If you bought a home with your VA benefits, you probably think you can’t get another VA loan. Technically, you are right – you are only supposed to have one VA loan at a time. However, the VA allows a one-time exception that makes it possible to have two VA loans at once.
We’ll tell you how below.
Your First VA Loan
If you used your first VA loan to buy your home and you’ve decided you don’t want to live there anymore, you may be able to get the VA to agree to an exception. Technically, you aren’t supposed to be able to reuse your VA entitlement until you sell your home and pay the loan off in full. The VA may grant you an exception for any of the following reasons:
- You outgrew your home’s size. This often happens with starter homes. As families expand, they run out of room and need to move.
- Your job relocated you. If you have to commute an unreasonable distance, you may want to move.
- The military reassigned you. If you are still active in the military and your assignment changes, you may need to purchase a home closer to your new assignment.
If the VA approves your situation, allowing you to use your remaining entitlement on another VA loan, you’ll have to refinance your first VA loan. You must refinance it with the VA Interest Rate Reduction Refinance Loan. This simple refinance program refinances your first mortgage with only a mortgage payment history and proof of a net tangible benefit to qualify. Unlike the purchase VA loan, you don’t have to prove that you’ll live in the home as your primary residence.
Getting the Second VA Loan
If you are able to get the VA’s approval, your next step is to figure out if you have enough entitlement to buy another home. Just because the VA gives you the ‘all clear’ to buy another home doesn’t mean you can reuse the entitlement.
The entitlement on your first VA loan remains with it. You can’t reuse that entitlement until you sell that home and pay the loan off in full. If you didn’t use your full entitlement though, you may use whatever is left to buy another home.
In 2019, the VA allows veterans entitlement of $484,350. If you only use $200,000 of that entitlement, you’d have $284,350 left to use to buy another home. If you are able to find a home that costs less than or equal to the entitlement you have left, you won’t need a down payment. If you find a home that costs more than your entitlement, you’ll have to make a down payment. The down payment you usually have to make is 25% of the difference between the purchase price and your entitlement.
Qualifying for 2 VA Loans
Now everything we discussed above had to do with being eligible for two VA loans. This doesn’t mean that you automatically qualify for two VA loans. You still have to prove that you qualify for them.
The VA has relaxed guidelines, but you must meet the following:
- 620 credit score
- 43% total debt ratio (this includes both mortgage payments)
- Stable income and employment
- Proof that you’ll live in the home as your primary residence
- Proof that you haven’t had a bankruptcy or foreclosure in the last 2 years
While it’s a rare circumstance, it could be possible to have two VA loans at once. Keep in mind that this can only happen once in your lifetime. The VA only grants a one-time exception – once you use the benefit, you can’t request it again.