If your family has outgrown your home and needs more space, you may be wondering: Can you use your VA loan twice? Luckily, the answer is yes. You can restore your full VA loan entitlement by selling your home or paying off the mortgage in full. Alternatively, you can also use the remaining entitlement amount from the purchase of your first property to buy a second home that better suits your needs.
However, there are certain VA loan requirements you’ll need to meet to take out a new mortgage. Here’s a helpful, quick guide to all you need to know about reusing your VA loan.
VA Loan Entitlement: How It Works
Your entitlement is the amount of money the VA will pay to guarantee your loan if you default on it. Entitlements generally guarantee 25% of the loan amount, so they eliminate the need for a down payment and private mortgage insurance.
There are two different types of entitlements that you’ll receive when you qualify for a VA loan: basic and bonus.
- Basic entitlement covers 25% of your loan amount or $36,000, whichever is less. Basic entitlement only applies to loans up to $144,000, though. If you want to buy a higher-priced home without a down payment, you’ll need to tap into your bonus entitlement.
- Bonus entitlements cover 25% of the loan amount on any home purchase above $144,000. There’s no upper limit for the purchase price of your home.
So even if you live in an expensive area, you’ll be able to use your VA loan to buy a beautiful property for your family.
How to reuse your VA loan benefit
VA loans are a lifetime benefit that you can use to upgrade your home as your family and need for space grow. After you sell or pay off your current home, you can have your full entitlement restored and use it to buy a bigger house. If you’d prefer to buy a second home before selling your first home, you may be able to use your remaining entitlement to do so. Here’s a more detailed look at your options.
Restoring your entitlement after selling
One of the easiest ways to reuse your VA loan is to sell your current home. You can use the proceeds from the sale to pay off your mortgage in full and request that the VA Eligibility Center restores your entitlement. Both your basic and bonus entitlement is reinstated once your paperwork is processed, and you’ll be ready to buy a new dream home for your family.
Using your remaining entitlement
If you haven’t used your full entitlement yet, you may be able to take out a second VA loan to buy a new home without selling your current one. You can find out if you’ve used up your full entitlement by requesting a certificate of eligibility from the VA or doing a little math yourself.
To see how much of your entitlement is left, you’ll need to find the conforming loan limit for your county, which is available on the VA website. Conforming loan limits are the maximum mortgage amounts that government agencies like the VA are willing to back. Each county is assigned its loan limit to account for differences in the cost of living, so more expensive areas will have higher loan limits.
The maximum guaranty is also an essential factor to consider. It is the amount of your VA loan that is backed by the VA (aka it is the amount they will cover if you default). Having that backing brings down the risk for lenders, enabling borrowers to borrow more at better rates.
Calculate your maximum guaranty by subtracting the portion of your entitlement that you’ve already used from 25% of the conforming loan limit, which is the portion of the loan that the VA will guarantee. So, for example, if the loan limit in your county is $510,400, the maximum guaranty you would qualify for is $127,600. If you’ve already used $50,000 of your entitlement, your maximum guaranty available will be $77,600. If you want to buy a more expensive home, you’ll need to save up for a down payment of 25% of the loan amount that’s not covered by the guaranty.
VA loan requirements
To take out a new mortgage, you’ll also need to meet a few VA loan requirements.
- Your new home will need to be a primary residence — not a vacation home or rental property.
- You’ll also need to move into your house within 60 days after closing.
There are certain exceptions to this rule, though. If you’re deployed, working out of state, or living somewhere else while you renovate your home, you can delay occupancy for up to 12 months. Your spouse or child can also meet the occupancy requirement if you’re unable to do so.
OVM is here to help
If your family is growing, you don’t have to stay in your current home. You can reuse your VA loan to buy a new home even if you don’t have a down payment saved up. You can sell your current home to get the full entitlement reinstated, or use the remaining amount to help fund your next home purchase. Whatever you decide to do, we at OVM are here to help you with any questions you have and guide you through the process. Give us a call or start your application today.[/vc_column_text]
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