VA home loans have historically been known for providing Veterans and service members with a no down payment purchase option. But starting January 1, 2020, the VA down payment requirements gets better! Although, how can the VA loan down payment up to the VA loan limits get better? We will explain the expanded VA home loan benefits included in the Blue Water Navy Vietnam Veterans Act of 2019 works for all military or Veterans.
Plus, we explain how Veterans can have two VA loans at once. Have two VA loans at once? Absolutely! It is very possible to use a 2nd VA loan with no money down while keeping another VA loan. Currently, as the purchase price level increases, a down payment could be required. Again, we will show how this should improve January 1, 2020. Having two VA loans at once is called accessing a Veteran’s “bonus entitlement”, which is also called 2nd Tier Entitlement. So in this article, we will not only discuss how to obtain a 2nd VA loan but also reveal the updates coming for VA loan down payment.
VA Loan Down Payment Solutions
One of the purposes of this article is to show you that the VA loan down payment solution is not a one-time thing. It doesn’t stop there! There are ways for VA buyers to qualify easier while owning 2 homes with VA loans too. Let’s discuss.
Using VA Bonus Entitlement
As mentioned, using a Veteran’s bonus entitlement to have two VA loans is a very beneficial mortgage tool. Although, at a certain price point, a VA loan down payment could be required. Determining if a down payment is necessary or not depends on the amount of entitlement used and the purchase price for the new home. In these cases, our team will determine a borrower’s entitlement as well as eligibility. Part of this process is determining if a down payment is required. So what are the benefits of using VA a second time around?
When is VA Bonus Entitlement or 2nd Tier Entitlement Beneficial?
- Converting a home with a VA loan on it to a rental
- Previous VA foreclosure, short sale, or compromise sale
- Turning a current home that has a VA loan on it into a second home
- Buying another primary residence with potentially no money down
This is quite a lot of benefits and it is easy to see why many would prefer to use VA again!
Converting a Primary to a Rental
Either by choice or necessity, converting a primary house into a rental could take place. This is especially a common occurrence for military experiencing a permanent change of duty station, otherwise knowing as PCS to a new base. The great thing about VA guidelines is that it will allow up to 100% of the new monthly lease amount towards covering the mortgage on the rental property.
But VA will only allow the new rental income up to the current total monthly mortgage payment. So if the mortgage payment (including taxes and insurance) on the new rental is $1000 and the rent will be $1100, then $1000 could be counted. Otherwise, this would be a wash of the mortgage payment which helps the buyer more easily qualify for the new loan.
Using VA to purchase a home with a previous VA short sale, foreclosure, or compromise sale
For one reason or another, bad things happen sometimes. This is no different in the home ownership realm. So, what if the government takes a loss because of a previous foreclosure, short sale, or compromise sale? Believe it or not, it is possible to get another VA mortgage! Now, the amount of the loss does affect the Veteran’s entitlement available. Then, the amount of entitlement used affects the amount which can be borrowed on the new VA purchase.
A benefit is that from a loan amount of $144,000 on up, a Veteran may still get 100% financing. One of our VA loan officers would calculate if a down payment is required or not. Ultimately, being able to buy another home using VA with potentially little to no down payment after a negative housing event is quite the benefit.
Converting a Primary to a Second Home Using a VA Loan
What if a VA borrower wants to keep their current house as a second home and buy another primary residence? Sometimes a homeowner with a VA loan may decide to keep the current residence. Use it as a vacation or second home. Actually, it is not a requirement to refinance to another type of mortgage. Although, there could be a benefit in doing this as it could free up the entitlement. Obviously, if the property will be a second home there is no rental income to be calculated.
So, the Veteran must qualify using the entire payments of both homes, along with any other debts. In order to buy another primary residence using VA, it must make sense. So, buying a similar home down the street may not fly. Yet if the home is in a resort area and the buyer is moving to another area, this could be allowed. In these cases, a good explanation letter is very helpful to prove why the new home will be a primary residence.
Buying Another Primary Residence with Potentially No Money Down
Basically on all of the above scenarios, it is still possible to buy a home with no money down. So, that is just one of the beauties of a VA loan. Whether there is a rental, second home, or previous derogatory housing event, getting another VA loan with no money down is possible.
The best thing to do is just ask about qualification and give us as much details as possible about your scenario. Worse case scenario is a buyer doesn’t qualify now. Yet, with detailed advice, qualification down the road could be possible. So, why not ask now?
Reminder: If the property with a current VA loan on it is being sold prior to the new purchase, the sale will clear up the Veteran’s entitlement being tied up by that VA mortgage
VA Loan Down Payment Changes January 1, 2020!
As mentioned above, the Blue Water Navy Vietnam Veterans Act includes some special benefits for VA loans. In 2019, VA loan limits for most counties is $484,350. Therefore, no down payment is required on VA loans at or under this loan amount. Exceeding the VA loan limit means a down payment is required. The higher the loan amount, the higher the down payment or equity required.
But, starting January 1, 2020, VA loan limits go away! Currently, there are not specific details available. Although, we do know that higher purchase prices or appraised values can now use the nothing down VA loan down payment solution! $600,000 price – no down payment. $800,000 price – no down payment! Now, if buying or refinancing under the current VA loan limits, there is no need to wait. Get your VA loan now. Going over the limit and being within a close window of the change date, means waiting could be an advantage.
Other changes will be made as well which include
- Higher VA funding fees to help fund the Blue Water Veterans Act
- Making reservist and regular military fees the same
- Eliminates purple heart recipients from paying VA funding fees
Hopefully this article was helpful and maybe shared something you may not have known. Stay tuned for updates closer to January 1, 2020. Contact us for your VA purchase or refinance. Our knowledge will get you the service and loan that you deserve!