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A Beginner's Guide to VA Second-Tier Entitlement Loans

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Understanding Second-Tier Entitlement, County Limits, and Down Payments

As a veteran or an active service member, you might be eligible for a VA loan to buy a home. VA loans offer several advantages over conventional loans, such as lower interest rates, no down payment, and no private mortgage insurance. However, if you've already used your VA loan benefit or if you have an existing VA loan, you might wonder if you can still get another VA loan. The answer is yes, thanks to the second-tier entitlement. In this blog post, we'll explain what second-tier entitlement is and how it works, along with other key aspects of VA second-tier entitlement loans.

When Does Second-Tier Entitlement Come Into Play?

First, let's define what second-tier entitlement is. In simple terms, second-tier entitlement allows you to have more than one VA loan at a time or to use your VA loan benefit again after you've paid off your previous VA loan. Second-tier entitlement comes into play when your first VA loan is still outstanding, but you want to buy another home using your VA loan benefit. However, to be eligible for a second-tier entitlement loan, you must meet certain criteria.

The criteria for a second-tier entitlement loan are as follows:

  • You must have paid off the first VA loan in full or transferred it to another eligible veteran who assumes the loan and agrees to repay it.
  • You must have the remaining entitlement available to use.
  • You must use the second-tier entitlement for a primary residence only.
  • You must meet the lender's credit and income requirements.

If you meet these criteria, you can apply for a second-tier entitlement loan and potentially buy another home with no down payment and other favorable terms.

Understanding County Limits

One thing to keep in mind when applying for a VA loan, whether it's your first or second one, is the county limits. The VA sets a limit on the amount of money it guarantees for each VA loan, which varies by county. The limit represents the maximum amount of money a lender can loan you without requiring a down payment. If you want to borrow more than the county limit, you'll have to make a down payment equal to 25% of the difference between the limit and the purchase price. For example, if the county limit is $500,000, and you want to buy a home for $600,000, you'll have to make a down payment of $25,000, which is 25% of the $100,000 difference.

It's essential to know your county limit before you start looking for a home because it can affect your budget and your ability to buy a home with no down payment. You can find out your county limit by checking the VA's website or asking your lender.

Why Down Payments Are Sometimes Required

As mentioned earlier, one of the benefits of VA loans is that they don't require a down payment, which can save you a lot of money upfront. However, in some cases, you might have to make a down payment, even if you're using your VA loan benefit. Here are some situations when a down payment is required:

  • If you exceed the county limit: If you want to borrow more than the county limit, you'll have to make a down payment equal to 25% of the difference between the limit and the purchase price.
  • If you have insufficient entitlement: Your entitlement represents the amount of money the VA guarantees for your loan. If you have a low entitlement, you might have to make a down payment to cover the difference between the loan amount and the entitlement.
  • If you have a low credit score or high debt-to-income ratio: Although the VA doesn't have a minimum credit score requirement, lenders often have their own standards. If your credit score is low, you might have to make a down payment to compensate for the risk. Similarly, if your debt-to-income ratio is high, meaning you have a lot of debt relative to your income, lenders might require a down payment to lower their risk.

Making a down payment can be challenging, especially if you don't have a lot of savings. However, even a small down payment can help you qualify for a loan, reduce your monthly payments, and save you money on interest over the life of the loan. Therefore, it's worth considering making a down payment if it means you can get a better loan or afford a more expensive home.

Other Things to Know About Second-Tier Entitlement Loans

Here are some additional things you should know about VA second-tier entitlement loans:

  • You can use your second-tier entitlement loan to buy a new home or to refinance your existing VA loan.
  • You can reuse your second-tier entitlement loan as many times as you want, as long as you meet the eligibility criteria.
  • You can use your second-tier entitlement loan to buy a multi-unit property, such as a duplex or a triplex, as long as you occupy one of the units as your primary residence.
  • If you default on your second-tier entitlement loan, the VA will still guarantee a portion of the loan, but the lender can seek a deficiency judgment against you for the amount of the loss.


VA second-tier entitlement loans can be an excellent option for veterans and active service members who want to buy a home or refinance their existing VA loan. Second-tier entitlement allows you to use your VA loan benefit again, even if you still have an outstanding VA loan. However, you must meet certain eligibility criteria and county limits to qualify for a second-tier entitlement loan. Additionally, down payments might be required in some situations, but they can help you qualify for a loan and save you money in the long run. By understanding the basics of second-tier entitlement loans, you can make an informed decision and take advantage of the benefits that VA loans offer.