A VA home loan is an excellent product for an active duty service member or veteran. Because the VA will guarantee the loan and reimburse the lender if you default on the loan, lenders are willing to accept those with less-than-perfect credit or no upfront funds.
There’s no minimum credit score, though many lenders expect a similar credit score to a non-VA loan, and you can often have a slightly higher debt-to-income ratio. Most important to borrowers, there is a zero down payment requirement, making it that much easier to purchase primary residences.
You can also pursue a cash-out refinance or streamline refinance to lower your down payment down the line, and there are specialized programs for veterans with a service-related disability that help reduce expenses even further.
If you’re considering using a new VA loan to purchase a home or refinance your current mortgage, understanding this type of loan is vital.
By understanding the ins and outs of VA loans, you can maximize your benefits and get into your new home faster.
If you are one of America’s 1 million LGBTQ veterans, you may have found it difficult to find lenders who understand your particular challenges. Additionally, approximately 26% of veterans are people of color, groups that also face difficulties in accessing financing for a home purchase.
Pride Lending is here to assist all active duty service members and veterans, no matter their identity or challenges. Whether you have a previous VA loan or are accessing your first VA loan benefit, our team will explain you how to use a VA loan to afford the home of your dreams.
VA Loan Entitlement: The Key to Multiple Loans
VA loans are reserved for active duty service members, those who have served the country through military service in the past, and surviving military spouses and children with GI loan entitlement.
These loans, provided by the Veterans Affairs office, are beneficial for helping refinance or find a new home. The VA guarantees each loan, meaning that if you default, the government will reimburse the lender for part of the loan. This makes mortgage companies more willing to provide loans to eligible veterans, even if they don’t have good credit or cannot afford a down payment.
To understand how many VA loans you can have at a time, you first need to understand something called entitlement.
Entitlement refers to the amount of a loan the VA commits to repaying to your lender if you default on your loan. There are two types of VA loan entitlement: basic entitlement and bonus entitlement.
Basic entitlement is the most common entitlement type used in the VA loan program. Basic entitlement allocates about $36,000 for each borrower, covering up to 25% of any VA loan under $144,000. If the loan is more than $144,000, bonus entitlement comes into play.
This additional VA loan benefit allows veterans and other eligible borrowers to qualify for larger loan amounts, enabling borrowers to purchase larger homes or homes in more expensive areas. Bonus entitlement still covers 25% of the conforming loan but allows for larger total loan amounts.
If you don’t use your full VA entitlement, whatever remains will factor into your loan limit and borrowing capacity.
How Many Times Can You Use a VA Loan?
Getting approved for a second VA loan is possible, but it’s not as simple as applying for a second conventional loan. To qualify for more than one VA loan, you’ll have to go through entitlement restoration.
Entitlement restoration allows a borrower to access previous entitlement benefits to put those VA loan benefits toward a new loan. Once you’ve paid off your existing VA loan and sold your home, you can apply to have your entitlement amount restored. Even if you keep your existing property, you can still qualify for one-time entitlement restoration.
In other words, you can get another VA loan even if you’ve already had one in the past. When it comes to entitlement restoration, the VA divides loan entitlement into two categories: full or partial entitlement.
Full entitlement gives you access to the maximum loan amount allowed with your VA benefit. To qualify for full entitlement, you must meet one or more of the following requirements:
You’ve never used a VA loan before.
You’ve used a VA loan before but have sold the home and paid back your loan in full.
Your entitlement has been restored.
Partial entitlement is more complicated. To have partial entitlement, you must have had a previous VA loan for which you did not use your full entitlement.
Restoring your entitlement can happen in one of three ways:
Pay off your original loan in full and sell the property.
Pay off the loan but keep the property and apply for a one-time restoration.
Exchange entitlements with another VA beneficiary.
Scenarios for Multiple VA Loans
Borrowers can have more than one VA loan simultaneously. At Pride Lending, we have assisted clients with their third VA loans. However, the rules change under these circumstances, subjecting borrowers to loan limits and typically requiring down payments.
Using Remaining Entitlement
One of the most common situations in which a military member might require more than one VA loan at once happens when an active-duty military member needs to move urgently as part of their service, such as if they have a permanent change to another duty station.
When this happens, you can use any remaining entitlement you have to secure a second home for yourself and your family. While this can be extremely helpful, it’s important to be aware of the down payment requirements. If your new loan amount is higher than the loan limit your partial entitlement can guarantee, you will be expected to cover the down payment.
Restoring Entitlement
Having multiple VA loans is also possible when you restore your entitlement. If you’ve sold your home and repaid your original loan in full, you regain access to full entitlement and can apply for another VA loan.
You also have access to a one-time restoration, which can happen in circumstances where you’ve paid back the loan but still own the property.
Additional Factors
Here are a few more factors to consider when looking into getting a second VA loan.
VA Loan Limits
Veterans with full entitlement no longer have VA loan limits following a legislation change during the Trump presidency, meaning you are only limited by what you can qualify for according to your DTI. The VA will guarantee any loan of any size as long as you have your full entitlement. However, those with reduced entitlement can only purchase homes up to the county conforming loan limit.
Loan Guarantee
No matter the amount of your VA loan, the VA will cover 25% of the loan to protect the lender and you. This helps protect you if you default on your VA loan.
Funding Fees
There are several costs associated with a VA loan, including appraisal fees, closing costs, and funding fees. These can add up to several thousand dollars to the total cost, so it’s important to plan for this before taking out a second VA loan.
If you’re a service-connected disabled veteran, you will be exempt from paying the funding fees but still required to pay the others. VA loan funding fees differ based on the amount of your down payment and how many times you’ve used your entitlement. Learn more about calculating VA funding fees through the US Department of Veterans Affairs.
Apply For a VA Loan With Pride Lending
Veterans can take advantage of all VA resources, including VA loans, to afford housing – and Pride Lending can help.
Our team consists of allies and members of marginalized communities, including LGBTQ+ and BIPOC-identifying individuals. We are here to help everyone, including service members, veterans, and surviving spouses who need assistance with the home-buying process.
We’ve worked with many VA borrowers and are deeply familiar with the VA loan process, including how to get your entitlement restored and what the maximum entitlement is according to your Certificate of Eligibility. More than that, we’ll provide helpful advice along the way, such as how to navigate the VA’s occupancy requirements and or how to access your remaining VA entitlement for a second mortgage.
Whether you’re getting ready to move to a new home or refinance your loan, Pride Lending can help you navigate the waters of VA home loans. Contact Pride Lending today to learn more about your options and get started.
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