If you’re a veteran of the US armed forces or on active military duty, you probably have heard of the VA loan. This government-backed mortgage can make homeownership more affordable for eligible borrowers by providing financing that requires no down payment and no private mortgage insurance. In addition, VA loans can offer lower interest rates, lower monthly payments and loan terms that are typically more favorable than conventional mortgages.
But what many homebuyers affiliated with the military may not know is that VA loan benefits can be used more than once.
That’s right. This exclusive mortgage program, backed by the US Department of Veterans Affairs, is not a one-and-done type of loan program. If you follow the program rules, you can repeatedly use VA loan benefits throughout your lifetime.
How to use a VA loan a second time
Scenario 1: Purchase a home with a VA loan, sell it and then buy another home with a new VA loan.
Hypothetically, let’s assume you used the VA loan program awhile ago to purchase your first home. Let’s also assume you’ve started a family since then, have outgrown your house and are looking for something with more bedrooms, bathrooms or outdoor space. You sell the first home and pay off the VA loan completely, freeing up your VA entitlement benefit to be used to buy your next home. By paying off the mortgage in full, your entitlement benefit is 100% restored. You can repeat this scenario as often as is necessary — as long as you sell the home that your VA entitlement benefits are tied to.
Can a borrower have 2 VA loans at one time?
Scenario 2: Have two or more VA loans for different homes at the same time.
In this scenario, imagine you live in a house you bought with a VA loan, but then you get assigned a PCS (permanent change of station) that’s too far of a commute. Of course, you’ll need somewhere to live, so you can either sell your first home outright, like in the scenario above, or you can keep your first home, rent it out and use any unused VA loan entitlement to buy a new home — as long as you meet certain conditions, like ensuring it’ll be your new primary residence.
Other ways to use a VA loan more than once
Scenario 3: Refinance from one VA loan into another.
What if you want to try to reduce the monthly payments you make on the home you purchased with a VA loan? No problem. Veterans, retirees and active-duty personnel can refinance an existing VA-guaranteed loan — to reduce the interest rate or switch an adjustable-rate to a fixed-rate — through the VA Interest Rate Reduction Refinancing Loan (IRRRL). There is also a VA refinance option that helps eligible military borrowers refinance their home loan to get cash out from built-up equity with a 90% cash-out option.
Scenario 4: One-time VA entitlement restoration
Eligible military homeowners can receive a one-time restoration of their VA loan entitlement benefit when they pay off the mortgage but keep the home. This scenario is typically seen if the house was purchased long ago, the mortgage has been paid off entirely and the owners are still living in it. It also applies to VA-backed mortgages that are refinanced with non-VA refi loans.
Keep your eyes open for these hurdles when considering using a VA loan more than once.
Your loan officer will keep you aware of any issues concerning a VA loan application, but the following are good to keep in mind before you even apply.
- You can’t convert your primary residence purchased with a VA loan into a rental and then buy a similar-sized home in the same community. The new primary residence will need to be either significantly larger or be located in a different region.
- When you finance a home purchase with a VA loan, the Department of Veterans Affairs charges a 2.3% funding fee that can be paid at closing or rolled into your loan balance. This fee will increase to 3.6% percent if this is your second time using the program.
Next steps in seeing if a VA loan is right for you
If you’re a homeowner who purchased through the VA loan program, you may request a COE (Certificate of Eligibility) from Veterans Affairs to determine if you’re eligible to buy your next home with a VA home loan. Or reach out to a local Movement Mortgage loan officer.
Learn more about VA loan eligibility in our recent article on the nuts and bolts of a VA loan. And then get better acquainted with the basics of VA loan entitlement benefits.