Can You Have 2 VA Loans At the Same Time?
In some cases you can have two. Veterans and active duty may be surprised to know that they can qualify for a 2nd VA Loan based on what's called their Second-Tier Entitlement.
There is a myth that veterans can only use their eligibility once. That is simply not true. As long as the maximum entitlement is not exceeded, the VA does allow for having two VA Loans at the same time. The borrower still meet debt-to-income limits and disposable income requirements to qualify, so if they are going to rent out their current residence to offset their mortgage payment, they may need a two year rental history.
First let’s explain the difference between entitlement and maximum loan amount.
Each borrower using a VA Loan initially starts with an entitlement of $36,000. This is what the VA guarantees to the lender in case the borrower defaults on the loan. The VA's formula dictates whether or not all that entitlement is used with the initial loan, and thus, additional entitlement can be available. And even if the entitlement is $0 after the purchase of the first house, then the Veteran or active duty member can still use their second-tier entitlement, but there will be a standard minimum and maximum loan limits on what the borrower can use to buy that second house.
Second-Tier entitlement is nice because for those people using it, it means they don't have to sell their property right off the bat when obtaining the second VA Loan. However, they still have to qualify for the VA Loan.
While Second-Tier Entitlement is not widely used because of its complexity (plenty of lenders are not well versed in calculating it), it does not mean that interested borrowers should give up and look elsewhere for a different home loan.
There are a lot of people that don't understand it or are misinformed, many lenders included. But there are a few out there, that know and understand second-tier entitlement and how to calculate it, and are comfortable working with it.
If you currently have a VA Loan and are thinking about using your VA Loan again, call a VA Loan Specialist to learn more about your second-tier entitlement.
Click here to Apply for a 2nd VA Loan
Here is an example of calculating second-tier entitlement:
Veteran has used $104,250 of entitlement on a prior loan, which may not be restored because the loan is still active and is now a rental due to orders to transfer. The Veteran is now purchasing a home for $350,000 where the county loan limit is $768,750.
$768,750 (County Loan Limit) X 25% (your VA guaranty) = $192,187.50 Maximum Guaranty
$192,187.50 - $104,250 (entitlement already used for active VA loan) = $87,937.50 Entitlement Available
$87,937.50 X 4 = $351,750 Maximum Loan Amount with 25% Guaranty – Since the proposed purchased price is less than the max loan amount, no down payment would be required.
If the Veteran would like to purchase a home for 400,000 using the same numbers above, they would be required to bring $12,062.50 as a down payment to meet the 25% guaranty.
400,000 x 25% = 100,000 needed entitlement/guaranty – 87,937.50 available = 12,062.50 difference needed by Veteran to meet lender requirement.
For a list of county loan limits, please email me or go to http://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp
If you would like to discuss your options for second-tier availability to you, please do not hesitate to contact me!
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