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How Many Times Can You Use VA Home Loan Benefits?

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For many military borrowers, VA loans offer an affordable path to homeownership. Since the program was created by the Servicemen’s Readjustment Act of 1944, these flexible, no-down-payment loans have made mortgages available to many veterans who otherwise might not have qualified for a conventional mortgage.

But once you’ve used your VA entitlement to buy a home, can you use it again? VA loans aren’t a one-time benefit. They can be used over and over again. You can even have more than one active VA loan at the same time. Before we cover how many times you can use a VA loan, let’s take a look at how VA entitlements work.

About VA entitlement

Entitlement refers to the maximum guaranty the VA provides to a lender for each eligible borrower. It does not refer to the maximum VA loan amount an eligible borrower can get. The VA does not cap the amount a veteran can borrow, but there is a limit to how much the VA can guaranty, which can affect the amount banks are willing to lend.

The basic entitlement available to each eligible VA borrower is $36,000, and lenders will generally lend up to four times the veteran’s available entitlement without a down payment, assuming the borrower meets other income and credit requirements. With a $36,000 basic entitlement, that means all eligible borrowers who have not previously used their entitlement can get a loan of up to $144,000.

In some areas of the country, $144,000 might be enough to buy a good-sized house, but in other areas of the country, it wouldn’t be nearly enough. To ensure veterans across the country have access to homeownership, the VA links its guaranty amounts to the conforming loan limit for conventional financing established by the Federal Housing Finance Agency. For 2018, in most counties, the FHFA limit is $453,100 for a one-unit residence; however, it can go up to $679,650 in high-cost areas such as New York, D.C. and the Bay Area, and even higher in some Hawaiian counties.

When an eligible VA borrower buys a home for more than $144,000, the VA provides an additional entitlement. That additional entitlement is 25% of the loan amount or 25% of the loan limit for that county, whichever is less.

To illustrate, say Jonathan is a Petty Officer 2nd Class in the U.S. Navy and has met the service requirements to be eligible for a VA loan. Jonathan has not yet used his available entitlement and wants to purchase a home for $200,000 in a county with a loan limit of $453,100. Because the VA’s guaranty is limited to 25% of the county loan limit or 25% of the loan amount, whichever is less, the VA will guaranty $50,000, or one-quarter of Jonathan’s $200,000 home loan.

But what happens if Jonathan wants to buy another home using his VA benefits?

Reusing VA eligibility

The rules for reusing VA eligibility depend on whether you plan to sell your existing home or rent out your existing home and buy another. We’ll look at both scenarios.

Sell existing home

“The easiest way to get another VA loan is to pay off the original VA loan,” said Randy Hopper, senior vice president of mortgage lending at Navy Federal Credit Union.

If you sell your existing home before buying another, proceeds from the sale will ideally be enough to pay off the existing mortgage balance in full — then you can regain your full entitlement. But timing a sale and a new home purchase can be tricky. Few homeowners want to sell their existing home without a new place to move into.

“If a veteran sells their house before it is paid off, the buyer can use the VA entitlement to take control of the mortgage,” Hopper said. “In that case, the veteran cannot get another VA loan until the first one is paid off, unless they sell it to a qualified veteran with their own entitlements.”

For example, say Jonathan buys his $200,000 home using the entitlement outlined above. Two years later, Jonathan wants to sell the home to Judi, who is not a veteran and not eligible for a VA loan. Any creditworthy borrower who agrees to take over payments can assume a VA loan, even if the buyer wouldn’t be eligible for a VA loan on their own. So Judi can assume Jonathan’s loan, but Jonathan’s entitlement would remain tied up in that loan until it is paid in full, because the VA benefit stays with the mortgage, not the individual.

If Jonathan instead sold the home to Bobby, a veteran who is a first-time VA loan user, Bobby can substitute his entitlement for Jonathan’s and restore Jonathan’s entitlement for another VA loan.

Rent and buy

What if Jonathan doesn’t want to sell his existing home and instead wants to rent it out and buy a house in a new area? It may be possible for him to have two outstanding VA loans at the same time.

Remember, eligible veterans in most parts of the country have a basic entitlement of $36,000 and an additional entitlement of $77,275 for a total of $113,275 (25% of $453,100).

In the scenario outlined above, Jonathan is using $50,000 of his entitlement. That means in most parts of the country, he would have $63,275 of entitlement left over. If Jonathan wants to buy a new home elsewhere but keep and rent out his existing house, he can use his remaining benefits.

Here’s how the math works, assuming Jonathan buys in another county with a standard loan limit of $453,100.

  • Maximum guaranty: $453,100 x 25% = $113,275
  • Entitlement available: $113,275 – $50,000 = $63,275
  • Maximum loan amount without a down payment: $63,275 x 4 = $253,100

Jonathan can access his VA entitlement to buy a second home priced at up to $253,100 without needing to come up with a down payment. If he wants to buy a more expensive property, he can still use his VA entitlement, but he would need to come up with a down payment of 25% of the excess loan amount.

To illustrate, say the second property Jonathan wants to buy is priced at $300,000 rather than $253,100. Jonathan would need to come up with a down payment of $11,725, or 25% of $300,000 minus $253,100.

How to restore your eligibility

Hopper said veterans can have two or more VA loans at the same time if they have some entitlement remaining on their VA benefits. “This most often happens if someone moves and they rent out their original home to subsidize the cost of the two loans,” he said. “But of course, they have to meet the income and credit requirements to be approved for a second loan by their lender.”

To access benefits for a new VA loan, you’ll need to restore your eligibility.

You can do this by completing VA Form 26-1880 (or VA Form 26-1817 for surviving spouses) — that’s the same form used to obtain a Certificate of Eligibility (COE), which shows you’re eligible for a VA loan.

You can apply for a new COE online through the eBenefits portal or get assistance applying through your lender. If you apply through your lender, you may be able to obtain an online COE in just a few seconds.

Once you have the COE in hand, the amount of basic entitlement and the amount currently tied up in your previous loan will be displayed near the center of the COE.

For example, in Jonathan’s case the COE might say:

“THIS VETERAN’S BASIC ENTITLEMENT IS $36,000. TOTAL ENTITLEMENT CHARGED TO A PREVIOUS VA LOAN IS $50,000.”

Note that the COE will not disclose the amount of the additional entitlement available. Instead, an asterisk refers to a note, which explains the possibility of additional entitlement.

You may not have to obtain a restoration of entitlement if you have enough remaining to cover the new loan for which you’re applying. Returning to the example above, if Jonathan sells his home, pays off the existing mortgage and wants to access his full entitlement for a new loan, he would want to restore his eligibility and get a new COE showing none of his benefits are currently in use. However, if the new home he plans on purchasing is only $250,000, Jonathan wouldn’t need more than his remaining entitlement of $63,275 — he could simply rely on his remaining entitlement.

Keep in mind that you may have to pay a higher funding fee when you reuse your entitlement. Funding fees are a percentage of the VA loan amount, and they vary based on the borrower’s military status, the size of the down payment and whether they’ve been used before.

VA Loan Funding Fees
Type of veteran Down payment Percentage for first-time use Percentage for subsequent use
Regular military None

5% or more

10% or more

2.15%

1.50%

1.25%

3.3%

1.50%

1.25%

Reserves/National Guard None

5% or more

10% or more

2.4%

1.75%

1.5%

3.3%

1.75%

1.5%

(rates as of November 21, 2011)

Bottom line

Navigating VA loan entitlement can be confusing, even for mortgage professionals. If you want to reuse your VA home loan benefits, work with a lender who understands how VA entitlements work. VA loans come with several advantages, including no mortgage insurance requirements, even on zero-down payment loans, which may make them the least expensive way to own a home for eligible service members and veterans.

 

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