VA Second Tier Entitlement or Conventional?

Question

Hi, I am new to learning about VA Second tier entitlement. I currently have a SFH which is under VA home loan which I got for $281,500 in California. I am looking into which route I should take or if it is a feasible route. Either I try for second tier entitlements or try and convert to a conventional with my current home. Need advice and input. Thanks.

Antonio Hernandez · Answer

Hey Patrick,

I just recently purchased my 2nd home with VA loan, kind of.

I ended up having to use a combination of CALVET and VA loan because my second home was more that the limit allowed by VA. If the pricewould have been $20k less I would have been good with just a VA loan.

So depending if you're looking at a larger more expensive house, I wouldn't refi the 1st one as I'm sure your interest rate is pretty low, plus adding closing cost would add more $ being refinanced.

Using someone else's money is always better, that using your own.

Just my two cents.

Carlos Scarpero · Answer

Second tier entitlement will almost always be the cheaper route from a rate perspective.Depending on the price of the new home, you may cap out on entitlement. If you cap out, the down payment is 25% of the overage. Have a conversation with a good lender that can explain your options. Good luck!

Antonio Hernandez · Answer

@Patrick Mulligan adding to @Cesar Castro if your first purchase was $281,500 that would have consumed about $70,375 of $121,087 normal VA benefits limits. That is considering your county isn't rated at a higher cost of living. In other words the generic limit of VA loans is $484,350 (if I'm not mistaken).

The loan for $281k consumed $70K, mean you have about $50k that you can still use, or another house under $200k.  If you look for something higher that the $200k, you would have to come up with some cash out of pocket. Don't forget closing cost and funding fee unless you've received a disability rating from VA.

I just paid around closing cost of $15K for a purchase of $338k.

Cesar Castro · Answer

@Patrick Mulligan @Antonio Hernandez has good points about closing cost and such. It really depends on how much % of your VA Home Benefit you used up (have left over). If you have access to VA/DoD eBenefits you can get a certificate of eligibility (COE) to help you figure out how much purchase power you have left on your VA Home Benefit. From their you can figure out what other programs (CALVET, FHA, etc..) you can use in conjunction.

VA Second Tier Entitlement or Conventional?

Most Popular Reply