How to Leverage a VA Loan for a Second Home Purchase

VA home loans make homeownership more accessible to service members, veterans, and their surviving spouses. The advantageous terms make them an attractive way to fund home purchases. But is it possible to use a VA loan for a second home?

If you define your second home as a vacation property, the answer is no. However, there are ways an eligible borrower could use a VA loan to buy a second home. This post will explore some of those options.

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Using a VA Loan for a Second Home Purchase

Primary Residence Requirement

The VA loan program aims to help veterans and service members attain homeownership. That’s why they strictly enforce rules preventing people from using the loans for leisure or investment properties. However, you can use them to buy a second primary residence.

Occupancy Requirements

One way the VA prevents the misuse of these loans is with occupancy requirements. The borrower must live in the home for most of the year. They must also move in within 60 days of closing on the purchase.

Exceptions

There are exceptions to the occupancy requirements. For example, your spouse can stand in as the occupant if you are on active duty. Retiring service members can have up to a year to occupy the home. You can also apply for an exception if the home needs repairs that may take more than 60 days.

Remaining Entitlement

A VA loan is an entitlement for the borrower. The basic entitlement is $36,000 for homes up to $144,000. That means the VA will guarantee up to $36,000 for a home up to that price. However, there is also a bonus entitlement. If the home costs over $144,000, the VA will back 25% of the additional cost.

However, if you have a previous VA loan, you might only have a partial entitlement for the second loan. Calculating a partial entitlement can be complicated. Use this percentage calculator from the VA for help.

You can also restore your entitlement by paying the original VA loan in full and applying for restoration.

Buying a second home with a VA loan may be complicated. Even if it will be a new primary residence, there might be issues concerning the first VA loan and your remaining entitlement. Buyers should consult with real estate professionals or lenders with experience in VA loans. They can help you maximize the value and avoid any issues.

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