What do I need for a second VA loan?

Question

I have read some of the VA guidebook and I think I've found that there are some bare minimums for the underwriting requirements on a second VA loan (I might be wrong, so feel free to correct me). First, one property has to be under $144k, the other has to be over. Second, you must have 2 years of income. Third, your first home must be under a lease that covers the monthly mortgage payment. That seems to be about it as far as absolute requirements.

My question is, when it comes to the lenders' own requirements, what should I expect? Is there a minimum credit score? Do they want to see liquid assets? I've heard the funding fee tends to be higher, how much higher? How much debt is too much debt (total or monthly minimums)?  I really want to move onto a second property, preferably multi-family, but I am having trouble finding out what I need to do and I don't want to take the hit on my credit for a pre-approval and not get approved for enough to buy something in my market.

Last of all, does anyone know any good VA lenders who work with people looking to leverage their VA loans into investment properties?

Thanks in advance to anyone who answers, I appreciate the help.

Chris Mason · Answer

Baby boomers needed to be told something to stop them from getting a Macy's and Target card to save 5% on this transaction every single time they walked in the door. So the fear of God was put into them about credit inquiries, because you couldn't directly tell them that their credit addiction was stupid or that would have upset their sensitive feely feels. Big picture, this has helped them be less stupid. This subset of boomers are still perpetual tenants with shaky finances, but not as bad as they'd be if their credit addiction continued unabated.

Yes it is overstated. For the boomers' own good.

You are not thinking of a pointless saving 5% on some shoes; you're thinking of a house. :)

John Ford · Answer

I am closing next month on a second VA loan while keeping my first home financed under a VA loan. First, as stated, the home you're buying (second home) must be your primary residence. So you will have to move into the new home.There is a minimum loan amount on the second loan of $144k. Chris M did a good job explaining the maximum so I won't go into that.The minimum score is 620 for your middle score on a tri-merged report. That's the VA minimum. Lenders can still require higher but generally won't be able to go lower than that.They don't require the first home be covered under a lease unless you want/need to offset the first mortgage on your debt to income ratio. If you make enough to cover both loans and still come in under DTI ratios, you don't have to have a signed lease or cash reserves. If you will need to use projected rental income to lower your DTI, then you will need a signed lease and deposit check. I think you also need 6 months of cash reserves to cover the mortgage on the first house.There's definitely a lot to it. In addition to research, I recommend finding a loan company that specializes in VA mortgages. I did and they have been awesome and know this crap inside out and were great about educating not only me but also my agent on what I could/couldn't do (so she wasn't wasting our time showing me things I couldn't buy). I'm not at all sure the process would have been as smooth as it has been if I went with a regular bank that occasionally does VA loans.

Chris Mason · Answer

No one (credible) is going to preapprove you based on stated credit. If you can't handle a credit pull and don't have all cash, you aren't ready to buy a home.

You cannot purchase investment properties using VA loan, only places you intend to live. If they happen to be 2-4 unit properties, and you happen to rent out the other units, that's perfectly fine too, but you need to live there, and the loan limit will be based on the SFR loan limit in that area regardless of actual unit count.

Anything over that loan limit, 25% down on the difference. For example near me the SFR loan limit is $625,500. So if this was your first and only VA loan and you wanted to buy a $725,500 duplex in the Bay Area, you'd need to come in with $25k, because that's 25% of the $100k difference between those two numbers. In that scenario, VA with $25k down and no MI is a better deal than FHA 3.5% down ($25,375) with MI. Note that you can max out your VA entitlement and have one FHA mortgage, simultaneously.

For multiple simultaneous VA loan scenarios, it will be impossible for anyone to determine your remaining VA loan entitlement amount without aaaaaaaaaaallllllll the paperwork. It would take more time to train you to run those numbers than it would take for you to gather aaaaaaaaaallll the paperwork and push the "send" button on an email. If you want to go over your remaining entitlement, it'll be the same as above with 25% down on the difference. Sometimes the solution is that if you've got enough equity in your current home, great refinance it out of VA and free up 100% of your VA loan entitlement. Sometimes, given your local market, you have enough entitlement left that you're good to go right now.

VA is pretty magical, I put my money where my mouth is and am in VA financing, but these scenarios start to have legs to them.

What do I need for a second VA loan?

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