VA Loan and Second Tier Entitlement

11 Replies

@Samantha Reeves

Hi Samantha,

I have read some of your post explaining VA Entitlement and you have done a great job clarifying some of the quirks that go along with VA loans. I do have some additional questions if you get the time to answer that would be wonderful.

I own a home that I bought using my VA home loan. The cost was $148,000 so I know I have $269,000 remaining in my second tier entitlement (Kansas City.) I plan on renting out my current home.

If I have this correct; once I have my home rented with a rental agreement for at least twelve months and a deposit check, this will offset the mortgage payment in the lenders eyes? Do I need to rent is out for a set amount of time before using my second tier entitlement?

Do I still need cash reserves if it’s rented? Also, I believe I cannot consider the income from the rented home for at least two years for future loans? This would be fine in my situation I just want the rental income to offset my current mortgage.

I plan on purchasing a duplex, triplex, or a quadplex with my second tier entitlement shortly after renting my house out. I know the minimum loan amount needs to be $144,001, but no more than $269,000 per my remaining eligibility, any amount over $269,000 I would be required to put a 25% down payment on. I also know I need to reside in the residence for the time set by the lender, not the VA.

I didn't have to pay the VA funding fee because of a service disconnected disability, would I need to pay it if I use my second tier entitlement? Are there any other addition fees with the second tier that aren't associated with the first?

Furthermore, do I need to have good reason to use my second tier entitlement like a job change, etc? It seems like most of the time active/reservist will get orders, but since I’m out that won’t happen. Is there a distance that the second property has to be within or exceed from my original home? 

Lastly, I can restore my entitlement by refinancing to a conventional non-VA loan option, but not the IRRRL?

Thank you for your time with answering this lengthy post. I hope it helps others who may have these same questions.

Chris

This post has been removed.

Chris you have great questions here... Did you get an answer or any further info on this?
-Nicholas Schwab

@Nicholas Schwab Thank you, I did speak to a lender and they did confirm that as long as I have lease agreement for at least one year and a deposit, they can use that to offset the mortgage. To them it looks like a wash and the income from the rent cannot be considered for at least two years. I'll have to inquire again about the other details with them. If you have any additional information to share in regards to VA entitlement do share.

Thanks,

Chris

I am interested in this as well

I also have a similar situation and would like to know more about second tier entitlement. I have one rental
Outside of my primary residence that is a conventional loan. My current residence has a 220k 30yr VA loan. How do I use my second tier entitlement to purchase a 3rd property for a REI.

Another Vet here...like to learn more myself.

Hey @Paul W. and @Greg Rutkowski ,

From what I know most counties have a VA loan limit of $417,000. So in your case Paul you could buy another property 1-4 units up to $197,000 with no money for a down payment. Any amount over that would require a 25% down payment, but only on the amount over the $197,000. The minimum purchase price has to be $144,001 and the VA funding fee is a little higher on the second go around. Unless you have a service connected disability then you don't pay the funding fee. You must occupy the property. I asked Veterans United and they told me I had to occupy the property for at least 6 months and a day. If you refinance out of a VA loan into a conventional loan, I believe you can get your entitlement restored one time. If @Samantha Reeves is still active I have seen her post a lot of information in regards to VA loans. I think she could give you guys more information. I hope that helps.

Thanks,

Chris

@Chris Thein looks like my previous comment was deleted. Not sure why that happened. 

@Paul W. Keep in mind that the home you purchase using your VA loan has to be your intended primary residence at the time you buy the home. Just wanted to make sure it was clear that you can't use a VA loan to purchase a strictly investment property.

I have a VA loan also and looking at doing the same thing. I have about $224k 2nd entitlement left but I know the loan limits are different for multi-units. For instance in my county the max for a 2 unit is $543k. My question is if I am using 2nd entitlement to buy a Duplex do I have $$343k available or $224k? ($543-$200=$343) or ($424-$200=$224)

@Louis Bratt Sorry for the slow response, I missed the notification. The example below I copied directly from the VA Guaranty Calculation examples.

"Veteran has used $48,000 of entitlement on a prior loan, which may not be restored, and is purchasing a home for $320,000 where the county loan limit is $625,000.
$625,000 X 25% = $156,250 Maximum Guaranty
$156,250 - $48,000 = $108,250 Entitlement Available
$108,250 X 4 = $433,000 Maximum Loan Amount with 25% Guaranty
Since the proposed loan amount will be less than $433,000, the lender will receive 25% VA Guaranty on the loan of $320,000. A down payment should not be required."

So in your case:

$543,000 X 25% = $135,750 Maximum Guaranty

$135,750 - $48,250 = $87,500 Entitlement Available (Assuming your original loan was $193,000, if not just divide your original loan amount by 4 and replace $48,250 with that number)

$87,500 X 4 = $350,000 Maximum loan with no down payment.

I hope this helps. I would double check with the VA though.

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