Tom Kelly: VA loan could be used for your next home

Jim Kelley, a retired naval officer who spent much of his military career in cold environments, said the recent snap had caused the garage roof to leak and finally pushed him to look for a primary residence in a drier environment.

His master plan is to keep his home for the summer and early fall yet live seven to eight months of the year in southern Arizona. Even though he purchased his present home with a loan insured by the Department of Veterans Affairs, a Navy buddy told Kelley it would be possible to buy his next home with a VA loan because it would be the place in which he spends most of his time.

Typically, if the VA loan has been paid off and the property sold, home benefit eligibility can be restored for additional use. In addition, the VA offers a one-time-only bonus – eligibility can be restored if a prior VA loan has been paid in full but you still own the property.

While federal regulations require that all loans insured by the Department of Veterans Affairs be used only to acquire a “primary residence” it is possible to purchase another home using the VA loan guaranty. As in many cases involving the use of real estate, the definition of primary residence is the place you live “most of the year.” So, if you use the home more than six months of the year, it can be defined as your primary residence.

“The law was not intended to help people enter the business of real estate and purchase lots of homes,” said Chris Michel, a former naval reservist and founder and chairman of www.military.com, an internet site targeting present and former military personnel and their families. “The law was written to help people afford the home that they are going to occupy.

“A VA loan can most definitely help purchase that next home or retirement home. Hopefully in their retirement years, people are spending most of their time in what was their vacation home.’’

The VA requires that you move into the home in a “reasonable” amount of time and that you keep it as your primary residence. If those are your intentions at the time you apply for the loan, then there is nothing to keep you from using your VA guaranty to purchase a second home or retirement property.

The perception that a VA loan guarantee can only be used once is incorrect. If your original VA loan was paid off, you are eligible to use the guarantee again. If you purchased a previous home with a VA loan and the buyer assumed your loan, your eligibility can be restored only when the assumer has paid off the loan. The only other alternative would be if the assumer is an eligible veteran who is willing to swap his or her available eligibility for yours.

The critical requirements for eligibility are an honorable discharge, an eligibility certificate and the ability to make the loan payments. All VA loans have a funding fee for a borrower’s first VA loan is 2 percent of the loan. That 2 percent is reduced to 1.2 if the borrower provides more than a 10 percent down payment.

The unmarried surviving spouse of a veteran who died on active duty or as the result of a service-connected disability is eligible for the home loan benefit. The children of an eligible veteran are not eligible for the home loan benefit.

Some seniors and aging boomers still are unaware that reservists are eligible for VA programs. After 50 years of offering loans only to vets who served active duty, the VA changed its ways. Army, Navy, Air Force, Marine Corps and Coast Guard Reserves, or the Army National Guard and Air National Guard, are eligible for VA home loans, including no-down-payment programs.

In addition, reservists who were called up to active duty after August 1990 and served 90 days continuously on active recall are eligible for VA loans and other benefits.