first time home buyer he provided all the information and assistance I needed.” – Marc, Navy, bought a home in Iowa.
In addition to private lenders, we help you find a great real estate agent, as well as title companies and home inspectors. The whole team will get you from beginning to closing, and once you close on a house, we will send you a Hero Rewards® check that averages $3,000 when you buy a home, $6,000 when you buy and sell, and that can help you with appliances, furniture or renovations. Register online today to speak with a member of our team about how we can assist you and save you some good money in the process.