Assuming a VA Loan - Can I do it while my 1st property is VA?

[Josh Edelman]

I currently own my own property as a VA loan. I want to assume a VA loan property across from me as an investment property and/or move in to it. If I assume it, will it count against my VA eligibity cap? Am I even able to do this since VA is strict on proximity to second home? Or will it not be affected? Thanks!

[Erik Browning]

@Josh Edelman

Straight from the VA Guidelines:

Any purchaser may qualify to assume a VA loan; [THIS LINE APPLIES TO YOU] however, for a Veteran’s entitlement to be restored, a Veteran purchaser with sufficient entitlement must complete a Substitution of Entitlement (SOE) when the ROL is closed. The Veteran’s entitlement is not restored unless the Veteran purchaser, in addition to assuming the payment obligation, also agrees and is eligible to substitute their entitlement for the Veteran seller’s entitlement. It is important for the servicer as soon as possible in the assumption process to obtain COEs for both the Veteran assumer and Veteran seller to determine if there is sufficient entitlement in which to substitute.

VA Guideline from Ch5

Hypothetical Scenario that applies to you: 

Let's say you bought your home in Vegas for $300k and the county loan limit is $600k. Because the maximum amount the VA will guarantee is $600k (you can go higher than this, still at 0% down, but this illustration is in the realm of split entitlement - which is your situation, which also applies to you regarding remaining entitlement).

Your buddy's home that you want to assume is $250k. $300k + $250k = $550k.

$550k is less than the county loan limit of $600k, so it means you can assume the loan as long as you meet the DTI and credit limits.

If your buddy's home is >$300k, say $350k, then $300k + $350k = $650k, which is < $600k. In that case, you cannot assume his loan.

Handful of things: 

This is only for VA to VA assumable transactions. VA to Non-VA is slightly different. The departing veteran takes the entitlement with them even though they don't own the home anymore.

You're probably asking yourself, "What's Clark County's (Las Vegas) county loan limit?" 

You're probably also asking, "how much of my entitlement did I use up already?"

First - get your certificate of eligiblity and look for the number in this location:

That number in the picture is how much entitlement you've "used up." This is a function of the loan amount. Only worry about the entitlement charged.

Then take that number, plug it into THIS CALCULATOR, select the drop down for your state/county, then see how much entitlement you have left. Do the same for your neighbor buddy, then make the comparison.

Good luck!