How Many VA Home Loans Can I Have?
Most veterans think that VA loans can only be used once, but that is not true. You can use your VA loan benefits as much as you want. However, in order to get the maximum benefits of this loan, you will have to meet some conditions. Among the factors that you should look at when you want to secure your second is your VA loan entitlement.
It is very possible to have more than one VA loan at the same time. The most common scenario is when a military officer buys a home using a VA loan and then has to PCS. They can choose to remain with their primary residence, which will then be rented out. The borrower may have sufficient remaining entitlement to buy a new home without making any down payment at a duty station.
Using the second-tier entitlement or second layer of entitlement, allows veterans who have lost a VA loan to foreclosure to buy again using the program. The borrower’s Certificate of Eligibility will determine how much entitlement remains. Those borrowers who do not have sufficient entitlement can still get a VA loan by making a down-payment, usually for less than what would normally be required for other kinds of financing.
What Is VA Loan Entitlement and How Does It Work?
VA entitlement refers to the amount of guarantee that is made by the U.S. Department of Veteran Affairs. Usually, the entitlement will guarantee to reimburse 25% of the lender’s loss in case the borrower defaults the mortgage. The protection encourages most lenders to offer loans with no down payments, lower interest rates, and relaxed eligibility terms.
To elaborate, if you use your VA loan to purchase a home worth $200,000, the VA will guarantee $50,000 which is a quarter of the total cost. In most counties, the entitlement is about $121,087, but the limit may be higher if you are living in expensive areas such as Los Angeles, New York or Washington, D.C.
Types of Entitlement
There are two types/tiers of entitlement; the basic and the bonus entitlement.
If you meet all the eligibility requirements, you will receive a basic entitlement of $36,000. The VA will guarantee $36,000 which is 25% of the loan, and that will translate to a total of $144,000. Therefore, if you have found a home that costs $144,000, you will not make any down payment.
However, if you find a home that costs more than $144,000, you will have to use your bonus entitlement. The bonus entitlement is approximately $77,275.
What Are VA Loan Eligibility Requirements?
A majority of the members of the regular military, National Guard, reservists, and veterans are eligible to apply for a VA loan. The spouses of military members who perished while on active duty or due to a service-related disability are also eligible.
Active-duty military personnel will generally qualify for this loan after approximately 6 months of service. Members of the National Guard and reservists must wait for at least 6 years before they can be eligible. However, in case they are called into active duty before that, they can apply for the loan after 181 days of service.
It is important to point out that getting a COE does not mean that veterans will qualify for a mortgage - these two processes are separate. In case you qualify for a COE, you can start shopping for a home loan. Nonetheless, you will still need to meet all the requirements of the lender which will include things such as debt-to-income ratio, credit (FICO) score, and income verification.
Does VA Loans Need A Private Mortgage Insurance (PMI)?
Unlike other low-down-payment mortgage alternatives, a VA loan does not require PMI. Federal Housing Administration (FHA) loans and conventional loans that have less than 20% down payment require PMI, that may end up costing the borrower thousands over the loan’s lifetime.
The advantages translate into considerable monthly savings for VA borrowers. For example, a borrower who makes a 3.5% down-payment on a $200,000 FHA-insured mortgage will pay each month $100 for mortgage insurance.
What are VA Loan Funding Fees?
Though the costs associated with getting a VA loan are typically lower than other kinds of low-down payment mortgages, they still do carry a one-time fee which varies, depending on the down payment amount and military category. This fee helps in offsetting the taxpayer’s costs since there is no down-payment or PMI required.
A borrower in the military who gets a VA loan for the first time, with no money down, will pay a fee of 2.15% percent on the total loan amount. The fee gets reduced to 1.25% in case the borrower makes a down payment of at least 10%. National Guard members and reservists usually pay about a quarter of a percentage point more in fees as compared to active-duty personnel. Those borrowers who are using the VA loan program for the second time without a down payment will have to pay 3.3% of the total loan amount.
Are There Any VA Home Occupancy Requirements?
VA loans usually need the borrowers to move into their new home within 60 days of purchase, and to use it as their main residence. Nonetheless, exceptions can be made depending on the circumstances.
Lenders usually evaluate occupancy circumstances on a case-by-case basis. For active duty personnel, a spouse can fulfil the occupancy requirement when the military member cannot. Furthermore, a military officer’s minor child can also satisfy this particular requirement.
Note: Borrowers cannot use VA loans to purchase second homes or investment properties.
VA Loan Underwriting Requirements (What You Need to Know)
The VA does not need a minimum credit score to get a VA loan. However, lenders generally have their own internal requirements. A majority of lenders want an applicant who has a credit score of 620 or much higher. Borrowers need to demonstrate sufficient income to repay the loan, and they should not have a heavy debt load. However, the guidelines are usually more flexible as compared to conventional loans. VA loan guidelines allow veterans to make use of their home-loan benefits one year or two years after foreclosure or bankruptcy.
VA Loan Amount Limits 2019
The VA loan amounts for 2019 varies by county. However, the maximum guaranty amount is $484,350 in a majority of US counties and up to $726,525 in some high-cost areas.