Contrary to popular belief, VA eligible borrowers may use a VA loan multiple times throughout their life. Additionally, it is even possible to have two VA loans at once! Actually, many in the mortgage industry do not even know that. Fortunately, there are many ways for active service, Veterans, and surviving spouses to use a VA loan. So, let’s discuss how to get a VA loan after the first time use.
Reasons to Use a VA Loan After First Time Use
Most are familiar with using VA loans to buy a first home with no down payment. Maybe even know the other benefits like no monthly mortgage insurance, seller paid closing costs, sales concessions to pay off items, and flexible guidelines. But, there are plenty of other reasons to use VA loans again and again. Examples include…
- Potential no money down purchase
- Move up buyer
- Downsize home
- PCS to another base
- Rent current home to buy another
- Refinance for lower payment, shorten term, or cash out
How to Get a VA Loan and Rent Out Current Home
Whether it is by choice or out of necessity, it is possible to count rent on a current residence for qualifying on a new purchase. Yes, VA loans allow that! Sometimes the homeowner desires to become a landlord for long term investment purposes. Others find it hard to sell their home, so decide to rent it out. Whichever the reason, VA qualification guidelines allow for the buyer to use new rental income on the prior residence. VA rental guidelines include…
- Use up to 100% of the new 12 month lease or market rent
- Maximum rent allowed cannot exceed the monthly principal, interest, taxes, & insurance (PITI) payment
- Calculated rent is used to offset the current PITI payment
- No equity is required in the departing residence
Let’s explain the 2 ways to count rent on a departing residence.
Using Market Rent to Qualify for a VA Loan
If a VA buyer chooses to rent out the current or departing residence, there is one easy guideline to use. That is using the market rent for the current home. In order to use the market rent for a VA loan qualification, the buyer may request a market rent analysis from a Realtor. We are then able to use the market rent from the Realtor’s report as a way of qualifying the borrower.
Using New Lease to Qualify for a VA Loan
The other option involves proving the new lease on the current home. Typically, this option involves more work because obtaining a signed 12 month lease is required. Just like the market analysis option, it is still possible to count 100% of the new rental amount up to a maximum of the current home’s PITI payment.
Using Rent on Departing Residence as Income Example
Now you know when rent may be used on a departing residence. So, let’s show a couple of examples
- New lease of $1,000 per month and a PITI payment of $1,100 per month. There would be a $100 rental loss calculated in the debt to income ratio
- New lease of $1,100 per month and a PITI payment of $1,000 per month. We could use $1,000 of rent because we cannot go over the PITI payment
How to Get a VA Loan Using Bonus Entitlement
Bonus entitlement, also called 2nd tier entitlement, allows Veterans to use a VA loan while a portion of their entitlement is used. Thus, having multiple VA loans at once is possible. VA entitlement may be tied up because of a prior VA foreclosure or short sale plus just an outstanding VA mortgage on another property. Now, if the property that has the VA loan will be sold or paid off prior to the new VA purchase, then using bonus entitlement is not necessary. If the entitlement will be tied up through the next closing, the buyer must be qualified using the bonus entitlement.
Bonus Entitlement Minimum Loan Amount
Using a Veteran’s bonus entitlement has some limitations. Believe it or not, there is a minimum loan amount on the new VA loan while there is other VA entitlement tied up. That minimum loan amount is $144,000. So, the VA buyer must purchase a home with a price of $144,000 or higher. Otherwise, the VA entitlement must be restored or another lending product must be used.
VA Bonus Entitlement Down Payment
Let’s assume our VA buyer is over the $144,000, the lender must now calculate if a down payment is required. If any down payment is required, it depends on the amount of entitlement available, purchase price, and the county VA loan size limit. Basically, the higher the purchase price, the greater the chance of some down payment. Although it is common for homes in the $144,000 into the 200’s often qualify for no money down. The best course of action, like always, is to contact an OVM Financial loan officer.
How to Get a VA Loan – We Find Solutions!
No matter if a first time home buyer, downsizing, or buying a retirement home, our team of VA home loan experts will show you how to get a VA loan that fits your goals and scenario. VA loans offer so many advantages and we want to make sure we use every possible one needed.