Many VA borrowers apply for their first VA mortgage not thinking about what they might want or need years down the line. That first home may seem perfect when it’s first purchased, but many first time home owners outgrow that home at some point.
Others may need to sell to relocate for a new job, a new career or simply a change of scenery. Regardless of the reasons, a VA borrower looking for another home will definitely start asking questions about what it takes to get a new VA mortgage and buy once more with all the benefits of a VA insured mortgage.
What exactly does it take to get into a new VA loan?
For starters, it’s important to differentiate between a second VA loan for a home purchase and a “second mortgage”, where a borrower takes out a second loan on the property they already own. VA borrowers who want to buy a new home have to take steps to get their eligibility restored—they used VA loan eligibility to buy the first home and it must be restored before the second VA loan application will be considered.
Restored eligibility usually happens after the home purchased with the VA mortgage has been paid off by the owner or when the house is sold. But it’s not automatic–the buyer must apply for restoration with the VA.
Once the eligibility issue is settled, the buyer should be aware that just as with the original VA home loan they applied for, the new VA guaranteed mortgage requires a VA funding fee. VA loan fees are higher for second-time borrowers. First time VA borrowers pay a 2.15% VA loan funding fee for a no-money-down VA mortgage. Compare that with the VA loan funding fee for a second-time use, which is 3.30% at the time of this writing.
The VA rationale for the higher funding fee for second-time borrowers is simple; the Department of Veterans Affairs knows first time buyers have more budget constraints than a second time buyer who is likely in a stronger financial position when they purchase for the second time.
Knowing these two critical issues for second-time VA borrowers is a huge help when planning budgets, selecting a lender and trying to prequalify. Once the buyer has restored VA loan eligibility much of the rest of the process is similar to the first VA home loan, and the buyer should have an easier time knowing what to expect from the process having been through it once already.
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