VA Eligible Properties | Using a VA Loan for a Second Home

Thomas Short
Military VA Loan contributor

Can I use a VA loan for a second home?

The VA home loan program exists to help active-duty and retired military members buy homes to use as primary residences.

Because of this intent, borrowers can’t use their VA loan benefits to buy a vacation home or rental property.

But it is possible to buy a second home if you have enough remaining entitlement — and if you plan to move to the second property after buying it.

Check your VA home buying eligibility. Start here (May 29th, 2024)

When can I use my VA home loan benefit on a second home?

Active-duty military members move around a lot. Then, upon retirement, veterans may move thousands of miles from their last posts.

Sometimes, relocating veterans and service members don’t want to sell their current homes; other times, it takes longer than expected for a home to sell.

So the VA allows eligible veterans and surviving spouses to get mortgage loans to buy new homes even when they still have an active loan on their first home. To make this work, you’ll have to show you’re planning to move into the new home within 60 days of closing on the loan.

Plus, the VA may limit the size of your second home loan or require a down payment if your home purchase price exceeds your level of remaining entitlement.

Understanding VA bonus entitlement

VA loan entitlement rules confuse a lot of borrowers. If you don’t quite know where you stand with your remaining entitlement, you’re not alone.

Let’s start with a review of how entitlement works on a first home purchase: If you’re an eligible veteran or active duty service member who does not currently own a home with VA financing, you should have full entitlement. Full entitlement combines your basic entitlement and bonus entitlement.

With full entitlement, you can buy a home — with no money down — at any price as long as you’re approved by your VA-authorized lender. VA loan limits won’t affect your loan size when you have full entitlement.

How to find my level of remaining entitlement

Your Certificate of Eligibility (COE) from the VA should list your level of entitlement, but here’s where a lot of the confusion comes from: the numbers you’ll see on your COE don’t show the size of the loan you’re eligible for.

Instead, these numbers tell your lender the level of insurance the VA will provide on your behalf.

The VA insures only 25% of your home loan — enough to cover the lender’s losses if you were to default and enter foreclosure. So you can borrow, roughly, four times more than your level of entitlement.

VA loan entitlement on second homes

When you’re buying your first home, you can pretty much forget your entitlement amount and worry about things like your credit score and debt-to-income ratio.

But your level of remaining entitlement could come into play when you’re using a VA loan to buy a second home.

But the way entitlement limits your home buying budget for a second home isn’t always simple.

How remaining entitlement limits your second home budget

While first-time VA loan borrowers don’t have VA loan limits to worry about, these loan limits could affect your second home purchase.

Loan limits vary by location. Areas with more expensive real estate have higher loan limits. For most U.S. counties, the limit is currently $540,250. We’ll use this common loan limit in this example.

Here’s the equation: The VA will insure a fourth of your local loan limit minus any currently used entitlement. A fourth of the national conforming loan limit, $540,250, is $135,062.50.

Let’s say you owe $200,000 on your current home loan which means you’re using $50,000 (a fourth of your loan size) of your VA entitlement. You’d subtract this $50,000 from $135,062.50 and get $85,062.50.

That $85,062.50 is how much mortgage insurance the VA would provide your lender. Since the insurance covers only 25% of your loan, you could get a loan up to $340,250 with no down payment.

What if I need a more expensive home?

In the example above, we learned the VA would cap your no-down payment loan size at $340,250, based on current VA loan limits, if you were already using $50,000 of your entitlement.

But what if the home you’re buying costs $500,000? You’d need to come up with a down payment.

The good news: You won’t need to come up with the full difference between your maximum loan size and your home purchase price. With most lenders, your down payment would need to cover a fourth of the difference.

In our example, there’s a $159,750 difference between the VA’s maximum loan size ($340,250) and the home’s price ($500,000). A fourth of that difference — $39,937.50 — would be your down payment amount.

Confusing, right? Your loan officer can help you better understand these complex rules.

And it’s possible you won’t run up against these loan limits at all.

For example, if you were buying a home that costs only $200,000 and you were already using only $50,000 in current entitlement, you’d have plenty of room left for the VA to ensure another no down payment loan.

Check your VA mortgage rates. Start here (May 29th, 2024)

How to buy a second home with your VA loan benefit

Using your VA home loan benefit a second time will work a lot like your first time but with a few extra considerations.

Here are the steps you’ll need to follow:

Step 1: Find your level of entitlement

With a second loan, your remaining entitlement, combined with your local VA loan limit, could affect your price range as we described above. It’s good to know right away what loan size you can get, especially if you’re counting on making no down payment.

If you already have a VA loan that hasn’t been paid off, you’re using a portion of your entitlement, and your second home loan amount could be limited.

Details about your entitlement should be listed on your current Certificate of Eligibility. You can get your COE with help from a VA lender if necessary.

Step 2: Choose your VA-authorized mortgage lender

The Department of Veterans Affairs does not lend money; it simply insures loans you’d get from a private lender. Not all private, VA-authorized lenders work the same way, so you should shop around to find one you’d like to work with.

Compare mortgage rates, but also read reviews to see what kind of experience other veterans and service members had with the lender. When you have a few finalists in mind, ask for quotes that are specific to your application. (Advertised rates don’t apply to every borrower.)

Step 3: Go under contract and apply for your loan

By now you should know your price range and can shop for homes you could afford. When you’ve chosen a home, make an offer, negotiate on a final purchase price, and go under contract. This process could take several weeks or longer, depending on your local housing market.

Once you’re under contract to buy a home, you can make your loan application official, and start the process of getting approval.

Step 4: Follow through until closing

It could take six to eight weeks to go through the full underwriting process. Your lender will check out your personal finances. Your VA appraiser will check out the home you’re buying to make sure it meets the VA’s Minimum Property Requirements. An attorney will do title work to make sure you can legally own the home.

During this time, be sure you’re responding to your loan officer’s questions and providing any documentation that’s requested. Your loan officer should schedule a closing day and time.

Keep in mind, as part of your closing costs, you’ll face a higher VA Funding Fee of 3.6% (instead of 2.3%) upfront since this is your second use of your VA home loan benefit.

Step 5: Move-in

The VA requires you to move into your new home within 60 days of closing. The idea is that 60 days gives you enough time to sell your old home and transition into your new one.

But it’s not impossible to keep both homes, especially if you’ll be retiring from the military within a year or if your spouse will continue living in the first home while you’re posted elsewhere.

Check with the VA and with your loan officer if you have these kinds of plans and would like to keep both homes.

VA Minimum Property Requirements

Whether it’s your first or second home, your new property must meet the VA’s Minimum Property Requirements.

The VA will send an appraiser to see whether the home you’re buying measures up. Your new home must have:

  • Access to water and sewer
  • Heating and electricity
  • A roof that will last at least three more years
  • A basement or crawl space that’s properly vented and free of debris
  • Access from a public or private street year-round
  • No exposed lead-based paint
  • No presence of toxins
  • Enough living space
  • No construction defects or material decay
  • No termites

If your home fails to meet the VA’s standard, the seller must bring the home into compliance. You may need to choose a different home if the current owner can’t or won’t make the repairs.

The owner could also provide the money for repairs by accepting a lower price for the home. Then you could complete repairs after closing on the loan.

VA occupancy requirements

The VA insures new home loans and refinances for primary residences. So you couldn’t buy a home with the intention of renting it out or using the home as a vacation home.

To meet this occupancy requirement, you’ll have to certify your intention to move into the new home within 60 days of closing.

The VA does make exceptions to this 60-day occupancy rule. Often, homebuyers can push the limit to a full year, especially if:

  • Retirement is coming up
  • The home needs significant repairs
  • You’re working in a different state

If you won’t be able to meet the VA’s 60-day occupancy requirement, ask your VA lender about writing a letter to the VA requesting an exception.

Check your VA home buying eligibility. Start here (May 29th, 2024)

FAQs about VA loans for second homes

Can I use my VA home loan a second time?

Yes. You can use your VA home loan benefit more than one time. After paying off your first loan you can restore your full entitlement and borrow again with no down payment and no VA loan limits. You can also use the benefit on more than one home at one time. But this can stretch the resource. A VA mortgage lender may have to limit your second loan amount based on your area’s conforming loan limits and the size of your original VA loan.

Does the VA do vacation home loans?

The VA insures loans only for primary residences and not investment properties or vacation homes. You’d need to get a conventional loan to buy a vacation home.

How many VA loans can I have?

The VA home loan benefit for military service members is renewable. You can use it throughout your life as a perk of military service. But having more than one VA loan at a time stretches the entitlement and can limit its power. Depending on your area’s conforming loan limits and the size of your existing loan, your second loan may require a down payment.

Can a VA loan be used for a second home?

Yes, you can buy a second home with a VA loan, but you’ll need to move into the home within 60 days or get permission to wait up to a year before making the new home your primary residence. And, if you already have a home that’s financed with a VA mortgage, your loan amount for your second home could be subject to loan limits.

What kind of property can I buy with a VA home loan?

Just like the FHA and USDA loan programs, VA loans work only for buying and refinancing primary residences. You couldn’t buy a VA home for the sole purpose of earning rental income or to use as a vacation home.

Can I buy any regular home with a VA loan, regardless of cost?

If by “regular” home you mean a single-family home, townhouse or apartment, then yes. As far as cost goes, there’s no limit to the cost of the home you can buy with your first VA loan. Technically speaking, there’s no maximum loan amount you can take out with a VA loan.

As of January 1, 2020, VA-eligible borrowers can get any size loan with no down payment. There are no official loan limits. But remember, you’ll still have to demonstrate you can afford to make the mortgage payments.

So, if you are buying an eligible home, you can definitely use a VA loan.

Can I buy a multi-unit property with a VA loan?

Yes but with some stipulations.

The U.S. Department of Veterans Affairs intends the VA home loan program to give qualifying homebuyers the chance to afford a home to live in. With your loan, you can purchase a property that has up to four units. To meet the VA occupancy requirements, you’re going to have to make one of the units your permanent residence. This is fairly standard with other mortgage types, such as FHA loans.

You don’t have to live in the building the entire time you own it, though. Once you pay off your VA loan, you’ll now own a fourplex that can generate rental income.

Can I buy a vacation house with a VA loan?

Because VA loans are meant for buying a primary residence, you cannot buy a vacation home. In fact, you cannot buy any type of second home in general with the VA loan, and — with some exceptions — you cannot have two VA loans out at the same time.

Can I buy foreign property with a VA loan?

Even if you’re planning on permanently moving into a home in a different country, VA loans will not cover foreign property. You need to purchase a home in designated spots in the United States, which for most VA home buyers is no problem at all.

Can I buy a mobile home with a VA loan?

Technically, you’re able to buy a mobile home and the property you put it on with a VA loan. However, these mortgages are tricky, and you’ll have a difficult time finding a lender that’s willing to approve you for this.
That being said, these programs are available with a few VA lenders. If you are looking for this type of loan, the best thing to do is get in touch with multiple lenders.

Can I buy an investment property with a VA loan?

VA loans can’t be used to purchase an investment property. But you could buy a home with a VA loan and pay the loan off, or refinance the remaining loan amount to a conventional loan. After that, the VA requirements won’t apply to the home and you can do whatever you want with it — including renting it out.
You also can’t flip homes with a VA loan. The goal of the program is to offer special homebuying benefits to military service members. VA loans often have lower interest rates and require no down payment. These benefits are better than any other program, and lenders don’t want you taking advantage of the program to make real estate investments.

Can I refinance my VA loan?

Yes. You can refinance a VA loan just like you could any other type of mortgage. The VA guarantees two different refinances: the Interest Rate Reduction Refinance Loan (IRRRL) and a cash-out refinance loan. But you don’t have to use a VA refi. You could use any other mortgage type, such as a conventional loan, to refinance your VA loan.

Property options with a VA loan

The VA home loan program offers a multitude of benefits to homebuyers looking for a new home. These benefits include zero down payment, low-interest rates, and no mortgage insurance.

While it might seem like you don’t have many options when it comes to purchasing a home, most houses in the nation are VA-eligible so you can take advantage of the VA loan program and become a homeowner.

Check your VA mortgage rates. Start here (May 29th, 2024)