Yes, it is possible to purchase a second home with a VA loan. The Department of Veterans Affairs (VA) offers home loan benefits to eligible veterans, active military personnel, and their surviving spouses. These benefits extend beyond purchasing primary residences and can also be used to purchase a second home.
In order to use a VA loan to purchase a second home, you must meet certain eligibility requirements:
- You must have sufficient entitlement. The VA loan entitlement is the amount the VA guarantees to the lender in case of default. This entitlement is typically enough to finance the purchase of a primary residence, but if you want to purchase a second home, you may need additional entitlement.
- You must meet the credit and income requirements. Lenders will evaluate your credit score, debt-to-income ratio, and employment stability to determine if you meet their lending criteria.
- You must occupy the property for a portion of the year. While VA loans can be used to purchase second homes, they are still intended for primary residences. This means you must occupy the property for a certain period of time each year. The exact requirement may vary depending on the lender and the specific VA loan program you choose.
Using Remaining Entitlement
If you have used a portion of your VA loan entitlement to purchase your primary residence, you may still have remaining entitlement that can be used towards the purchase of a second home. The remaining entitlement is the amount of guarantee the VA provides to the lender for the second home loan.
Let’s say you have used $150,000 of your entitlement to purchase your primary residence valued at $300,000. This means you have $150,000 of remaining entitlement that can be used towards a second home purchase. However, keep in mind that the total loan amount, including both primary and second home loans, cannot exceed the county loan limit set by the VA.
Just like with a primary residence VA loan, a funding fee may be required when purchasing a second home. The funding fee is a one-time fee charged by the VA to help sustain the loan program. The fee amount varies based on factors such as the type of loan, down payment amount, and whether it’s your first or subsequent use of a VA loan.
Here is a table summarizing the funding fee percentages for second home purchases:
|Type of VA Loan
|Funding Fee Percentage
|Less than 10%
|10% or more
As mentioned earlier, if you use a VA loan to purchase a second home, you must occupy the property for a portion of the year. The occupancy requirements vary depending on the loan program:
- VA Loans: You must occupy the property as your primary residence for a minimum of one year.
- VA Interest Rate Reduction Refinance Loans (IRRRL): The property you refinance with an IRRRL must have been your primary residence and you must certify that you have previously occupied it.
- VA Cash-Out Refinance Loans: The property being refinanced must have been your primary residence and you must certify that you have previously occupied it.
Benefits of Using a VA Loan for a Second Home
Using a VA loan to purchase a second home offers several benefits:
- No down payment requirement: With a VA loan, you can potentially finance 100% of the purchase price of your second home, eliminating the need for a down payment.
- Lower interest rates: VA loans often come with more favorable interest rates compared to conventional loans, which can save you money over the life of the loan.
- No private mortgage insurance (PMI): Unlike conventional loans, VA loans do not require PMI, which can save you hundreds of dollars each month.
- Easier qualification process: VA loans have less stringent credit and income requirements compared to conventional loans, making them more accessible for eligible borrowers.
In conclusion, if you meet the eligibility requirements and have sufficient entitlement, you can purchase a second home with a VA loan. It’s important to work with a knowledgeable real estate agent and lender who specialize in VA loans to guide you through the process and ensure you fully understand the terms and conditions.