The VA loan carries many myths. The largest of them, however, deals with the VA entitlement. Many people believe you can only have 1 VA loan at a time. They believe once you use your entitlement, it’s gone. However, it’s not. There are ways you can have multiple VA loans at a time. Some borrowers can hold 2 VA loans at the same time if they meet certain circumstances.
How Entitlement Works
First, you must understand VA entitlement. It’s how veterans secure VA funding. Without it, you couldn’t qualify for a VA loan. Entitlement means the VA will guarantee a loan in your name. Basic entitlement equals $36,000. This means the VA will guarantee 4x this amount or $144,000. No, you aren’t stuck purchasing a home for $144,000 though. There is another type of entitlement called bonus entitlement.
You don’t have to do anything special to receive bonus entitlement. It’s available to eligible veterans. Right now, it’s equal to $70,025. This gives you total entitlement of $106,025 or a purchase price of $424,100. This is also the maximum conforming loan amount for this year.
Now, you don’t have to use the entire amount of your entitlement. You can determine how much you use by dividing the purchase price by 4. Let’s say you purchase a home for $175,000. This means you used $43,750. Subtract that amount from the total $106,025 and you still have $62, 275 left.
Using Your Remaining Entitlement
Now you know you have the entitlement left. How do you use it? How do you have 2 VA loans at the same time? You must meet specific circumstances.
If you are still active in the military and they move your base you may qualify. Some military members prefer to keep their current residence. They often rent it out and purchase another home closer to the base. This way when they complete their service at that base, they can move back to their original home.
Veterans may also use this option. The veteran must live in the home they purchase with the new VA loan. Keep in mind, the amount of the purchase price is also capped. They can only borrow up to 4 times the amount of the remaining entitlement. The exception to the rule is if the borrower puts money down on the home. Let’s say you have $25,000 left in entitlement. This means a $100,000 mortgage. If you want to purchase a $150,000 home, you’d have to put $50,000 down. This leaves you with a $100,000 mortgage. This may defeat the purpose of the VA loan, though, so it may or may not make sense for you.
Qualifying for 2 VA Loans at Once
Just because you have entitlement doesn’t mean you qualify for a VA loan, though. Just like any other loan program, you must personally qualify for the loan. Here are some things you should consider:
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- Credit score The VA is unique because they don’t have minimum credit score requirements. Most lenders, however, won’t allow scores below 620. Some may even require higher credit scores. Just like with any other loan, the higher the score, the better your chances of approval.
- Debt ratio Again, the VA is unique. They don’t have maximum debt ratio requirements either. In general, your total debt ratio shouldn’t exceed 41%, though. You may find lenders that grant exceptions. The VA focuses more on disposable income. We’ll discuss that below. It’s a good idea to stick to the conventional debt ratio requirements, though. No more than 28% of your income should cover your housing payment. Also, no more than 36% of your income should cover your total debt payments.
