Can you get a second home with a VA loan while still owning your first?

It’s possible to get a second home using a VA loan, but the process is nuanced, and you’ll need to meet some very specific requirements to make it happen.

It all depends on how you plan to use the house, as well as how much of your VA loan entitlement you’re using for your current property (if any). 

Are you considering using a VA loan to buy a second house? Here’s what you need to know about this strategy and when it might work.

Key takeaways: 

• You can use a VA loan to buy a second home, but you must meet specific requirements.
• VA loans are designed for primary residences, so you must certify that it’s your intent to live there as your primary residence.
• If you used a VA loan to buy your first home and still have a mortgage balance, you may have less entitlement to work with on your second home purchase.
• If you don’t have enough entitlement to fully cover the new home, you may also owe a down payment when buying your second home.

Occupancy requirements: VA loans are for primary residences only

VA loans are designed for use on primary residences only, meaning somewhere you plan to live full-time. For this to work on a second home, you need to certify that it’s your intent to occupy the new home as your primary residence. In the meantime, you could turn your first house into your vacation home or an income-earning rental property.

Lenders won’t just take your word for it, either. They will want you to sign off on documents that state you plan to live in the home before you can close on your mortgage. Of course, there are legitimate and acceptable reasons that a servicemember may need to move from the home they bought as their primary residence; PCS orders being one of the most common ones.

VA Loans and Vacation Homes: Is It Possible?

VA loans cannot be used directly to purchase vacation homes. But, you could eventually turn a VA-purchased house into a vacation property at a later date. 

You could also use a VA loan to purchase a new primary residence and then turn your existing property into a vacation getaway if that works for your lifestyle. 

VA Loans and Investment Properties: Is it Possible? 

You can use a VA loan to buy a new primary residence, and then turn your old house into an investment property.

You can also use a VA loan to buy a multi-unit property. With a VA loan, properties with one-to-four-unit homes are allowed; you’ll just need to commit to living in one of the units as your primary residence. You can rent the remaining units out while you live on the property, and then, at a later date, move out and rent the entire property out as you wish.

Entitlement when getting additional VA loans

Aside from occupancy status, your VA loan entitlement can play a big role in what sort of real estate you can purchase, too. 

Basic VA loan entitlement is 25% of your loan amount (up to $144,000) or $36,000. This is how much the VA will repay the lender if you default on your loan. This lowers the risk the lender takes with your mortgage, allowing you to buy a home with no down payment and, on average, lower interest rates than conventional loans.

Second-Tier Entitlement

If you want to buy a second home, you can use what’s called your second-tier entitlement. With this, the VA caps your total entitlement at 25% of the area’s conforming loan limit minus the entitlement you’ve already used. In most parts of the country, the conforming loan limit is $806,500, so that comes to about $201,625 in entitlement.

If you already used $100,000 of your entitlement on your first home, that’d leave you with $101,625 in entitlement to use toward your second home. 

It’s a complicated topic, and the limits change yearly depending on where you live. For instance, in higher-priced housing markets (like many places in California), the conforming loan limits (and thus your potential VA entitlements) go much higher. 

If you don’t have enough entitlement left to buy a home you’re eyeing, you may still be able to use a VA loan to purchase it. You just might need to bring a down payment to the table to make it happen.

Restoring Entitlement

You can restore your full VA entitlement by paying off your first VA mortgage loan. Once this is restored, you’d be able to use a VA loan to purchase a new property, as long as it meets the VA’s other requirements. 

Buying a second home and keeping the first

If you want to use a VA loan to purchase a second home, there are several ways to do it. The first is to keep your first home and use your remaining VA entitlement to buy the second property.

Then, you can move into that second home as your primary residence and keep the original home as a vacation home or investment property.

This strategy works whether your first home is paid off or not (though there will be a difference in what you can afford based on your first loan’s status).

Buying a Second Home After Paying Off Your First

If you’ve fully paid off the VA loan on your first house and you’ve applied for your full VA loan entitlement to be restored, you’ll have a much bigger budget to work with. For most buyers, you’ll have over $201,625 in entitlement, or up to 25% of your area’s conforming loan amount. As a reminder, entitlement simply refers to the amount that the VA will cover – not how much you can borrow. 

These limits are higher in costlier housing markets, so be sure to check what the limit is in your area to see what you’re working with. See Fannie Mae’s website to get info about your county’s conforming loan limits. 

Buying a Second Home While You’re Still Paying Off Your First

You can also buy a second house if your first one still has a balance on it. This just means you’ll have less budget to work with and may need to bring a down payment to the table. Having two mortgages will also impact your DTI ratio, which can impact your preapproval amount.

For instance, if your remaining VA entitlement is $75,000, and you need more than that to qualify for the loan, you will likely need to make a down payment out of pocket to make it happen.

When you get your Certificate of Eligibility from the VA (this details your eligibility for the VA loan program), it should say how much of your entitlement remains. A VA loan officer can also help you understand how much entitlement you have available and how that impacts your homebuying options. 

You might also opt to refinance your existing VA loan into a non-VA product. You could then restore your entitlement in full and use the VA loan program toward your second home freely.

Buying a Second Home While or After Selling Your First Home

Your entitlement will remain impacted until you sell your first home and pay off the loan attached to it. This means that if you’re hoping to buy a second home while selling your first one (a common occurrence with PCS orders), you can expect to have less to work with than if you’d waited to buy unless after the sale went through.

A potential but rare alternative to this option is to buy a home with a VA loan already on the property. In this scenario, you could do a VA loan assumption, essentially taking over the loan, with its existing term, payments, and interest rate, from the current seller. Under these circumstances, your entitlement wouldn’t come into play. 

This isn’t always possible. In this case, you may need to come up with a down payment to make the second home purchase work. You will also need both lender and buyer approval. You could also consider another loan program, like a conventional, FHA, or USDA loan. Again, talk to a loan officer to get personalized guidance.

About Post Author