Can VA Loan Borrowers Use Their Home as a Vacation Home?

There are a number of opportunities available to service members when it comes to purchasing a home. Depending on the schedule, duties, and finances of the individual, they may wonder if they can use those benefits to purchase a vacation home. See how the VA loan terms work in this kind of situation.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

A Quick Refresher

In order to qualify for the VA loan, military members are supposed to inhabit the home as a primary residence. However, those who are liable to be transferred once every couple of years may reasonably come to think of every home as a vacation home. Over the years, the VA has worked to account for these situations by building in more flexible language.

The Exceptions

There is something known as bonus entitlement that's available to military members, which essentially allows members to purchase a second primary residence. Even if a member has a VA loan, they can take out another one—potentially without the need for a down payment. As with a normal VA loan, members won't be required to pay for private mortgage insurance but will likely be charged a funding fee. This fee varies, depending on everything from military ranking to length of service.

Bonus Entitlement

Members have a certain entitlement for homes, and it's listed on their certificate of eligibility (COE). The dollar value on the COE is the maximum amount members can use for their home. However, if they're not using it all, they can roll the leftover entitlement over into another home. For instance, a $100,000 home would take up 25% in terms of entitlement, or $25,000. Standard entitlement is $36,000, which could give service members extra funds to consider for a second home.

Final Considerations

There are a few more things to note about using a military home as a vacation residence:

• The VA allows members to borrow up to 4 times their available (not total) entitlement.
• Talking to a lender is the best way to determine the numbers (just make sure to bring a current COE).
• Owners who have sold a home in the past need to restore their entitlement by applying for another COE.
• Owners can complete a substitute of eligibility so long as they sell to another eligible veteran.

Consulting with a real estate expert is generally the best way to determine whether a service member can purchase a second home, and if so, what kind of terms they can reasonably expect. It generally comes down to the entitlement on the COE and the individual's standing in the service.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.