In many ways, the procedure for getting a second (or third, or fourth…) VA loan is similar to obtaining the initial home financing.
First, veterans must be able to show that they satisfy the basic eligibility rules mandated by the U.S. Department of Veterans Affairs. The eligibility requirements can be found at the following Department of Veterans Affairs General Rules of Eligibility website.
Second, the VA loan has to be received through a lender that has been approved by the U.S. Department of Veterans Affairs. It is important to check with lenders prior to starting to ensure that they are qualified to provide a VA mortgage.
Third, the VA will analyze your mortgage application including your payment history on your previous loan to see if you have a history of paying your mortgage on time or have gone into default at some point.
The VA loses money veteran borrowers go into default, which means they are essentially doing a cost analysis on you to decide whether or not to grant you another VA loan. In addition if the VA suffered a loss on a previous loan you will be required to repay it before having your eligibility fully restored.
If you currently have a VA mortgage, or have had one in the past, then you already know about the required VA funding fee. However, there are differences between what the funding fees are for first-time VA loan borrowers and subsequent borrowers.
For VA loans, regular military members are categorized as either a first time user or a subsequent user. For first time users the fee structure is set up as follows:
- No down payment: 2.15% fee
- Up to 10% down payment: 1.5% fee
- More than 10% down payment: 1.25% fee
For subsequent users the fee structure is:
- No down payment: 3.3% fee
- Up to 10% down payment: 1.5% fee
- More than 10% down payment: 1.25% fee
The funding fee requirement for both the Reserves and National Guard members is different than that for the regular military. For first time users, the fee structure is:
- No down payment: 2.4% fee
- Up to 10% down payment: 1.75% fee
- More than 10% down payment: 1.5% fee
For subsequent users the fee structure is:
- No down payment: 3.3% fee
- Up to 10% down payment: 1.75% fee
- More than 10% down payment: 1.5% fee
Basically, the only difference between funding fees for first-time and subsequent VA loan borrowers is for “no down payment” scenarios.
If you are planning on making a down payment on your subsequent VA loan, then there will not be any difference from what you would pay for a first-time VA mortgage.
It’s important to understand that you may not hold more than one VA loan at a time. The loan you took out previously must be repaid in full before you will be eligible to apply for a new VA mortgage. If you still own the property but it is no longer financed with a VA loan (either because you refinanced or paid off the mortgage) you may request a one-time exception to have your eligibility restored.
Even if the loan was assumed by another party, the loan must either be repaid or if the assumer is eligible for a VA loan, they could transfer their eligibility to the loan.