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Getting a Second VA Loan

January 12, 2015

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Getting a Second VA Loan

va loanMany VA borrowers apply for their first VA loan not thinking about what they might want or need years down the line. That first home may seem perfect when it’s first purchased, but many first time home owners outgrow that home at some point.

Others may need to sell to relocate for a new job, a new career or simply a change of scenery. Regardless of the reasons, a VA borrower looking for another home will definitely start asking questions about what it takes to get a new VA loan and buy once more with all the benefits of a VA-insured mortgage.

What exactly does it take to get into a new VA loan?

For starters, it’s important to differentiate between a second VA loan for a home purchase and a “second mortgage,” where a borrower takes out a second loan on the property they already own. VA borrowers who want to buy a new home have to take steps to get their eligibility restored—they used VA loan eligibility to buy the first home and it must be restored before the second VA loan application will be considered.

Restored eligibility usually happens after the home purchased with the VA loan has been paid off by the owner or when the house is sold. But it’s not automatic–the buyer must apply for restoration with the VA.

Once the eligibility issue is settled, the buyer should be aware that just as with the original VA home loan they applied for, the new VA-guaranteed mortgage requires a VA funding fee. VA loan fees are higher for second-time borrowers.

First time VA borrowers pay a 2.15% VA loan funding fee for a no-money-down VA mortgage. Compare that with the VA loan funding fee for a second-time use, which is 3.30% at the time of this writing.

The VA rationale for the higher funding fee for second-time borrowers is simple; the Department of Veterans Affairs knows first time buyers have more budget constraints than a second-time buyer who is likely in a stronger financial position when they purchase for the second time.

Knowing these two critical issues for second-time VA borrowers is a huge help when planning budgets, selecting a lender and trying to prequalify. Once the buyer has restored VA loan eligibility, much of the rest of the process is similar to the first VA home loan, and the buyer should have an easier time knowing what to expect from the process having been through it once already.

23 Comments
  1. roy knox

    I would like to build a small house on my vacant land in Texarkana, Arkansas, with my VA benefits/certificate of eligibility. I am a veteran, age 70. What steps should I take?

    • Joe Wallace

      You can pre-qualify for a VA loan at VAloans.com using the online form to get started--it's best to have a look at the form to see the types of information you'll need before getting started. You can also contact the VA directly if you need additional information on your VA loan options at http://www.benefits.va.gov/homeloans/contact.asp

  2. Jim Bartow

    Regarding previous conventional foreclosure - went out of business, (builder removeling - Bk discharged June 07 - last forclosure Sheriff sale 12/08 - redemption period up in June 09 - foreclosed home sold 11/09 - now,for the most part debt free - excellent cash reserves - excellent ratios...credit scores around 700...how long must we wait to get a VA loan - had one previously...35 to 40 years ago... Jim Bartow

    • Joe Wallace

      Hi Jim, thanks for asking. There's a seasoning period of two years for VA loans following foreclosure action. Some lenders require an additional year, but VAloans.com will work with qualified borrowers after the two year waiting/seasoning period.

  3. Chris

    If I am a disabled vet whose funding fee is waived for Loan #1, would it also be waived for Loan #2?

    • Joe Wallace

      If your condition exempted you from paying a VA loan funding fee the first time, unless the VA has changed your records or upgraded your condition from the original used to verify your exempt status, you would most likely be exempt from the second funding fee as well.

  4. Thomas

    If I have not used the the VA loan over 12 years and have sold my house a year after. Will I have to pay a second VA loan funding fee? Thomas

    • Joe Wallace

      Yes, when you reapply for VA loan eligibility your certificate will show the previous VA loan and your finding fee will be the "subsequent use" funding fee which is higher than the first time use fee.

  5. Ozzie

    Is there anyway to get another VA loan if I have not paid off my existing loan and don't want to sell the property? I moved due to a relocation and am interested in buying in another part of the country.

    • Joe Wallace

      You may be able to use any remaining entitlement on a new home loan, but the VA requires borrowers in new purchase VA loans to certify the home is their primary residence. If you haven't refinanced the first VA loan, you would have to work out the residency issue with the lender and the VA to the satisfaction of the Department of Veterans Affairs. Unfortunately you can't get your full entitlement restored for a VA home loan until you have paid off the property or otherwise satisfied VA regulations for VA loan entitlement--again, you may be able to use any remaining, unused entitlement if you have any.

      • Mark

        I'm in the same situation as Ozzy (took out a VA loan, moved to new state, kept original home as a rental). But I have refinanced the original VA loan a few years ago. I don't have any remaining eligibility on the first loan. Since it has been refinanced, though, does that make me eligible to reapply for a new VA loan to use as my primary residence? Thanks for all the good info.

  6. Robin Roberts

    We are still in the same home we purchased with a VA loan back in 1991. We refinanced back in 1993. Of course it was sold a few times to other mortgage companies along the way. But 1.5 years ago, we refinanced again from 7.5% to 5% with Wells Fargo. They paid off the original VA MTG and now the new 15 year mtg is an FHA mtg. So my question is does my husband need to contact VA to restore his entitlement since the VA loan was paid off? What documents does he need to provide? We are still living in the same residence, though. Is this the same thing since the VA loan was paid? Thank you very much for any clarification you can provide. Also, we may be looking to purchase a new home in the near future. If so, would he be eligible for a second VA loan?

    • Joe Wallace

      The VA normally requires proof that the original loan has been paid in full, so you'd need documents from the loan payoff to show that's been done. Contact the VA directly to learn more about your specific situation as there may be additional considerations or paperwork required due to the fact that the VA loan has been paid off but you're still in a mortgage on the home. Contact the VA regional loan center nearest you for more information: http://www.benefits.va.gov/homeloans/rlcweb.asp

  7. Jason Talley

    I have previously had a home loan through the VA that was paid off and my eligibility was restored for the purchase of our second house here in Las Vegas. Due to the market, we are upside down about 20k and do not have the option to sell without taking a loss or foreclosure. We are being re located to Houston, Texas and want to know if we can buy a second home in Houston with the remaining eligibility on our VA. Our current VA loan is for 180k of the 417k. We plan on using our current home as a rental property. Thanks!

    • Joe Wallace

      If you have a new purchase VA home loan, you're required to certify at the time of the loan that you will use the property as your primary residence. You would be required to certify that any new purchase VA home loan is the primary residence. Unless you have refinanced the current VA home loan, you could have a conflict with the VA primary occupancy rule--you should get in touch with the Department of Veterans Affairs directly to get advice in this situation before committing to a new home loan. Contact them at 1-800-827-1000.

  8. carl ealy

    Lost my job. my house was foreclosed on. I lost 2 cars 7 years ago. Can I ever buy a house with a va loan again?

    • Joe Wallace

      Much depends on your individual circumstances, but VA loan rules require a two year minimum wait after foreclosure before you can apply for a new loan. In the meantime, establishing a history of reliable payments and reestablishing good credit patterns is key. Call the VA for more information at 1-800-827-1000.

  9. CHARLES G EPPS

    Once I pay off the first V.A. Loan and I want to get a second V.A. Loan to purchase another home. will you give me a number that I can get through on to speak to a V.A. Rep

    • Joe Wallace

      Call the Department of Veterans Affairs at 1-800 827 1000.

  10. A Perez

    I first used a VA loan 27 years ago. I'm considering using it again. What would the VA funding fee be? Would it be 3.3% or considered first time?

    • Joe Wallace

      Your VA loan funding fee would be for second-time use--it wouldn't matter how much time has elapsed since your first use of the VA loan entitlement.

  11. Alise Perez

    I first used a VA loan 27 years ago. I'm considering using one again. What would the funding fee be? Would it be lower than 3.3%?

    • Joe Wallace

      Your VA loan funding fee would definitely be for second-time use. The funding fee would be a percentage of the amount used to calculate the loan so there is no set amount, it varies by transaction.

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