Reusing your VA loan benefits is definitely possible. Here we cover how that works and the two levels of entitlement – basic and bonus.
Whether it's a need for more bedrooms, storage space, or even a backyard for the kids to play in, eventually, the house that used to fit two newlyweds comfortably becomes cramped beyond belief, and so begins the search for the new perfect home.
Often called "moving up," this process can present obstacles as families try to save up funds for a traditional down payment.
Fortunately, a fantastic benefit of the VA loan program is the ability to purchase with no money down, meaning service members and Veterans could bypass this common barrier to homeownership.
There is no maximum or limit on how many times you can use a VA loan. You can use a VA loan once, twice, three times or seven. As long as you have remaining entitlement, you typically always have the option to obtain another VA loan.
Veterans United has even worked with a handful of Veterans on their 9th VA loan. If you're ready to check your remaining entitlement, a trusted home loan specialist from Veterans United can assess your situation and guide you through your next homebuying journey.
The key to using your VA loan twice or more is entitlement. Veterans and active military members who meet the program's service requirements have what's known as VA loan entitlement. VA entitlement is a specific dollar amount the VA promises to repay to a lender if the Veteran defaults on the loan.
Qualified borrowers have two levels of entitlement - basic and bonus. Whenever a Veteran purchases a home, they apply some or all of their entitlement to the loan. The VA typically guarantees a quarter of the loan amount, meaning borrowers will normally use a quarter of their available entitlement.
Entitlement is a concept that even confuses people in the mortgage industry. I've broken down VA entitlement here for a more in-depth look.
The bottom line is that when it comes to "moving up" the homebuying ladder, current VA homeowners may be able to capitalize without having to sell their current residence.
The VA home loan is a lifetime benefit. Eligible service members and Veterans can seek to restore their full entitlement once the original loan is repaid in full or use their remaining entitlement to rent out their first home and purchase again with no down payment.
Having more than one VA loan at the same time is certainly possible, but Veterans will still need to meet the VA's occupancy requirements.
Learn more about how to reuse your VA Loan benefit: Restoration of Entitlement: How to Reuse Your VA Loan Benefit in Full
VA borrowers looking to move up are more commonly going to sell their current home rather than try to keep it. Generally, buyers don't have to worry about how much entitlement they have left in these cases. That's because Veterans who sell their home and pay off the mortgage in full can seek to have their full entitlement restored.
For example, let's say you purchase a home for $225,000. Since the VA insures a quarter of the loan, you've likely got $56,250 of VA entitlement tied up in the property. Once you sell the property and the lender is made whole, you can file paperwork to get back the $56,250 of entitlement used on that first purchase. At that point, Veterans looking to "move up" can do so with their full entitlement intact.
For qualified buyers, that means borrowing as much as a lender will extend without the need for a down payment.
Remember that Veterans apply a portion of their entitlement when buying a home. Depending on how much is left over, it's actually possible to retain and rent out that first home and purchase again using a second VA loan.
One of the most common examples of this is when an active service member purchases a home at one duty station and then has to PCS to another. But there are some unique restrictions and requirements to utilizing this leftover VA loan entitlement.
You can learn about using remaining entitlement, which is often categorized as second-tier entitlement, in this article.
If you're ready to take the next step and move up, let a Veterans United home loan specialist help you get clarity on VA Loan entitlement. You can call 855-870-8845 or get started online today.
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Your Certificate of Eligibility (COE) verifies you meet the military service requirements for a VA loan. However, not everyone knows there are multiple ways to obtain your COE – some easier than others.