Let’s take a look at how and when to use your VA loan as well as how many times you can take advantage of this product.
Who Can Get a VA Loan?
The VA has very specific criteria that you’ll need to meet to be eligible for a VA loan. These differ depending on what time period you served and whether you were on active duty, in the reserves, or in the National Guard. Generally speaking, if you began your service after Aug. 2, 1990, and you were an active-duty service member, your eligibility for a VA loan will require that one of the following circumstances applies to you:
At least 24 continuous months of serviceAt least 90 days during which you were called or ordered to active dutyFewer than 90 days if you received a discharge for a service-connected disabilityAt least 90 days if you were discharged for a hardship, the convenience of the government, or a reduction in force
Furthermore, to be eligible for a VA loan, you also cannot have received a dishonorable, other-than-honorable, or bad-conduct discharge.
How Many Times Can You Use a VA Loan?
Fortunately for veterans and service members, you can use a VA loan as many times as you wish. This doesn’t mean you can hold unlimited numbers of loans; each service member receives a specific amount of “entitlement.” Your basic entitlement is $36,000, which means that if you’ve got a home loan under $144,000, the VA guarantees your lender that they’ll pay $36,000 in the event of default. For loans over this amount, the VA will pay up to 25% of the loan amount. It’s important to note that these aren’t the limits to how much you can borrow. If you’ve got full entitlement, the VA won’t set a limit on how much your loan can be. Even if you’ve already used your VA loan, you can still use it again. If you’re looking to restore your full entitlement, you’ll need to have paid off your loan in full and no longer own the property.
How To Get a Second VA Loan
If you have an existing VA loan, you can still get another in certain cases. You don’t need to have full entitlement to qualify for a second loan; in this case, you’ll have “remaining entitlement.” There are plenty of situations in which you may need to get a second VA loan. One common situation is when a service member receives orders to a new station. For whatever reason, they choose not to sell their existing home—which is financed by a VA loan—and also want to purchase another property at their new duty station. Other situations include when you’ve:
Paid off the loan but still own the property Had a foreclosure and haven’t paid back the loan Refinanced the home with a non-VA loan
When using your remaining entitlement, the amount you can borrow depends on county loan limits. These limits match those set by the Federal Housing Finance Agency (FHFA) and will vary according to the cost of living in each area. The VA will either cover 25% of the loan limit minus the entitlement already used or 25% of the county limit, whichever is less. This means if you’re in a low cost-of-living area and you wish to purchase an expensive home, you may need to front your down payment to meet that 25% guarantee for your lender.
Calculating Your Remainder
Say you’ve already used $50,000 of entitlement and you’re considering a $250,000 loan in a county with an FHFA loan limit of $500,000. Your remaining entitlement will be the lesser of: $500,000 x 25% = $125,000 - $50,000 = $75,000 OR $250,000 x 25% = $62,500 In this case, because the second figure is lower, your remaining entitlement for an additional mortgage is $62,500.
When To Use a VA Loan
Using a VA loan can be an excellent option in a number of situations, including when you:
Don’t want to make a down payment Want to make a down payment but not the standard 20% rate Want to avoid private mortgage insurance (PMI), which VA loans do not require
