As most readers of our blogs know, Gustan Cho Associates are experts in VA mortgage lending. Our highly skilled team is growing into more states, so we are able to help more of our nation’s veterans. With the current housing market on fire, many Americans are moving themselves and their families to different areas. Our veterans are no exception. Lately, we have been getting many calls about VA entitlement and how the remaining entitlement works to purchase a second (primary) home with a VA mortgage loan. In this blog, we will detail the steps on how a veteran can relocate and utilize a VA mortgage even if they already have a VA mortgage. Many veterans are not aware this is an option!
Questions on Having Two VA Loans at The Same Time?
The information in this blog may be confusing to many of our readers. For any specific VA-related mortgage questions, please contact Mike Gracz at 630-659-7644 or via email at email@example.com. Mike will be able to go over your individual qualifications and pair you with a licensed loan officer in the state you plan to move to!
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Can I Purchase A New Home With A VA Loan If I Already Have a VA Loan on My Exiting Home?
As most veterans know, you may only utilize a VA mortgage loan when purchasing a primary residence. So, this means, to utilize your VA loan for the second time, while keeping your current home with a VA mortgage loan, you must be moving into the new property (this will be your new primary residence). Keeping your current property is a possibility. If a veteran is given a permanent change of station orders known as PCS, you may be eligible to utilize a second VA mortgage loan.
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Can You Have Two VA Loans at The Same Time
Whether it is through you selling your current home, or you like the idea of having an investment property, a second VA mortgage loan may be possible. The main consideration that must be addressed is called entitlement. As a veteran who is eligible for VA home financing, you are given a certain amount of entitlement. This entitlement is the portion of the mortgage balance that will be backed by the VA and is a guaranty to a lender in case of default.
Maximum VA Loan Limit on VA Mortgages
Since there is no longer a VA loan limit, when utilizing your VA loan for the first time or only having one VA loan at a time, you will never require a down payment no matter how much the home costs (assuming you have a full VA entitlement). But when you have utilized a portion of your entitlement, the second VA loan amount will vary depending on how much remaining entitlement you have left (and which county you are moving to).
How Does the VA Entitlement Work?
VA entitlement is very confusing, to the point that most loan officers and mortgage professionals do not know how to properly calculate the remaining entitlement. There are now two layers of entitlement, clouding the waters even further. An eligible veteran has their basic entitlement and secondary entitlement. The basic entitlement is $36,000 and due to the 2022 conforming loan limits, in most counties across the nation, the secondary entitlement is currently worth $125,800 (25% of $647,200, the current conforming loan limit for most counties). When you add both of these together, your total entitlement is $161,800. We know this is confusing so let’s go over a few different examples: In this scenario, the veteran is keeping their current home, so the entitlement used to purchase that property is not available to purchase the next property.
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Case Scenario on How to Calculate VA Entitlement
Let’s say in this example, a veteran purchased a home in 2017 for $200,000 which utilized $50,000 of their entitlement in the process. Since the VA guarantee is 25% of the total loan amount, this is how we come up with $50,000 of entitlement used. The veteran now plans to move him and his family to a new state for a job offer and since 2017, homes have gone up in price a considerable amount. The veteran is now looking to purchase a home for $400,000 in the suburbs of Chicago. Since the conforming county loan limit is $647,200 in the Chicagoland area, giving a total entitlement of $161,800, this is how we break down this scenario.
- $161,800 (total entitlement) – $50,000 (entitlement already in use) = $111,800 remaining entitlement
- $111,800 * 4 = $447,200 remaining secondary entitlement
In this example, $447,200 is the maximum loan amount a veteran can use before a down payment is required. In this example, the veteran is looking to purchase a home for $400,000, so no down payment is necessary. He is able to utilize his remaining entitlement to purchase a second primary residence utilizing a VA mortgage loan.
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Another Case Scenario on VA Entitlement Calculations
Now let’s go over another example. In this example, a veteran purchased a home in 2019 for $300,000 which utilized $75,000 of entitlement. The veteran is now moving to the Dallas area and homes are considerably more expensive. It will be a difficult task to get a home for less than $450,000. Once again, the conforming loan limit in the Dallas area is $647,200. Which gives a total entitlement of $161,800 (see above for breakdown).
- $161,800 (total entitlement) – $75,000 (entitlement already in use) = $86,800 remaining entitlement
- $86,800 * 4 = $347,200 remaining entitlement
Since the next home being purchased will be over the $347,200 remaining entitlement threshold, a down payment will be required. How much down payment is needed? Since the VA guaranteed 25% of the loan amount, the veteran is responsible for 25% of the difference between the purchase price and the remaining entitlement. In this example the math breaks out as follows:
- $450,000 (purchase price) – $347,200 (remaining entitlement) = $102,800
The veteran is required to pay 25% of $102,800. A down payment of $25,700 is required.
Two VA Loans at The Same Time: Mortgage Options for Homebuyers
In this example, a veteran may want to explore other mortgage options with a lower down payment threshold. As of now, $25,700 is a 6.1% down payment. As you may be aware, an FHA loan only requires a 3.5% down payment and you may qualify for conventional financing with a down payment as low as 5%. It is important to weigh the pros and cons of each one of these mortgage programs as they will involve mortgage insurance. FHA will have both up-front and monthly mortgage insurance. A conventional loan with a 5% down payment will require mortgage insurance that can be paid in a few different ways. Our team of highly skilled loan officers is here to walk you through which program will put you in the best financial situation. It is important to use a mortgage team that knows the pros and cons of each mortgage program.
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High-Balance VA Loans
We would like to share one more scenario with you that will help veterans in certain areas of our country. These areas are called high-balance counties. Each year the Federal Housing Finance Agency (FHFA) will share the home price index which creates conforming loan limits for every county across the nation The information above pertains to the majority of counties across the nation where the current conforming loan limit is $647,200. But in some areas of the country, the average cost of a home is considerably higher, and they have a higher threshold for their conforming loan limits.
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Jumbo VA Loans in High-Cost Areas
As of today, the states with areas considered high balance include California, Colorado, Connecticut, District of Columbia, Florida, Idaho, Maryland, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Tennessee, Utah, Virginia, Utah, West Virginia, and Wyoming. It is important to understand that not every county in those states is considered high balance. Typically, the areas around major metropolitan cities have a higher cost of living and the homes usually cost more in those areas.
Buying A Home with a High-Balance VA Loan in a High-Cost Area
In this example, we will show a veteran purchasing a home in Los Angeles County, California, where the conforming loan limit is currently set at $970,800 for the calendar year of 2022. In this example, a borrower already has a VA loan for $450,000. Remember Los Angeles County is a high cost county in California, and the conforming loan limit is now $970,800. Entitlement used is $112,500. Secondary entitlement in this high balance area is $278,700 ($970,800 / 4 = $242,700, then you add the $36,000 primary entitlement). $278,700 (total entitlement) – $112,500 (entitlement already in use) = $166,200 remaining entitlement. $1666,200 * 4 = $664,800 remaining entitlement
Having Two VA Loans at The Same Time in High-Cost Counties
In this high-balance example, the borrower already owns a higher-priced home. The homebuyer can buy all the way up to $664,800 without a down payment! Keep in mind, that if the veteran would like to buy a home above $664,800, they will be responsible for a down payment of 25% of the difference between $664,800 and the purchase price.
Please visit the County Lookup Tool to check your area’s conforming loan limit.
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Two VA Loans at The Same Time by Utilizing Secondary Entitlement
In all of these examples, we would like to make a note that the veteran must borrow more than $144,000. Because you were utilizing your secondary entitlement, above and beyond for times to $36,000 basic entitlement, you must borrow at least $144,001. Once again, we understand this can be incredibly confusing. That’s why your team is here to help.
Selling Your Current Home to Restore Full VA Entitlement Versus Having Two VA Loans at The Same Time
There is also the option of selling your current home to restore your full entitlement. With a VA loan, depending on your current financial situation, becoming a landlord and renting out your current home may be too much for you. If you are moving a long distance away and do not have the ability to utilize a management company, this could actually put you in a worse financial situation.
Selling Home and Purchasing Home on the Same Day Restoring Full VA Entitlement
Many veterans are unaware that they can sell their home and purchase another home on the same day restoring their full entitlement. This is a process our team is very familiar with and can walk you through the process as seamlessly as possible. When you sell your home, your current VA loan will be paid in full, restoring your full entitlement. Our team can then utilize a VA mortgage loan to purchase a home the same day utilizing a new VA mortgage.
Property Tax Exemption for Disabled Veterans
One more thing we would like to educate our veteran readers on is a property tax exemption offered by numerous counties across the United States. Many counties in states across the country will offer veterans a lower tax rate or even completely eliminate property tax payments for disabled veterans. If you currently have a VA tax exemption on your existing property, your county may require you to start paying the full property tax bill when you move out, since this home will no longer be your primary residence. This is something you must consider in your new monthly budget. Depending on where you are moving, you may or may not receive a property tax exemption. Make sure you discuss this thoroughly with the realtor in the area you are seeking to move to.
Contact Us For Further Explanation on Having Two VA Loans at The Same Time
We understand the information in this article can be confusing. Please reach out to our team of professionals today. We strive to make customer service our number one goal and make sure our veterans understand every aspect of their mortgage loan. Please reach out to Mike Gracz at 630-659-7644 to go over your remaining entitlement. Utilizing your secondary entitlement can be a great way to further your real estate portfolio. Buying your second home with no down payment (or limited down payment) can be a great tool for building wealth and battling inflation.
Qualify and Get Pre-Approved Today For VA Loans with Lender with Easy Guidelines and No Overlays
Gustan Cho Associates are experts in VA mortgage lending without lender overlays. While your remaining entitlement is not an overlay issue, many veterans are told they do not qualify for a home loan when in fact they do. The VA does not have a minimum credit score requirement. So even if you have been turned down in the past, please reach out to our team for assistance. If you do not qualify today, you will know exactly why and when you may qualify in the future. We work with many families for well over a year before they qualify for the home that is best for their family. We take pride in helping our brave veterans. We are only one phone call or email away. The housing market is hot and not needing a down payment can help you start building equity in a stable asset!
Contact Us To Qualify For Having Two VA Loans at The Same Time
April 15, 2022 - 9 min read