02 Jun Buying Second With A VA Home Loan
VA home loans are lifetime benefits for eligible military members, reservists, and their family members. Meaning, you can borrow a VA loan as many times as you want.
There are multiple ways to borrow a VA mortgage for the second time. However, before moving on to that, let’s understand VA Entitlement.
VA Loan Entitlement
VA entitlement is the dollar amount the VA guarantees on each loan without a downpayment. This can either be 25% of the total loan amount or $36,000.
Simply put, if you default in any way or are unable to pay back the loan, the department will either pay 25% of the amount you borrowed or $36,000 to your lender.
If we take a deeper look, VA loan entitlement is divided into two parts-
- Primary/Basic Entitlement- As stated above, basic entitlement is either 25% or $36,000. This allows applicants to borrow a loan of up to $144,000 ($36,000 x 4) without a downpayment.
- Secondary Entitlement- While having primary entitlement would let you purchase a home worth $144,000 without any down payment, most Veterans tend to borrow more than $144,000. Keeping this in mind, the VA created secondary entitlement, which provides a total entitlement of $127,600. Meaning, if an applicant has secondary entitlement, he/she can purchase a property worth $510,400 without paying the down payment.
HOW TO QUALIFY FOR A VA LOAN FOR THE SECOND TIME?
To borrow a VA mortgage twice, you can either restore your entitlement or use the remaining entitlement to borrow the loan.
Restoring the Entitlement
There are three primary ways to restore the entitlement and qualify for the VA loan.
- You can sell the VA loan-financed home and repay the department in full.
- Instead of selling the property, you can find a fellow Veteran who can take over your property and mortgage. This will substitute your entitlement.
- You can refinance your VA loan into a non-VA loan, restoring 100% of your entitlement.
Using Remaining Entitlement
As stated above, an applicant with secondary entitlement can borrow up to $510,400 without a downpayment. So, if your first loan was less than $510,400, you can use the remaining entitlement to borrow another.
Example: The VA entitlement is 25% of the loan amount. If your first loan was for $200,000, the VA would guarantee 25% of it, i.e., $50,000.
So, your remaining entitlement would be $77,600 ($127,600-$50,000).
Next, to determine how much loan amount you would qualify for without a downpayment, you’ll need to multiply your remaining entitlement by 4.
In this case, the amount equals $77,600 x 4 = $310,400. This means you would still be eligible for the $310,400 loan amount without down payment for the second time.