If you have a Veterans Affairs (VA) Loan on your first home and are thinking about buying a second property, you can get more than one VA Loan without having to sell or refinance your current home. This is called VA Loan second-tier entitlement. The higher tier entitlement kicks in for purchases over $144,000 per VA guidelines.
The federal government has provided veterans and military personnel with the VA Loan so they can come back to the United States and purchase a home with no down payment. That’s much better than having to come up with a 20% down payment for a conventional loan on a second home, so you should take advantage. If you are considering getting two VA Loans, here’s how it works:
VA Loans Second Tier Entitlement
Michigan has a county loan limit of $453,100 for VA Loans. The VA provides borrowers with a 25% guaranty on their loan, which, in Michigan’s case, would be a maximum of $113,275. If you already have a VA Loan on your first house, the guaranty provided to you would be subtracted from the maximum amount.
VA Entitlement Calculation Example
Let’s say you bought a $200,000 primary home with a VA Loan and you want to buy a second home in Michigan with a VA Loan. Let’s figure out the math on this.
$424,100 X 25% = $113,275 maximum guaranty
$200,000 X 25% = $50,000 guaranty and down payment required
$113,275 – $50,000 = $63,275 maximum guaranty allowed on second home
$63,275 x 4 = $253,100 maximum price of second house
Maximum VA Loan Amount Calculation
Basically, if you bought a $200,000 home in the state of Michigan using a VA Loan, the VA would have guaranteed $50,000 toward your down payment. If you want to buy a second home in Michigan with a VA Loan, you can buy one that is a maximum of $253,100 with no down payment. If your second home costs more than that, you will have to add some money for the down payment.
Let’s say the second home you’re considering is $300,000. The 25% entitlement on that house would be $75,000, putting you $11,725 above the $63,275 maximum guaranty. That means you would have to add a down payment of $11,725 to be able to purchase the second home for $300,000 with a VA Loan.
Related: Try our VA Mortgage Calculator to estimate mortgage payments for your VA Mortgage.
Benefits to getting two VA Loans
If you are relocating or just want to buy a new home, a second VA loan may be the best solution. Here are the benefits of getting your second VA Loan versus Conventional financing:
- Do not need to sell your current home that has a VA Loan
- Do not need to refinance your VA Loan into a Conventional Mortgage to qualify
- You may be able to rent your current home and offset the mortgage with rental income
- You will save on home sales fees
- You will save on mortgage refinance costs
- You may still qualify for Zero Down Financing
Buying a Second Home with a VA Loan
VA Loans are typically more lenient than other types of loans. If your first home was foreclosed, you can still get a VA Loan on your second home. Riverbank Finance can help you find out how much of the VA’s 25% entitlement you still have left to use.
If you are planning on buying a second home using VA financing to use as your primary residence we would be glad to assist you. You may be eligible for a second VA loan for your purchase and not be required to sell your current home. For more information, call Riverbank Finance at 800-555-2098 to set up an appointment with one of our loan officers.