VA Loan Second Home Use
Numerous circumstances exist that allow the borrower the opportunity to qualify for an additional VA loan following a foreclosure, bankruptcy or short sale. In fact, the VA has not set a cap on the number of times the VA loan entitlement may be used. The entitlement is restored after previous loans have been paid off. When talking about multiple loan uses, the question of purchasing a second home while possessing more than one loan at the same time often comes up.
Surprising to many is that the possibility of using multiple VA loans at once does, in fact, exist. Qualifying for a second loan in conjunction with the first is contingent upon the service members remaining entitlement and their unique situation.
Military members are allotted two forms of entitlement, basic and bonus. The basic entitlement amount is $36,000 while the bonus entitlement is for $144,000; it is permissible to use both entitlements in connection with each other. Essentially, if the previous home purchase did not drain the borrower of the entirety of their entitlement, they may use the remainder for a second home purchase. Furthermore, when the borrower pays back the original loan, the entitlement is restored.
Aside from the remaining entitlement requirement, a borrower must also demonstrate that purchasing a second home provides a net tangible benefit.
Examples of a net tangible benefit include:
- Moving to a larger home
- Moving closer to work
- Purchasing a home for your spouse if your spouse lives out of state
- Purchasing a smaller home as a result of a divorce or a substantial change of financial circumstance
In understanding allowable second home loan usage, it is important for borrowers to be aware that the VA home loan program is intended to be used for an owner occupied residence. The veteran borrower must certify that the loan purpose will be for their own residence or the residence of their spouse. A primary residence is defined by the owner living in it a minimum of six months and one day out of the year.
The specific restrictions of using a second loan while carrying a first are:
- You cannot use your VA home loan guarantee for more than one outstanding loan at a time.
- You or your spouse must intend to occupy the second home a minimum of six months and one day of the year.
- You may or may not be required to sell, transfer or convey the original home purchased using the VA home loan benefit. You are allowed an exclusion to have your benefit restored on a one-time basis for a new VA loan.