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100% Financing with VA: Can You Have 2 VA Loans??
In the ongoing quest to unearth the few remaining 100% home loan options, I wrote a recent article about VA loans called 100% Financing: Focusing on VA. Since then, I have been asked numerous times whether or not a veteran can have two VA loans.
The answer is yes and yes. Now I know that the question above refers to two VA loans and not two questions, so let me explain the two yes answers. As most lenders and veterans already know, a veteran can have two VA loans in succession. Once a VA loan has been paid off and the property sold, VA eligibility is reinstated and reusable. On a one time basis, a veteran can even pay off the VA loan while retaining the property.
But the second part of that question is much more interesting.
Can a Veteran Have Two Concurrent VA Loans?
In this down market, it is not unusual for a homeowner to want to buy a new home while waiting until the market improves before selling the current home. So can the veteran purchase a second using her VA entitlement while retaining the first?
Yes, often they can. The key is how much of the entitlement was used to buy the first home. As I stated in my previous VA post, the maximum amount of the entitlement shown on each veteran’s Certificate of Eligibility is $36,000. That represents a 25% VA guarantee on the old $144,000 loan amount. But those figures are obsolete. There is a bonus entitlement of $68,250 available to the veteran buying a home valued at more than $144,000. The two entitlement amounts total $104,250 which is 25% of the current conforming loan limit of $417,000. Got it?
Let’s look at how this worked out for a recent client of mine.
Example
A recent client of mine bought a home 8 years ago in Southern California for $120,000. Of his available $36,000 entitlement, he used only $30,000 (25% of the $120k). He came back to Sacramento recently from overseas duty and wanted to buy a $290,000 home while retaining the SoCal financed home as a rental.
Because the price of the new home exceeds $144,000, the veteran has 6,000 remaining of his original entitlement plus the bonus entitlement of $68,250. That total ($75,250) equals 25% of $297,000, so he has enough remaining entitlement to cover the full cost of the new home. He could buy a more expensive home by simply making up the difference in cash.
As more veterans return home, questions about VA are arising more frequently. My next post will focus on CalVET loans, available here in California.
Leave your questions or comments below, and join in the conversation!
January 28th, 2009 at 10:04 pm
I’m not sure if we did use all our entitlement, but if we did and we want to buy a new house while having this one on the market, do we qualify for the new home with the bonus entitlement? Old home was 200,000 – new home is a foreclosure, bank-owned valued at 300,000 but selling for 215,000 – thanks!
January 29th, 2009 at 5:52 pm
KLM, while you do have some of the original entitlement left, it’s not enough to buy that home with a down payment.
You have a total $104,250 guarantee available. Of that you used $50k (25% coverage) to buy the original home. That leaves $54,250 remaining. Divide that by .25 yields $217k which is the max home price you could pay at 100% financing. Looks like it will work. What state do you live in?
March 11th, 2009 at 1:34 am
I just wanted to say that I love this site
March 11th, 2009 at 8:34 am
Thanks! I hope you’ll come back and comment more often!
September 23rd, 2009 at 4:10 am
I tried to get a VA loan done with the remainining entitlement as you mention above, with the previous company I worked with. The VA LAPP underwriter declined it stating that the additional entitlement is only allowed the first time they get a VA loan or on a subsequent purchase, after a pay off. They can get as many VA loans as they want, but only after they pay the previous one off. She called the investor and they agreed with her. Any suggestions? I moved companies but my client still wants to buy a home here as he was transferred and left his VA home behind as a rental.
September 23rd, 2009 at 9:01 am
Hi Anna,
It could be that VA has changed its guidelines since I originally wrote this piece, however my information came from the head of government underwriting at Flagstar Bank back East, with whom I discussed this at length. Banks are applying “overlays” frequently these days that create restrictions beyond those of VA guidelines(this happens with FHA and conventional loans as well), so that “no” might result from bank policy rather than VA. Try some other banks; try Flagstar if possible. Come back and let me know what you find.