Yes, it is possible to use a VA loan for a second home. However, there are certain conditions and requirements that need to be met in order to qualify for this option. Let’s explore the details of using a VA loan for a second home.
1. VA Loan Eligibility
In order to use a VA loan for a second home, you must meet the eligibility requirements set by the Department of Veterans Affairs (VA). These requirements typically include:
- Serving a certain length of active duty in the military
- Having a good credit score
- Meeting the income and employment criteria
- Obtaining a Certificate of Eligibility (COE) from the VA
It is essential to fulfill these eligibility criteria to proceed with obtaining a VA loan for a second home.
2. Occupancy Requirements
One crucial factor to consider when using a VA loan for a second home is the occupancy requirements. VA loans are intended for primary residences, and the VA expects borrowers to occupy the home as their primary residence within a certain period of time after purchase.
However, there are a few exceptions to this rule. For instance, if you have already used a VA loan to purchase your current primary residence and want to buy another home due to a change in station or need for a bigger house, you may be eligible to use a VA loan for a second home.
It is important to consult with a VA-approved lender to understand the specific occupancy requirements and exceptions that may apply to your situation.
3. Funding Fee for Second Homes
When using a VA loan for a second home, you will be required to pay a funding fee. The funding fee for subsequent use of the VA loan is generally higher compared to the fee for the first use. This fee varies based on factors such as the amount of the down payment, your military category, and whether it’s your first or subsequent use of the loan benefit.
Here is a table to provide you with an overview of the funding fee percentages for subsequent use of a VA loan:
| Down Payment | Funding Fee for Regular Military | Funding Fee for Reserves/Guard |
|---|---|---|
| 0% | 3.6% | 3.3% |
| 5% – 9.99% | 1.8% | 1.65% |
| 10% or more | 1.65% | 1.5% |
It’s important to budget for the funding fee when considering a VA loan for a second home.
4. Loan Limits and Entitlement
VA loan limits and entitlement are additional factors to consider when using a VA loan for a second home. The VA has set certain limits on the amount they will guarantee on a VA loan, which can vary based on the location of the property. Additionally, your remaining entitlement may impact your ability to secure a second VA loan without a down payment.
Consulting with a VA-approved lender will help you understand the loan limits and entitlement details that are applicable to your specific situation.
5. Refinancing Options
If you already have a VA loan on your primary residence, another option to consider when purchasing a second home is refinancing your existing VA loan. Refinancing can free up your entitlement to be used towards the purchase of a new home, while potentially securing a better interest rate or loan terms.
Refinancing options can be complex, so it is advisable to work with a knowledgeable VA loan specialist to explore this route.
In conclusion, it is possible to use a VA loan for a second home, but there are eligibility requirements, occupancy restrictions, funding fees, loan limits, and entitlement considerations to keep in mind. To understand your options fully, it’s best to consult with a reputable VA-approved lender or mortgage professional who can guide you through the process and help you make an informed decision.