By Gary Schwind
VA loans are a great resource for many active and retired military personnel. They allow those who have served in the military to purchase a home without a down payment, which is one of the big initial hurdles when trying to purchase a home. The lack of a down payment is one of the reasons a VA loan is often a better option for veterans than a standard loan. A frequently-asked question about VA loans is whether a person is allowed to have more than one VA loan at a time. Even a lot of veterans don’t realize that they can have a second VA loan if they qualify for it.
Why would someone need a second VA loan?
Military personnel get transferred frequently. However, getting transferred to another station doesn’t mean that a serviceperson has to sell his or her existing home. It is possible to keep that existing home and rent it out while securing a loan for a home in the new station. Even if a veteran or active serviceperson is simply looking for an investment property like a lot of savvy investors, a second VA loan is possible.
In most parts of the country, veterans looking to secure a VA loan have an entitlement of $36,000 (although it may be higher in some areas where the median cost of a home is higher). This is the amount that is guaranteed to the lender in the unfortunate event that someone defaults on a VA loan. In addition, there is a second-tier entitlement that can be used by veterans attempting to secure a second loan. The second-tier entitlement is $70,025, although it is not thoroughly explained on the Certificate of Eligibility. What this means is that between the two loans, the serviceperson has an entitlement of $106,025.
There is a catch, however. One of the benefits of a VA loan is that you can purchase a house with no down payment. That can change if you are approved for a second VA loan. Between the two loans, if the entitlement amount is exceeded, a 25% down payment is needed to cover the amount not met by the entitlement. It should be noted however, that even if you haven’t exceeded your entitlement, you still need to qualify for the loan.
Mortgages can be confusing under any circumstances. Trying to figure out the terms and conditions of two VA loans only makes things that much more difficult. Before entering into another VA loan agreement, you will need your Certificate of Eligibility. This is a statement showing the amount you are eligible to receive for the loan, although it may not give you a complete picture of your situation in trying to get a second loan. Once you have this, you will probably want to speak with a veterans-loan specialist to help you figure out all the ins and outs of securing another loan. A veterans-loan specialist will be better able to help you figure out how any previous VA loans might impact the new one.