U.S. veterans, active-duty service members and some widowed military spouses can take advantage of a special type of loan known as a VA loan to purchase a home. The VA loan program is an attractive benefit for service members, and it is something that can be used more than once under certain circumstances as a borrower’s needs change. Here is a look at how this type of loan can be obtained more than once.
What Is A VA Loan?
A VA loan is a type of mortgage that is guaranteed by the Department of Veterans Affairs. This type of loan can be obtained through private lenders, such as mortgage companies and banks, and the VA guarantees a portion of the loan, which allows lenders to provide those who are eligible with more favorable terms. In many cases, it means buying a home with no down payment or private mortgage insurance.
These mortgages offer service members great flexibility and the possibility of no down payment, and eligible borrowers can use them to buy a primary residence or refinance their existing mortgage.
Can You Get A VA Loan More Than Once?
It is entirely possible to get a loan more than once or even have two at the same time depending on entitlement. In fact, there is no maximum number of times that a VA loan can be used. However, those with diminished entitlement due to having active loans already or previous defaults may need to factor in a down payment.
What Is Entitlement For A VA Loan?
Active military members and veterans have something known as entitlement, which is a dollar amount that the VA promises it will pay the lender should the veteran default on the loan. There are two levels of entitlement: basic and bonus. Some or all of a veteran’s entitlement may be used when they purchase a home. In general, the VA guarantees a quarter of the loan amount, so borrowers typically use one quarter of their available entitlement.
Basic, or primary, VA loan entitlement is $36,000. However, because the VA pledges to repay up to one quarter of the loan amount, this places the maximum loan amount for most borrowers at $144,000, which may not be enough to buy a reasonably sized home in many areas of the country.
To give more veterans access to homeownership, the VA created a second type of entitlement that links its guaranty amounts to the conforming loan limit of conventional financing, which is far higher. Right now, it is $510,400, a quarter of which is $127,600. After subtracting the basic entitlement amount of $36,000 from this figure, it provides a secondary entitlement amount of $91,600 that comes into play when purchasing homes that cost more than $144,000. It is important to keep in mind that this kind of loan limits change each year.
How To Use Entitlement In A VA Loan
There are a few ways that entitlement can be used in this kind of loan more than once. Below are some of the most common approaches.
How To Use VA Loan Benefits Again
VA home loan benefits are considered a lifetime benefit for eligible veterans and service members. When an original loan has been repaid in full, they can seek to have their entitlement fully restored. It is also possible to have more than one VA loan at a time if occupancy requirements are met.
Restoring Entitlement After Selling
VA borrowers who choose to move, such as those who have outgrown their current home, typically choose to sell their current home. In such cases, entitlement is not a big concern as selling the home and paying off the mortgage in full will allow them to restore their full entitlement.
After selling the property, borrowers can file paperwork to get the entitlement tied up in the property returned and then buy a different home with their full entitlement intact. Qualified buyers are then able to borrow as much as their lender extends without needing to make a down payment.
Using Remaining Entitlement For Multiple VA Loans
Because veterans only apply a portion of their entitlement when they buy a home, they could retain and rent out their first home while buying another one using a second loan under certain circumstances.
For example, if an active service member buys a home at a duty station and then has a permanent change of station but wishes to keep their primary residence and rent it out while buying another home at their new duty station, they may be able to do so. This is known as second-tier entitlement and is possible if the borrower meets residual income and debt-to-income ratio requirements.
Work With MyLendingPal For Your Home Loan Needs
If you are interested in exploring your options for reusing entitlement, get in touch with the VA loan experts at My Lending Pal. Their experienced team can give you clarity on all aspects of loan entitlement.