Taking out Multiple VA Loans
One common question when it comes to VA Loans is whether or not it is allowed to take out multiple VA loans. Although there are certain circumstances that dictate whether or not you can, for many borrowers the answer will be yes. To get started with understanding how this system works, it is helpful to understand how the entitlement works.
Generally speaking, a borrower will be able to take out a loan with a value up to the 103% of the appraised value of the property they wish to purchase. In most counties, the maximum amount that the VA will guarantee is $417,000. The VA guarantees 25% of the loan from default not the entire loan amount. So if you purchased a home for $400,000 with your VA Loan the VA guarantees 25% of $400,000 which equals $100,000. This is the reason why when you purchase a VA Loan you do not have to make a down payment or pay PMI. For those wishing to purchase a home that exceeds the maximum county limited with the VA, it requires a down payment to cover the amount above the allowable limit. For example, Joe is interested in purchasing a home in a county where the maximum amount that the VA will guarantee is 25% of $417,000 which equals $104,250. The home that Joe wants to buy is $450,000 which is $43,000 above the maximum VA guaranteed limited. Therefore, Joe will have to put down $43,000 in order to use his VA Loan on the $450,000 house.
Here are some specific examples where multiple VA Loans can be taken out:
- One reason are that it is possible to have an additional VA loan is in cases of refinancing, for example, when a borrower takes out one loan to refinance another. This is because there is an assumption that the second loan will pay off the first one.
- Some VA Loan users will also have a remaining entitlement that will allow them in certain cases to purchase another home with whatever entitlement that they have left. This situation depends on how much of the entitlement that you used for the previous usage and how much would be needed for the home you are interested in purchasing.
- Those that paid off their VA Loan can apply for a restoration of entitlement which will allow them to use their VA Loan Benefits again. This is common for those that may have purchased a home using their VA Loan and have lived in it for a while and paid the loan off. In this case, after applying for a restoration of entitlement you would be able to purchase another home with your VA Loan.
It’s important to understand that the specific amounts of these loans will depend on each individual circumstance. There is an occupancy requirement for any homes funded with the VA Loan Guarantee Program. This means that you can’t buy one home with a VA loan to live in, and then take out a second to purchase another home for investment purposes. The VA is explicit with its requirements that properties be purchased for residential purposes. It’s best to read more about the different potential uses of VA loans to determine how they could affect you.