Can you use a VA loan for a second home?

If you’re ready for a change of scenery and wondering if you can get a VA loan for second home financing, you’re in luck.¹ The short answer is yes. While the Department of Veterans Affairs designed this benefit to help eligible military home buyers purchase a primary residence, there are workarounds that allow you to use a VA loan when buying a second home.

VA entitlements and lender requirements

The VA has rules in place to ensure the program fulfills its core mission: helping veterans secure primary housing, rather than building real estate portfolios. Because of this, strict guidelines govern how you can use your benefits for another property.

Here are the primary rules to keep in mind:

• You must intend to occupy the new property as your primary residence for the majority of the year.
• You generally must move into the home within 60 days, as outlined in the VA loan occupancy requirements.
• You need a valid VA Certificate of Eligibility (COE) to prove to your lender exactly how much entitlement you have available for your next purchase.
• Whether this is your second or 10th time using a VA loan, you generally still need to pay the VA funding fee. This fee is higher if it’s not your first time using a VA loan. There are limited exemptions.

Understanding bonus entitlements

Your COE will show your basic entitlement, but you also have access to a bonus entitlement, sometimes called a second-tier VA entitlement. This bonus entitlement is what may allow you to buy a second home without fully paying off your first VA loan.

If you have full entitlement, the VA doesn't set a limit on how much you can borrow, which helps you explore buying a house with no money down using a VA-guaranteed loan. However, if your entitlement is tied up in another property, you have what's called a partial entitlement.

Partial entitlement

The first thing to do is to check your COE. If it shows a used entitlement, you only have a partial entitlement, meaning you may have to make a down payment to buy a home with a VA loan. When a client has partial entitlement, the VA guarantees the lower of 25% of the loan amount or 25% of the county conforming loan limit minus the client's used entitlement.

For example, Joan wants to buy a $500,000 house in an area with a conforming loan limit of $832,750 for a one-unit property. She’s used $100,000 of her VA entitlement in the past, which hasn’t been restored.²

For the first equation, let’s take a look at 25% of the local loan limit minus the unrestored entitlement:

$832,750 × 0.25 - $100,000 = $108,187.50

Now, let’s take a look at the other option, which is strictly 25% of the loan amount.

$500,000 × 0.25 = $125,000

The VA takes the lower number from these two solutions, so it’ll guarantee $108,187.50. Since most lenders, including Rocket Mortgage, require that the combination of any down payment and VA guarantee covers a minimum of 25% of the loan amount, Joan might have to make a down payment of $16,812.50 ($125,000 - $108,187.50).

Because of this rule, it’s important that you make sure your entitlement is restored if you sell your previous property. However, the process isn’t automatic. You must apply for restoration after selling your property.

Partial entitlement in a high-cost area

In the case of the highest-cost counties, loan limits are set at the county level, which can reach as high as $1,249,125 for a 1-unit property.

Now, let's say Joan wants to buy a $900,000 home in an area with $1,249,125 loan limits and $100,000 in previously used entitlement.

Remember, the first equation is 25% of the county loan limit minus any existing used entitlement:

$1,249,125 × 0.25 - $100,000 = $212,281.25

The second equation is the loan amount times 25%:

$900,000 × 0.25 = $225,000

Because the VA covers the lower amount of the two solutions, she would have to come up with a $12,718.75 down payment under the policies set by most lenders.

While loan limits have no impact on a VA loan for someone with full entitlement, lenders can set their own policies, and most have special requirements if the loan amounts reach a certain threshold.

Rocket Mortgage offers VA jumbo loans up to $1.5 million without a down payment if you have a median credit score of at least 640. You can obtain a VA jumbo loan of up to $2.5 million with a 680 credit score and no down payment.³

Restoring your entitlement

If you paid off an existing VA loan and want to use the benefit again, you can request a one-time restoration of your entitlement by essentially asking for a new Certificate of Eligibility. You can fill out Form 26-1880 online or have your lender request restoration on your behalf. They may be able to do so through an expedited process.

What happens if you’re buying a second home with a VA loan?

Because every situation is unique, the specific details of a second home purchase depend heavily on your individual circumstances. Let's break down the most common scenarios.

If your first home is paid off

When you buy a home with a VA loan, your loan is based on your VA loan entitlement. If you’ve paid off your first VA loan, you can do a one-time entitlement restoration.

However, this only happens once during your lifetime. Based on rules established by the Department of Veterans Affairs, under this scenario, the new property must become your primary residence. Luckily, the paid-off home then becomes your vacation home, and you only have one mortgage payment.

If your first home isn’t paid off

If your first home isn't paid off or it was foreclosed on, you may be able to use a VA loan to buy a second home. Based on your situation, you may have a partial entitlement, which means you may need a down payment for future financing.

In this scenario, you must occupy the new property as your primary residence. Similar to the previous situation, the previous residence will now serve as your vacation home. The VA has no rules regarding the minimum length of time the house must be the primary residence, but most lenders require at least 1 year of occupancy.

If you plan to sell your first home

If you find a buyer who’s eligible for a VA loan, there’s a special benefit you can offer: VA loans are an assumable mortgage. This means you have the option of letting the buyer take over your existing VA loan. Buyers may find this option attractive if current market rates are higher than they were when you took out your VA loan.

You can offer this benefit to any buyer. Although if the buyer isn't eligible for a VA loan, you forfeit your current or future VA entitlement. However, if you find a buyer who is already eligible for a VA loan, they can exchange your entitlement for theirs on the loan. Then, your entitlement is restored.

If you’re buying an investment property

It’s not possible to directly buy an investment property with a VA loan. However, you can generate rental income by purchasing another primary residence with a VA loan and renting out your previous home. Or, you can pursue a house hacking strategy by buying a multiunit property with up to four units and living in one of them.

To use a VA loan for an investment property in this way, you'll need to follow several rules:

• You must occupy the property for the minimum amount of time specified in your mortgage contract.
• You may have to make a down payment.
• The lease agreement must be fully executed.
• You’ll need a 1007 or 1025 appraisal report.

If you’re buying a vacation home

As we’ve said, it’s not possible to directly buy a vacation home with a VA loan. However, you can consider purchasing another primary residence and converting your previous primary residence into a vacation home. As part of this process, you generally have 60 days to make the new home your primary residence, but there are exceptions.

However, there’s an exemption to occupancy requirements for active-duty military, so you can also buy a home as a single soldier. There is more flexibility in terms of move-in date if you intend to return to the property after finishing your tour of duty. You must have a retirement date in this case.

FAQ

Here are answers to a few frequently asked questions about a VA home loan for a second home purchase.

Will I have to put money down for a VA loan?

If you have full entitlement, you typically won't need a down payment. If you only have partial entitlement, you may need to put some money down, depending on the county loan limits and your total loan amount.

What is the VA funding fee for a second home?

The VA funding fee for a subsequent use of your loan benefit is generally between 1.25% – 3.3%. Keep in mind that making a larger down payment will lower your overall funding fee.

How many houses can I get with a VA loan?

There is no limit to the number of homes you can buy with a VA loan over your lifetime. As long as you restore your entitlement by paying off the previous loan and selling the property, you can keep reusing the benefit indefinitely.

How long do I have to wait to get a second VA loan?

You generally need to satisfy the occupancy requirement on your first VA loan before applying for a second one, which is typically 1 year on primary residences. Lenders will also verify your financial situation and credit score during underwriting to ensure you still qualify.

Can a veteran have two primary residences?

You cannot have two primary residences simultaneously. However, you can convert your previous primary residence into a vacation home or rental property and use your remaining entitlement to buy a new primary residence.

The bottom line: Yes, you can buy two homes with a VA loan

Buying a second home with a VA loan is an excellent path forward, as long as you intend to live in the new property as your primary residence. By understanding your remaining entitlement and following the VA's occupancy rules, you can smoothly navigate the process of keeping your previous home as a rental or vacation property.

If you’re exploring options, you can check out standard VA loan rates or rates for jumbo VA loans. If you're ready, you can apply online.

¹ Rocket Mortgage is a VA-approved lender, not endorsed or sponsored by the Dept. of Veterans Affairs or any government agency.

² Any figures, interest rates, loan examples, and market data referenced in this article are hypothetical or aggregated for educational purposes only. They are not intended to reflect current pricing, available terms, or personalized loan options for any consumer. This content does not constitute an advertisement of credit terms, a solicitation or offer to extend credit, or a rate quote under federal or state lending laws. Actual mortgage rates and terms are determined by individual financial qualifications, property characteristics, market conditions, and other factors, and are subject to change without notice. If you are seeking current, real-time mortgage rate information please refer to the official live rate information and product details published at RocketMortgage.com/mortgage-rates, where current pricing and various loan terms are made available.

³ Rate pricing and closing costs dependent on loan qualification requirements and factors including but not limited to credit, income, assets, down payment, product selection and loan amount. This is not a commitment to lend.

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