Rebecca Richardson - Mortgage Consultant
Get The Most Out of Your VA Housing Benefits
If you’re an active-duty service member or a veteran, you’ve got valuable VA loan benefits that can help give you a cheaper and easier path towards homeownership. But how can you know that you’re getting the most out of these benefits?
Below are three different methods to get the most out of those benefits. Give them a read and don’t hesitate to reach out to a member of my team if you have any questions!
How Often Can You Use Your VA Benefits?
One of the biggest perks of a VA loan is that a down payment isn’t required. Because of this, many veterans don’t want to “waste” this perk on a starter home or a home near their current base if they PCS again in just a few years.
However, the reality is that you can use your VA benefits over and over again. Also, in some cases, you could even have multiple VA loans at the same time.
So, how does this work? For most individuals, you’ll buy a home with a VA loan. Then, when you sell, your eligibility will be restored and will allow you to buy your next home with a VA loan without having to pay a down payment.
The one change to keep an eye out for, unless you’re exempt, is your VA funding fee—the VA’s version of mortgage insurance. This funding fee will be lower the first time you buy compared to any of the subsequent homes that you buy.
Can You Use a VA Loan to Invest in Real Estate?
Can you use your VA loan benefits to invest in real estate? In the traditional sense of real estate investing, no. However, there are some workarounds that can benefit you and your fellow service members.
VA loans are strictly for primary homes, meaning that you and your family must move into the house within 60 days of closing with the intention to reside there for at least one year. Depending on your MOS, you might rotate through the same few bases throughout your career.
Your workaround would be to buy a home at one of your frequently stationed bases to live in while you’re there. When you PCS, rent that home to another service member, then move back in when it’s your duty station again.
By having an anchor home like this, you can build equity while living there and when you’re stationed somewhere else.
How to Buy Another Home with a Second VA Loan
Say you already own a home with a VA loan and want to buy another home. How do you do that?
Before we dive into that, let’s cover some basics regarding loan limits and entitlement. Across most of the country, the standard loan limits are $726,200.
Now, there are also two layers of entitlement: basic entitlement and bonus, or secondary entitlement. Basic entitlement equates to $36,000. In most parts of the country, the second tier is worth $145,550. This equates to $181,550 of total entitlement—25% of that $726,200.
Because that home must be a primary residence which you keep & reside in, the entitlement used to secure your original VA loan isn’t accessible for a second.
So, let’s say you purchased a $300,000 home utilizing $75,000 (25% of the $300,000 home) of entitlement. This gives you $106,550 in remaining entitlement. Multiply that remaining entitlement by 4 gives you a maximum of $426,200 available to borrow with no down payment.
By utilizing your remaining entitlement and the remaining amount available to borrow according to conforming loan limits, you’re able to use those VA loan benefits to purchase another home without selling your current home.
There are plenty of nuances to VA loans and even more misinformation online. That’s why it’s valuable to work with an experienced lender who you trust. If you’d like to maximize your VA benefits, contact a member of my team and we’ll be sure to find a mortgage solution that benefits you and your family.