Can You Use a VA Loan on a Second Home?

While a VA loan generally cannot be used for a second home like a vacation or investment property, it can be used for a primary residence. VA loans are specifically designed to help eligible individuals purchase a home they will personally occupy as their main residence.

However, veterans can use their VA loan eligibility to acquire an additional primary residence, effectively obtaining a second VA-backed loan. These circumstances are governed by specific rules that prioritize the veteran’s intent to occupy the property.

Primary Occupancy Requirement

The VA loan program is structured to assist veterans in securing a primary residence. The property acquired with a VA loan must be the borrower’s main dwelling. This requirement means properties like vacation homes, investment properties, or rental units do not qualify for VA financing.

Borrowers are expected to move into the property within a reasonable timeframe, generally 60 days after the loan closes. The VA allows flexibility for active-duty service members with deployments or Permanent Change of Station (PCS) orders. The intent to occupy the home as a primary residence is certified at closing, usually for at least 12 months.

This requirement prevents the use of VA loans for purely investment purposes, maintaining the program’s focus on homeownership. Exceptions for delayed occupancy, such as for active duty personnel or those awaiting home renovations, are granted with clear communication and specific timelines.

Using VA Loan Eligibility for Another Primary Residence

While a VA loan cannot be used for a traditional second home, eligible service members and veterans can secure another VA-backed loan for a new primary residence under specific conditions. This often occurs when life circumstances necessitate a move, allowing the veteran to utilize their remaining entitlement. A common scenario is a Permanent Change of Station (PCS) for active-duty military members. If a service member receives PCS orders, they can use their VA loan to purchase a new primary home in their new duty location, even if they still own a previously VA-financed property.

Another way to obtain a subsequent VA loan involves utilizing any remaining entitlement. Veterans may not have used their full VA loan entitlement on their initial home purchase, leaving a portion available for a future primary residence. This remaining entitlement can be applied towards a new home, allowing for another VA-backed loan without selling the first property. The amount of remaining entitlement is tied to county loan limits and the portion of entitlement already used.

VA loans can also be used to purchase multi-unit properties, such as a duplex, triplex, or fourplex, provided the veteran occupies one of the units as their primary residence. This allows for homeownership and potential rental income, aligning with the VA’s primary occupancy rule. Additionally, certain refinancing options, like a VA Interest Rate Reduction Refinance Loan (IRRRL), or selling a property can restore a veteran’s entitlement, making it possible to obtain a new VA loan for another primary residence.

Key Considerations for Subsequent VA Loans

Restoration of entitlement is a primary factor for obtaining a subsequent VA loan. Full entitlement restoration occurs when a veteran sells their previously VA-financed home and pays off the loan. A one-time restoration option is available if the veteran has paid off the original VA loan but still owns the property, allowing them to keep the first home while securing another VA loan.

Calculating remaining entitlement involves assessing how much of the VA’s guarantee has already been used against current loan limits in a specific county. While the VA guarantees 25% of the loan amount, if a veteran has used a portion of their entitlement, the remaining amount is determined by subtracting the used entitlement from 25% of the county’s conforming loan limit. If the new loan amount exceeds the remaining entitlement, a down payment may be required.

The VA Funding Fee is a financial implication for subsequent VA loan use. For most borrowers, the funding fee is higher for subsequent uses compared to a first-time use, unless the veteran is exempt. For example, the funding fee for a subsequent purchase with no down payment can be 3.3% of the loan amount, whereas for a first-time use it might be 2.3%. Veterans receiving VA compensation for a service-connected disability are exempt from paying this fee. Standard lender requirements still apply, including evaluations of the borrower’s credit score, income, and debt-to-income (DTI) ratio. While the VA does not set a minimum credit score, many lenders prefer a score around 620, and a DTI ratio is often 41% or lower, though flexibility exists with compensating factors.