5 min read Apr 10, 2024

VA Loan for Second Home: How Does It Work?

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Megha Mulchandani

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Megha Mulchandani

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Megha M. is an adept content editor well-versed in the intricacies of American market dynamics and economic trends. In her free time, she excels as a versatile theatre artist and public speaker.

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VA offers home loans with zero-down payments, low interest, and lenient debt requirements. As of January 10, 2024, interest rates for VA loans are 6.30% for a 30-year fixed period.

However, using a VA loan for a second property can be complicated, but it is possible. You must adhere to the occupancy requirements and VA entitlements to buy a second property.

🏠 VA Loan for Second Home

  • Every veteran gets a bonus entitlement that covers 25% of the loan amount if they default.
  • The VA loan limit for most U.S. counties in 2024 is $766,550, a considerable increase from $726,200 in 2023.
  • You can restore your entitlement only once by filling out Form 26-1880.

Can You Use a VA Loan for a Second Home?

Yes, buying a second home with a VA loan is possible. However, VA loans are primarily available for the purchase or refinance of primary residences. You must fulfill VA occupancy requirements to qualify and obtain a COE from the VA.

What Is VA Entitlement?

The VA entitlement is the amount the government pays the lender if the borrower defaults. Each veteran is eligible for a veteran’s allowance of $36,000. This amount is calculated based on the average home price of $144,000.

Most houses typically cost more than $144,000. This is the point at which bonus entitlement is relevant.

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What Are Bonus Entitlements?

Apart from your basic entitlement of $36,000, VA will also cover 25% of your loan as a bonus entitlement for your first house. However, if you want to buy a second home with a VA loan, you must have 25% of your loan amount left as your entitlement.

Since VA will only cover the amount left in your entitlement, you will have to pay the remaining amount in the form of a down payment on your own.

Remaining Entitlements

The calculation of a down payment can be complex as it is based on the conforming loan limits of your area and your present loan limits. As of 2023, conforming loan limits for most parts of the US is $766,550.

The VA does two calculations to determine if you have enough entitlement. Suppose you want to buy a house worth $600,000, and you’ve used $80,000 of your entitlement. The first calculation will be based on the local loan limit.

$766,550 x 25% – $80,000 = $111,637.5

The second calculation will be based on your loan amount.

$600,000 x 25% = $150,000

Your remaining entitlement is $111,637.5, which is $38,362.5 less than the required entitlement. Hence, to qualify for a second home through a VA loan, you must pay $38,362.5 as a down payment to the lender.

How to Restore Your Entitlement?

Once you’ve paid off one VA loan, you automatically become eligible for a one-time restoration of your entitlement. You can again use this entitlement to purchase another primary home. To avail of this benefit, all you have to do is fill out Form 26-1880 with the VA.

Can You Use a VA Loan for a Vacation Home?

It is impossible to use a VA loan for a vacation home. However, if you’re planning to take a permanent vacation, like retirement, then you can get a VA loan.

Nonetheless, you can only purchase a retirement home after applying for retirement in the next 12 months. Moreover, you don’t have to move into the property until you’ve retired. In that sense, it can be your vacation home for one year before you retire.

Can You Use a VA Loan for Investment Property?

You cannot use VA loans for investment properties because their main purpose is to fund the purchase of primary residences. Nonetheless, if you’ve lived on the property for 12 months, you can use it as an investment property. However, you must fulfill other occupancy requirements.

Apart from this, you can purchase single-family homes and multi-unit homes through VA loans. The VA does not prohibit you from renting out extra spaces in your home as long as you’re occupying it as your primary residence.

Bottom Line

VA loans don’t allow you to purchase a second home or an investment property. However, you can still do so by converting your primary residence after you’ve lived on it for enough time.

Apart from this, you can use your VA property as an investment unit by renting out extra rooms and spaces.

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Frequently Asked Questions

Can you have two VA loans at the same time?

VA loans are mainly for primary residences, so yes, you can have two VA loans at the same time for two primary residences.

Can you transfer a VA loan to another property?

No, you cannot transfer your VA loan to another property or any other person. This is because the property has to fulfill VA loan requirements, which may not be the case while transferring the mortgage to another property.

Can you use a VA loan for a rental property?

You cannot use VA loans for investment or rental properties directly. However, you can rent out extra units if you have a multi-unit home.

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