If you are a service member, chances are high that springtime means relocation. Thanks to Permanent Change of Station orders, military families move on an average of every two to three years. That's 2.4 times more than civilian families.
Military families who currently own a home financed by a VA loan often scramble to sell in order use their VA loan benefits again in their new location. But the truth is that, under the right circumstances, borrowers may be able to have two VA home loans at a time. One scenario that meets the VA's rules is when a military homeowner is required to relocate under PCS orders.
A military homeowner may decide to keep their "old" home for a number of reasons. Perhaps they want to retain ownership until the market allows them to sell at the right price. Or they want to keep the home as a way to earn rental income. Regardless, if they decide to keep their current residence and purchase in the new base town, they will need to show the following before they can move forward with a VA loan:
- Ample Entitlement
- Ability to Pay for Two Loans
Two VA Mortgages Usually Require 2nd-Tier Entitlement
Borrowers who have used their VA home loan benefits in the past typically understand the concept of entitlement, which is the amount of money the VA agrees to repay the lender if there is a default on the loan. What many borrowers don't know is that the VA loan program offers a second-tier of entitlement that supplements the first tier amount.
First- and second-tier entitlements are easily explained and can help a borrower calculate if two VA mortgages are possible. The average no-down-payment VA purchase loan is around $210,000. This loan amount would use up around only a portion of an eligible borrower's entitlement. This leaves some entitlement left over for another loan. Here is a breakdown:
- 1st-tier entitlement is $36,000 or enough for a loan of up to $144,000
- 2nd-tier entitlement is $68,250, and can be used for loans over $144,000
- Full entitlement is $106,025 for loans up to $424,100 (most areas)
Talking strictly averages, let's say a borrower's first loan is $210,000. This would use up all of his or her 1st-tier entitlement and some of the 2nd-tier for a total of $52,500. Full entitlement is $104,250, so this leaves remaining entitlement of $51,750. That's potentially enough for another loan of up to $207,000.
A VA specialty lender will be able to help you determine how much entitlement you have left for your second home purchase.
Ability To Pay For A Second VA Home Loan
Qualifying for a second VA home loan is no different than when you did it the first time. Getting a loan from an approved lender requires income and credit verification. And, borrowers need to meet basic lender and VA standards for this type of government-guaranteed loan. It's the lender's job to verify a borrower's ability to pay. Here are some of the qualifying factors that the lender will be looking for:
- Current income and/or assets
- Current employment status
- Other forms of income or self-employment
- Credit history
- Monthly mortgage payments
- Monthly payments of other mortgages obtained at the same time
- Property taxes and other mortgage-related expenses
- Any other debts including child support and alimony
- Debt-to-income ratio
- Residual income
A PCS move can creep up fast. Knowing that multiple VA loans are possible may provide PCS'ers housing options that they may not have realized. For more information about using your home loan benefits, contact a VA home loan specialist.
Veterans First, a top VA-approved lender, has served America's brave men and women by providing quality VA loans since 1996. These zero-to-low down payment mortgages, backed in part by the Department of Veteran Affairs, help eligible borrowers purchase and refinance homes at competitive interest rates. Pre-qualify at www.veteransfirst.com or 888-359-3661.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender