When it comes to VA loans, one question that often comes up is, “how many times can you use a VA loan“? If you’re a veteran or a service member who’s eligible for this home loan benefit, knowing the answer is critical. You’ll be glad to know that with VA loans, there are no home loan limits to how many times you can borrow. But, as with all things, the devil is in the details.
How Many Times Can You Take Out A VA Loan?
You might be surprised to know that the VA home loan benefit can be used over and over again, as many times as you need. The catch is that you need to pay off your existing VA loan first before you can take out another one. Or, if you’ve sold your home, your entitlement is restored, and you can use your VA loan benefit again for another property. However, there’s also the option of having more than one VA loan at a time, given certain conditions.
How Many VA Loans Can You Have?
The Department of Veterans Affairs (VA) allows for the possibility of having multiple VA loans simultaneously. This is what’s known as “second-tier entitlement”. Essentially, it means that if you have remaining entitlement from your initial VA loan, you may be able to take out another VA loan without having to sell your current home. Remember, though, that the VA sets certain loan limits on how much you can borrow without a down payment.
How to Take Out a Second VA Loan?
If you’re looking to take out a second VA loan, there are a few requirements you need to meet. First and foremost, you need to be able to demonstrate sufficient income. This means showing that you can afford both your current mortgage and the mortgage on the second property. Secondly, you need to still have some of your VA loan entitlement left over from your first loan. The exact amount will depend on factors like the loan limit in your county and the amount you’ve already borrowed.
And that’s it! With the right information and planning, you could potentially leverage your VA loan benefits multiple times, helping you and your family secure the home (or homes) of your dreams.
What Is A VA Loan Entitlement?
When talking about VA loans, the concept of “entitlement” often arises. But what exactly is an entitlement? Essentially, it’s the loan amount that the VA guarantees to the lender if the borrower defaults. In the context of how many times can you use a VA loan. understanding entitlement becomes crucial, as it can affect the number of times you can reuse your VA loan benefit.
Full entitlement implies that you’re a first-time user of a VA loan or that you’ve fully paid off your previous VA loan and sold the property. Under full entitlement, you’re allowed to borrow up to the home loan limits without a down payment.
On the other hand, reduced entitlement refers to the scenario where you still have an active VA loan or you’ve had a foreclosure on a VA loan. In this case, you won’t be able to borrow as much without a down payment compared to full entitlement.
How To Take Out A Second VA Loan
If you’re considering taking out a second VA loan, you have two primary options, each with its own procedures and considerations.
One Loan At A Time: Restore Your Full Entitlement
By paying off your existing VA loan in full, you restore your full entitlement. This process involves paying off your existing VA loan and selling the property. Once you’ve done that, you can take out a new VA loan up to the conforming loan limit in your county without a down payment.
Having More Than One VA Loan At A Time: Figure Out Your Reduced Entitlement Amount
Under certain circumstances, you might be able to have more than one VA loan at a time. This option hinges on your remaining entitlement from the first loan, which would determine how much you can borrow for the second loan. However, this option might require a down payment depending on your remaining entitlement and the price of the second property.
How Can I Use My VA Loan Benefits Again?
There are two main ways to reuse your VA loan benefits: restoring entitlement after selling and using remaining entitlement for multiple VA loans.
Restoring Entitlement After Selling
Once you’ve sold the property and paid off the VA loan, your full entitlement gets restored. You’re then free to use your VA loan benefits again for another property.
Using Remaining Entitlement for Multiple VA Loans
With enough remaining entitlement, you could potentially take out another VA loan without selling your current home. However, the exact amount you can borrow without a down payment will depend on your remaining entitlement and the county loan limit.
Can Someone Takeover My Original VA Loan?
Yes, it’s possible for someone else to assume (or takeover) your VA loan. In this case, the person assuming the loan must be eligible for a VA loan and the mortgage must be current. Additionally, you would need to request a release of liability from the VA to ensure that your entitlement can be restored after the loan assumption.
What Does VA Loan Entitlement Mean?
A VA loan entitlement signifies the loan portion that the VA commits to repay the lender if the borrower defaults. This guarantee from the VA is essentially your VA loan entitlement. It’s a crucial concept, especially when considering how many times can you use a VA loan
Understanding Full Entitlement
Full entitlement implies that you are either using a VA loan for the first time or you have completely repaid your earlier VA loan and the property is sold. For loans up to $144,000, the VA provides a guarantee of up to $36,000, often referred to as your basic entitlement. However, given the property rates in most areas of the country, the VA extends its guarantee to 25% of the loan value for loans exceeding $144,000, sometimes termed as the bonus or tier 2 entitlement.
The Scenario of Reduced Entitlement
Reduced entitlement comes into play if you already have a VA loan that is yet to be paid off or if you had defaulted on a previous VA loan. This scenario curtails the loan amount you can take without making a down payment. The calculations can get quite complex, so we recommend liaising with a Home Loan Expert for any queries.
You might also encounter reduced entitlement if you’ve repaid a previous VA loan but continue to own the property purchased with that loan. In such cases, you can apply for a one-time restoration of your full entitlement.
While applying for a second VA loan with reduced entitlement, your entitlement value will be the maximum loan limit in your county (generally $726,200 in most areas in 2023), minus the entitlement you’ve already utilized.
In a scenario where the VA guarantees 25% of the loan, it implies that in most regions, you’ll have a reduced entitlement up to $181,550 (25% of $726,200), minus the entitlement currently involved in a loan. If you’re planning to buy a property costing more than what the VA guarantees 25% of, you’ll need to make a down payment equating to 25% of the difference.
Let’s elucidate this with an example. Suppose Alex has a current home that she purchased for $250,000. For this loan size, the VA guarantees up to $62,500 (25% of $250,000). So, when she applies for a second VA loan for a new house at her new duty station, her entitlement amount will be diminished by that much.
The loan limit in her new county is the standard loan limit: $726,200. Therefore, the maximum entitlement would be $181,550. However, we need to subtract the entitlement being used for her current VA loan from that number, which gives us $119,050.
Alex’s remaining entitlement is equal to $119,050. To find out the maximum loan she can take without making a down payment, we need to multiply that number by four, which is $476,200. So, Alex can take a loan of up to $476,200 without making a down payment.
However, suppose Alex discovers a house she wants to buy for $500,000. Since this amount surpasses her remaining entitlement, Alex will need to cover 25% of the portion not guaranteed by the VA, which amounts to $5,950 (25% of the $23,800 difference).
Tips for Using Multiple VA Loans
If you’ve used a VA loan before and want to use another one, here are some tips to keep in mind:
Managing Your Finances and Credit
Managing your finances and credit is essential to ensure that you qualify for another VA loan. Here are some tips:
Improving Your Credit Score
- Pay your bills on time and in full to improve your credit score.
- Keep your credit card balances low and avoid opening new accounts.
- Monitor your credit report regularly and dispute any errors or inaccuracies.
Tips for Using Multiple VA Loans
If you’re considering using multiple VA loans, there are some tips you should keep in mind to make the process go as smoothly as possible. Here are some key things to consider:
Managing Your Finances and Credit
One of the most important factors in getting approved for multiple VA loans is having good credit and managing your finances responsibly. Here are few things to keep in mind about credit score for VA loan:
Improving Your Credit Score
If your credit score is less than ideal, take steps to improve it before applying for another VA loan. This might include paying down debt, making all of your payments on time, and disputing any errors on your credit report.
Maintaining a Good Debt-to-Income Ratio
Lenders will also consider your debt-to-income ratio when deciding whether to approve you for a VA loan. Keep your debt low and your income high to improve your chances of being approved for multiple loans.
Working with a Knowledgeable Lender
Finding a lender who has experience working with VA loans can be invaluable when it comes to using multiple loans. Here are a few things to look for in a lender:
Finding a Lender with VA Loan Experience
Not all lenders have experience working with VA loans, so it’s important to find one who does. Look for a lender who has a solid understanding of the VA loan program and who can help guide you through the process of using multiple loans.
Building a Relationship with Your Lender
Building a relationship with your lender can also be helpful when it comes to using multiple VA loans. By working with the same lender over time, you’ll have someone who understands your financial situation and can help you navigate the complexities of using multiple loans.
Benefits of Using Multiple VA Loans
Using multiple VA loans can offer a number of benefits, including:
Building Wealth Through Real Estate
One of the primary benefits of using multiple VA loans is that it can allow you to build wealth through real estate. Here are a few ways this can happen:
Building Equity in Multiple Properties
By using multiple VA loans to purchase properties, you can build equity in each property over time. This can be a great way to build long-term wealth and create a passive income stream.
Generating Passive Income Through Rental Properties
Using multiple VA loans to purchase rental properties can also be a great way to generate passive income. By renting out your properties, you can earn a steady stream of income each month.
Flexibility and Options
Using multiple VA loans can also offer a lot of flexibility and options when it comes to choosing the right properties for your needs. Here are a few things to keep in mind:
Choosing the Right Property for Your Needs
By using multiple VA loans, you can choose properties that fit your needs and lifestyle. Whether you’re looking for a single-family home, a condo, or a multi-unit property, you’ll have more options to choose from. VA loans for disable veterans are designed to help military service members and their families become homeowners.
Adapting to Changes in Your Life and Financial Situation
Using multiple VA loans can also offer more flexibility when it comes to adapting to changes in your life and financial situation. For example, if you need to move for work or your family’s needs change, you can use a VA loan to purchase a new property without having to sell your existing home.
In conclusion, using multiple VA loans can be a great way to build wealth and create a passive income stream through real estate. By managing your finances and credit responsibly and working with a knowledgeable lender, you can make the process go as smoothly as possible. With the flexibility and options offered by using multiple VA loans, you can choose the right properties for your needs and adapt to changes in your.
How Just Funded Mortgage Can Benefit your VA Loan
Just Funded Mortgage will assist you in the process if you’re interested in obtaining a VA business loan for rental property. Due to our VA loan knowledge, we can assist you in understanding the standards and prerequisites for approval.
Our team of professionals can help you select the ideal lender, obtain prequalification and preapproval, and understand the VA appraisal and inspection procedure. With our assistance, you can be certain that you will be able to obtain a VA business loan that will enable you to fulfill your desire to make rental property investments.
To find out more about how we can help you with your VA business loan requirements, get in touch with us right now.