VA loans are a great option for first-time homebuyers that were in the military, but they aren’t the only veterans that can use this financing option. If you’ve already used your VA benefit, you have a few more stipulations you must meet in order to qualify, but you can certainly use VA financing as many times as you qualify to use it.
First-Time Homebuyers Have it Easier
As a first-time homebuyer, you do have it a little easier when you obtain VA financing. Because you’ve never owned a home before, you don’t have to worry about not having enough VA entitlement to buy your home.
The VA provides veterans with enough entitlement to buy a home for as much as $453,100 without a down payment. If you’ve owned a home before, you’ll have to prove that you don’t own the home any longer and that you have full entitlement. Veterans can apply for reinstatement of their entitlement once they sell their home and pay off the VA loan in full. First-time homebuyers don’t have to worry about this. The only thing you have to worry about is qualifying for the loan.
Just because you have full entitlement doesn’t mean you qualify for a loan as high as $453,100. You have to prove that you can afford the payments that come along with the mortgage in order to qualify. The VA has flexible guidelines, but you must meet the following:
- 620 credit score
- Maximum 43% total debt ratio (this includes all consumer debts plus the new mortgage)
- Have enough disposable income to support your family
- Prove you’ll live in the home as your primary residence
If a loan amount of $200,000 is all that you can afford since your debt ratio hits 43% with that payment, then you’d only qualify for a $200,000 loan, leaving the remaining $253,100 of entitlement untouched.
If you own a home now and want to move, you can use your VA benefit for this transaction as well. Before the lender can approve you for VA financing, though, you must prove that you will sell your current home and pay off the VA loan with the proceeds (in full).
The VA will reinstate your entitlement as long as you can prove that you satisfied the VA loan. You will have to petition the VA for reinstatement, though; it’s not an automatic benefit. Once you have reinstated entitlement, you can secure a new VA loan for the loan amount that you qualify for up to $453,100.
The One-Time Exception
If you don’t sell your current home, you may still be able to use your VA benefit. The VA provides a one-time exception to the rule. Here’s how it works.
Let’s say you bought a home for $250,000 with your VA benefit. Your family grew since you bought the home, though, and you no longer fit in the home you bought. You know that one day you’ll want to move back into this home, though, so you decide to keep it. If you refinance the VA loan with the VA streamline refinance, you won’t be under the obligation to occupy the property as your primary residence any longer. This means that you can buy another home and live in it, renting out your current home.
In our example, you would have $203,100 left in entitlement. This means you could buy another home for as much as $203,100 with no down payment. As long as you certify that you will live in the home as your primary residence, you can use VA financing for this home too.
If you find a home that costs more than $203,100, you may still be able to use VA financing, but you’ll have to make a down payment. VA lenders usually require borrowers to put down 25% of the difference between the purchase price and the amount of entitlement that is left.
Any veteran with entitlement can use their VA benefit, as long as you satisfy the VA’s occupancy requirements. If you need an exception or you want to buy a home for more than the amount of your entitlement, you’ll need to petition the VA and/or your lender for the necessary exception in order to fulfill your dreams of homeownership.