VA loans can't be used to buy vacation homes or investment properties directly; the borrower must live in the home as their primary residence.
In 2026, veterans with full entitlement can borrow up to $832,750 (in standard counties) or $1,249,125 (in high-cost areas) with no down payment.
If you have partial entitlement, you need to figure out how much of the remaining guarantee you can get based on county limits and used entitlement. You may need to make a down payment.
The most common way to buy a second home is to turn your old VA-financed home into a rental property.
Most lenders want you to live in the property for at least 12 months before you can rent it out, and they also add a 25% vacancy factor to projected rents.
You need to have two years of documented experience as a landlord or a professional property management contract in order to use rental income to qualify.
With one-time entitlement restoration, you can keep a VA property that you've paid off and buy another home with full benefits.
Funding fees go up from 2.15% for the first use to 3.30% for the second and later VA loans with no down payment.
About one-third of VA borrowers can get funding fee exemptions if they have a disability rating of 10% or higher.
If you get PCS orders for active duty or move for a civilian job, you can buy a new primary residence and rent out your old one.
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The Second Home Reality Check for VA Borrowers in 2026
I've talked to hundreds of veterans in the Dallas-Fort Worth area who want to use their VA benefits to buy real estate. Here's what I tell them all: yes, you can use VA loans to buy more than one property, but no, you can't buy a vacation home or an investment property directly with VA financing. You must plan to live in the property as your main home within 60 days of closing, with very few exceptions for active duty deployment or properties that are being renovated. The steady rise in loan limits to $832,750 for standard counties makes 2026 especially interesting for VA borrowers. The Federal Housing Finance Agency said in November 2025 that this is a 3.3% increase from the 2025 limit of $806,500. However, the increase is smaller than in previous years, which is a sign that home prices are rising more slowly in most markets. These limits don't stop veterans with full entitlement from borrowing money. Lenders make their own rules, and many will approve loans that are much higher than the conforming limits with no down payment. Most veterans shouldn't be asking "can I buy a second home with a VA loan?" Instead, they should be asking "how can I use my VA benefit to buy multiple properties over time?" That's exactly what this guide will help you do.
Understanding VA Loan Entitlement and How It Affects Second Home Purchases
If you don't pay back your loan, the Department of Veterans Affairs will pay your lender the amount of your VA entitlement. This is the VA's promise to pay up to 25% of your loan amount. That's why lenders can offer such good terms, like no down payment, no monthly mortgage insurance, and low interest rates. The basic entitlement of $36,000 covers loans up to $144,000. However, the bonus entitlement lets qualified veterans borrow much more than that, which is what most buyers care about.
Full Entitlement vs. Partial Entitlement
If your Certificate of Eligibility (COE) shows $36,000 in available basic entitlement, you have full entitlement. This means the VA doesn't impose any loan limits—you can borrow as much as a lender will approve based on your income, credit, and the property appraisal. According to Veterans Affairs guidelines, full entitlement status is available to veterans who either have never used their VA benefit, have paid off a previous VA loan and had their entitlement restored, or used their benefit only to purchase a manufactured home.Partial entitlement occurs when you have an existing VA loan that hasn't been paid off, when you've used your benefit on a property you still own, or if you previously defaulted on a VA loan and haven't satisfied that obligation. The calculation for partial entitlement gets technical—it's the lower of either 25% of your county's conforming loan limit minus your used entitlement, or 25% of your intended loan amount. For example, in a county with the 2026 standard limit of $832,750, veterans with $100,000 in used entitlement would have $108,188 in remaining entitlement (25% of $832,750 = $208,188 minus $100,000), which typically translates to roughly $432,750 in zero-down buying power.
The Seven Legal Strategies for Using VA Loans to Build a Multi-Property Portfolio
Here's what I've learned from closing deals with veterans who've successfully used their VA benefits multiple times. These aren't loopholes or gray areas—these are legitimate, VA-approved strategies that work within the program's occupancy requirements.
Strategy 1: The Paid-Off Property with One-Time Restoration
Let's say you bought your first home with a VA loan five years ago and you've paid it off completely. The VA allows a one-time entitlement restoration without selling the property—you can literally restore your full $36,000 basic entitlement once during your lifetime, even while keeping ownership of the paid-off home. You'll file VA Form 26-1880 or have your lender request restoration electronically, which typically processes within a few days through the VA's WebLGY system.When you buy a new primary residence with your restored VA benefit, your paid-off home automatically becomes your second home or rental property. This is the best part of this strategy. You're not breaking any occupancy rules because you lived in the first home as required and are now living in your new home as your main residence. The only restriction is that you can only do this once. After that, you'll have to either sell properties to get your entitlement back or work with partial entitlement.
Strategy 2: The Partial Entitlement Purchase
Most veterans don't know that they can use their VA benefit again without paying off their first loan, as long as they still have enough entitlement. The most important thing is to know your county's loan limits for 2026 and work your way back from there. If you have $200,000 in used entitlement in standard counties, you still have $8,188 left over ($208,188 maximum minus $200,000 used). This means you have about $32,750 in buying power with no down payment. It's not much, but it is there. But if you're willing to put down a down payment to make up the difference between the lender's required 25% guarantee and your remaining entitlement, you can buy at higher prices. Let's look at a real-life example: You want to buy a $600,000 house in a regular county, and you already have $100,000 in used entitlement. The lender wants $150,000, which is 25% of the loan. You still have $108,188 left to claim. The difference is $41,812, so to get VA financing, you would need to put down about 7% of that amount ($41,812 divided by $600,000). This is still much better than regular loans that require 10–20% down, and you're building equity in a second property.
Strategy 3: The Relocation Exception for Active Duty and Veterans
Active duty military members who get Permanent Change of Station (PCS) orders can buy a new main home with a VA loan while keeping their old VA-financed home. The VA knows that military service often means having to move quickly, so forcing a sale would not be fair. The VA allows this situation, where your old home becomes a rental property out of necessity, not choice. Many veterans don't know that civilian relocations also qualify, but the rules for underwriting are stricter. If you're moving for work, like taking a new job in Austin while your current VA-financed home is in Dallas, lenders will want to see proof of your job, proof of your move, and proof that the commute from your current home would be unreasonable (usually more than 50 miles). Your lender will also want to see that the rental income from your old property, minus the normal 25% vacancy factor, either covers or offsets the PITI payment, or that you have enough money to keep both properties without help from renters.
Strategy 4: The Multifamily House Hacking Approach
You can buy properties with up to four units (duplex, triplex, or fourplex) through the VA, but you must live in one of the units as your main home. This is the best way to hack a house: you can live in one unit and rent out the other units, all with no down payment if you have full entitlement. Chapter 4 of the VA Lender's Handbook says that rental income from units that aren't occupied can help pay your mortgage under certain conditions. If you can show that you've been a landlord for two or more years (on Schedule E of your tax returns), lenders can use 75% of the market rent from the non-occupied units to help you qualify for a loan. If you don't have that experience, you'll need to hire a property management company that is licensed and give them a signed management agreement and a projected rent roll. The loan limits for multifamily properties in 2026 are higher: $1,066,300 for duplexes, $1,289,050 for triplexes, and $1,602,250 for fourplexes in normal counties. In high-cost areas, they are $1,599,625, $1,933,600, and $2,403,375. You can move to a new primary residence with another VA loan after living in one unit for the minimum amount of time required by most lenders, which is 12 months. Your old multifamily property is now a pure rental investment that makes money from all four units.
Strategy 5: The Assumption Transfer Strategy
A buyer can take over your VA loan, including your interest rate and remaining balance. This is called "assumable." In a rising rate environment, this is very useful. For example, if you locked in a 3.5% rate in 2021 and rates are now 7%, that assumable loan is a huge selling point. If an eligible veteran takes over your loan, they take over your entitlement, which means you get your full VA benefit back right away without having to pay off the loan or sell the property in a normal way. In 2020, you bought a house for $350,000 with a 2.75% interest rate. You want to buy a second home in 2026, but you don't want to lose the great rate on your first home. You find a qualified veteran buyer who takes over your loan. They take over the $315,000 you still owe at 2.75%, replace their entitlement with yours, and your entitlement is fully restored. You can buy a new main home right away with a VA loan at the current 2026 rates, and your buyer will save a lot of money by taking over your low-rate loan. The veteran who is taking over must meet the lender's requirements for income and credit, and there is usually a 0.50% VA funding fee on assumptions (in our example, $1,575 on a $315,000 assumption). Not all buyers will be able to use the VA, but this strategy works really well in places with a lot of veterans, like military towns and areas near bases.
Strategy 6: The Post-Occupancy Rental Conversion
Most veterans will find this to be the easiest way, but it does take time. With your VA loan, you buy a home and live in it as your main home for the length of time required by your loan contract (usually at least 12 months, but some lenders require longer). After that, you can buy a new main home with either your remaining entitlement or a new VA loan. Your first property becomes a rental. Timing, paperwork, and qualifying for rental income are the most important parts. Most lenders want to see that you've really moved into your primary residence. This means changing your driver's license, registering to vote, updating your mailing address, and actually living in the home. After the occupancy period is over, you will need to show that the property can be rented by giving a market rent analysis or a signed lease agreement. This is usually done with a licensed appraiser's Form 1007 or 1025 rent schedule. Don't forget the 25% vacancy factor: if your property rents for $2,000 a month, lenders only count $1,500 toward paying off your PITI on that property. The rental income doesn't count toward your income for qualification purposes; it just pays for the housing payment on the property you're leaving. If your PITI on the rental property is $1,800 and you're getting $1,500 in rental offset (75% of $2,000), you'll need to show that you can handle the $300 monthly shortfall in your debt-to-income ratio. Many lenders also want you to have 3 to 6 months' worth of PITI reserves just for the rental property. This means having enough cash saved up to cover 3 to 6 months' worth of principal, interest, taxes, and insurance payments.
This is a plan that helps you manage your portfolio and build your wealth at the same time. You can do a VA cash-out refinance after living in your VA-financed home and building equity. This pays off your current mortgage and gives you the difference in cash. You can then use this money as a down payment on a second property with conventional financing or another VA loan if you still have entitlement. The cash-out refinance has a higher funding fee (2.15% for first-time VA cash-out use, 3.30% for subsequent use), but it frees up money while keeping your original property's good VA loan terms. The smart move is to use the cash-out money to either (a) make a down payment on an investment property with regular financing, leaving your VA benefit open for a future primary residence, or (b) make a down payment to fill in entitlement gaps on a second VA loan purchase. For instance, you have $150,000 in equity in your first home. You get a VA cash-out refi, take out $100,000, use $50,000 as a down payment on an investment property with regular financing, and keep $50,000 in savings. If you're moving to a new primary residence, your old home can become a rental. If you're not moving, your old home stays your primary residence and you make money from the investment property. The most important thing to do is to make sure that the cash-out refinance closing happens before or at the same time as the purchase of your second property. If you take out cash and can't explain what you did with it, or if your reserves suddenly disappear, lenders will want to see the whole transaction. This raises red flags in underwriting.
What's Different About VA Second Home Strategies in 2026
Veterans looking to buy more than one property in 2026 will face both challenges and opportunities in the lending market. The Federal Housing Finance Agency's data from November 25, 2025, shows that the conforming loan limit rose to $832,750, which is a 3.3% increase from 2025. This is a big drop from the 5.2% increase seen the year before. This means that home prices are rising more slowly in most U.S. markets, which changes VA strategy in two ways.
First, slower appreciation means that veterans who bought homes in 2024 or 2025 may not have built as much equity as they thought they would have. This affects cash-out refinance strategies and the ability to carry two mortgages if rental income falls short. Second, and in a good way, lower prices make it easier for people to buy a second home. Veterans with partial entitlement or those using traditional financing for investment properties have less competition and may have more negotiating power than they did in the crazy markets of 2021 and 2022.
Conventional mortgage rates have stayed between 6.5% and 7.5% in late 2025 and early 2026. VA loans, on the other hand, are always 25 to 50 basis points lower because of the VA guarantee. This difference makes VA financing even more appealing to veterans who are eligible. The funding fee structure is the same as it was in 2023: 2.15% for first-time use with no down payment, 3.30% for subsequent use with no down payment, and discounts for down payments of 5% or more. About one-third of VA borrowers can get funding fee exemptions if they have a disability rating of 10% or higher, are a Purple Heart recipient, or are a surviving spouse.
Real-World Examples: How Veterans Built Second Home Portfolios in 2026
Example 1: The Dallas Relocation with Partial Entitlement
Mike, an experienced software engineer, bought his first home in Fort Worth in 2021 for $285,000 with a VA loan that had a 3.0% interest rate. In 2026, he still owes $265,000, which means he has used up $71,250 of his entitlement (25% of his original loan). He takes a job in downtown Dallas that requires him to move, but he will lose that great 3.0% rate if he sells his Fort Worth home. Mike's plan is to keep the Fort Worth property as a rental and use the rest of his entitlement to buy a home in Dallas. The 2026 conforming limit for Tarrant County (Fort Worth) and Dallas County is $832,750 (standard county). His remaining entitlement calculation: $832,750 × 0.25 = $208,188 maximum entitlement minus $71,250 used = $136,938 remaining. Most lenders will let Mike borrow up to four times the amount he still owes without a down payment. This gives him about $547,750 in buying power with no money down. He finds a Dallas townhome for $485,000. He still has $136,938 left, which is more than 25% of the loan amount ($121,250), so he can get the loan with no money down. To qualify, his lender needs to see proof that the Fort Worth property can rent for enough to cover its PITI. The property is worth $1,900 a month in rent on the market. With the 25% vacancy factor, that's $1,425 less in rent. Mike's Fort Worth PITI is $1,680, which is $1,200 for principal and interest, $380 for taxes, and $100 for insurance. This means he has a $255 monthly shortfall that adds to his debt-to-income ratio. Mike makes $9,500 a month. He only owes $350 for his car. He will pay about $3,200 a month for his Dallas home. His DTI is 40.0% because he has $3,200 in Dallas PITI, $255 in Fort Worth shortfall, and $350 in car payments. Mike gets approved because he has good credit (730 FICO) and $35,000 in savings. He pays the 3.30% fee for using the money again ($16,005 added to the loan), and within 60 days he is living in Dallas and making money from renting out his Fort Worth property.
Example 2: The One-Time Restoration Success
Using a VA loan, Jennifer, a nurse with a lot of experience, bought a condo in 2019 for $200,000. She paid extra on the principal, and by 2026, she will own the property free and clear. She wants to buy a single-family home for $475,000 and keep the condo as a rental. The condo is worth $285,000 now. Jennifer's plan is to file VA Form 26-1880 for one-time entitlement restoration, which is approved in five days. She gets back her full $36,000 basic entitlement, even though she still owns the condo. She can borrow as much as she wants because she has full entitlement, as long as the lender allows it and she can qualify. Jennifer is using 100% VA financing with no money down to buy the house for $475,000. Her funding fee is 2.15% ($10,213) because this is the first time she is using her current entitlement (the condo loan was paid off and restored). Jennifer reports the $1,800 a month rent from the condo on Schedule E of her taxes. This rental income doesn't count toward her main income, but it does show that she knows how to manage cash flow. The nurse who works for Jennifer makes $7,200 a month. Her new home PITI will cost $3,100. She doesn't owe anyone else money. Her DTI is 43.1% ($3,100 ÷ $7,200), which is a little higher than the normal 41% limit. But she has some strong reasons to be compensated: a credit score of 780, $62,000 in retirement accounts, and 14 months of PITI reserves. Her underwriter approves the loan because the VA's unique affordability measure shows that she has $2,500 left over each month after all her bills are paid for a family of one in the South region. This is much more than the $441 VA residual income requirement.
Example 3: The Fourplex House Hacking Graduate
In 2024, Carlos, a veteran and first-time home buyer, bought a fourplex in San Antonio for $580,000 with no money down using his VA benefit. He lived in one unit and rented out the other three. Carlos has been managing properties well for 18 months, as shown by his tax returns and lease agreements. He now wants to buy a single-family home for his growing family and keep the fourplex as a rental property. Carlos's plan for 2026: His fourplex is now worth $615,000, and he still owes $565,000 on the loan, which gives him $50,000 in equity. He has $145,000 in used entitlement, which is 25% of his original $580,000 loan. The standard limit for 2026 in Bexar County (San Antonio) is $832,750. He still has $208,188 - $145,000 = $63,188 left, which gives him about $252,750 in buying power with no down payment. Carlos wants to buy a single-family home that costs $395,000. The lender wants $98,750, which is 25% of the loan. He still has $63,188 left, which is $35,562 less than what he needs. Carlos needs to put down 9% of the total cost ($35,562 ÷ $395,000) to fill the gap. He takes money out of his savings. The fourplex's total monthly rent is $6,200, or $1,550 per unit, which is the minimum amount needed to qualify. That means $4,650 less in rental income after the 25% vacancy factor. Carlos has a positive cash flow of $550 a month from the fourplex PITI, which he can add to his income because the rental income is higher than the PITI. Carlos makes $6,800 a year from his job. His qualifying income goes up to $7,350 ($6,800 + $550 positive cash flow from the fourplex). He will pay $2,600 for his new home PITI. He has to pay $425 a month on his student loan. His DTI is 41.1%, which is ($2,600 + $425) ÷ $7,350. Carlos gets approved because he has proof of being a landlord (Schedule E shows rental income from a fourplex for more than 18 months), has good credit, and the fourplex is doing well financially. He pays the 3.30% fee for subsequent use on the $359,438 loan amount (the purchase price minus the down payment), which adds $11,861 to the loan.
Common Mistakes Veterans Make When Pursuing Second Properties
After working with hundreds of VA borrowers attempting multi-property strategies, I've seen the same errors repeatedly. Avoid these pitfalls to save time, money, and stress.
Violating Occupancy Requirements
The biggest mistake is thinking that the VA occupancy requirement is a suggestion instead of a rule. Veterans who buy a home with the clear intention of renting it out right away, without ever actually living there, could face serious consequences. The VA can ask for the loan guarantee back, which means you would lose the good loan terms and could even be charged with fraud. Even if you get away with it at first, problems come up years later when you try to refinance or sell the property and lenders check the occupancy history. Always live in the property as your main home for at least the amount of time stated in your loan documents, which is usually at least 12 months.
Underestimating Rental Income Qualification Challenges
A lot of veterans think that the market rent for their rental property will completely cover their old mortgage payment for the purpose of qualifying. People are often surprised by the 25% vacancy factor. Your DTI calculation shows that you are short $550 a month because your property would rent for $2,000 a month but your PITI is $2,200. This is because $2,000 × 0.75 = $1,500 rental offset and $2,200 PITI - $1,500 = $700 shortfall. If you haven't planned for enough income to cover the gap, this could ruin your approval. Also, veterans who want to manage their own properties but don't have any documented landlord experience often find out too late that lenders won't accept their rental income projections unless they have either two years of landlord history or a signed property management agreement. If you're a first-time landlord, keep track of your rental experience right away by filing Schedule E taxes. Include property management costs, which are usually 8–10% of gross rents.
Forgetting About Funding Fees and Reserve Requirements
A lot of veterans are surprised by the 3.30% fee for subsequent use funding. If you buy a second home for $500,000, that's $16,500 added to your loan balance. This isn't a deal-breaker, but it does raise your monthly payment by about $105 to $110, depending on your interest rate. Veterans often get so caught up in the idea of a zero down payment that they forget about closing costs (which are 2–5% of the purchase price) and reserve requirements. For rental properties, most lenders want you to have 3 to 6 months' worth of PITI reserves. If your property has a monthly PITI of $2,000, you'll need to show that you have $6,000 to $12,000 in cash after closing. This is in addition to your down payment (if you have partial entitlement) and closing costs. Make sure you have enough money after closing—many deals fall through in the last few days when borrowers realize they don't have enough cash on hand.
Misunderstanding Entitlement Restoration Rules
Veterans often mix up paying off a VA loan with automatically getting their benefits back. You can't get your entitlement back just by paying off your loan. You have to fill out Form 26-1880 or have your lender ask for restoration online. You only have partial entitlement until the VA officially processes your restoration. People also often get the one-time restoration benefit wrong. If you pay off the VA loan on your property, you can restore your entitlement once without selling it. This is different from the unlimited restorations you get when you sell a VA-financed property and pay off the loan. Don't use your one-time restoration on a situation where selling the property would work just as well. Save it for times when keeping ownership of the paid-off property will save you a lot of money.
2026 VA Funding Fees: Complete Breakdown
The VA funding fee is a one-time charge that supports the loan program, allowing the VA to continue offering zero-down financing without requiring monthly mortgage insurance. According to the Department of Veterans Affairs, the funding fee rates effective since April 7, 2023 remain current through 2026. Most borrowers finance the fee into their loan amount rather than paying at closing.
Purchase Loan Funding Fees
For first-time VA loan users with zero down payment: 2.15% of the loan amount. On a $400,000 purchase, that's $8,600 added to your loan balance. For subsequent use with zero down payment: 3.30% of the loan amount. On that same $400,000 purchase, second-time users pay $13,200.Making a down payment reduces your funding fee significantly. With 5-9.9% down, both first-time and subsequent users pay 1.50% (saving $2,600 or $7,200 respectively on a $400,000 loan). With 10% or more down, the fee drops to 1.25% for all users, representing $3,125 on $400,000—a $5,475 savings compared to the first-time zero-down fee or $10,075 savings compared to subsequent-use zero-down.
Refinance Funding Fees
The VA Interest Rate Reduction Refinance Loan (IRRRL), commonly called a streamline refinance, carries a 0.50% funding fee regardless of prior VA usage. This makes IRRRLs incredibly cost-effective for veterans seeking to lower their rate on an existing VA loan. On a $350,000 streamline refinance, the fee is just $1,750.Cash-out refinances, however, carry the same fees as purchases: 2.15% for first-time VA cash-out use, 3.30% for subsequent use, with no reduction for equity or LTV ratio. If you do a $450,000 cash-out refinance and you've done a VA cash-out before, you'll pay $14,850 in funding fees. This is the same whether you're pulling out $10,000 or $150,000 in equity—the fee is based on the new loan amount, not the cash withdrawn.
Exemptions from Funding Fees
About one out of three VA borrowers can get a full funding fee waiver. Veterans Affairs says that you don't have to pay if you get VA benefits for a service-connected disability that is rated at 10% or higher, if you are a Purple Heart recipient, or if you are the surviving spouse of a veteran who died in service or from a service-connected disability. Your COE will clearly say if you're not required to pay the funding fee. Look for language that says you're not required to pay the fee. Once the VA has your disability rating on file, the exemption happens automatically. If you get a disability rating after closing a VA loan with a funding fee, you might be able to get your money back if the rating goes back to before your closing date. If you want to know if you can get a refund, you should call the VA directly. Don't expect your lender to tell you this right away.
Tax Implications of Multiple VA-Financed Properties
Converting your primary residence to a rental property or operating a multifamily investment creates significant tax implications that affect your overall return on investment. Understanding these rules helps you maximize deductions and avoid costly mistakes.
Depreciation on Rental Properties
You can write off the building's value (not the land) over 27.5 years after it becomes a rental. If your property is worth $450,000 and the land is worth $100,000 (which is a typical 22% of the total value), your depreciable basis is $350,000. You can claim $12,727 in annual depreciation deductions against your rental income on Schedule E if you divide by 27.5 years. This depreciation is a "paper loss" that lowers your taxable income but doesn't change the amount of cash you have on hand. Your net rental income would be $6,000 if your property rents for $24,000 a year but costs $18,000 a year to maintain (mortgage interest, property taxes, insurance, maintenance, and property management). If you add in $12,727 in depreciation, you have a $6,727 loss on paper. This could lower your other income, depending on your modified adjusted gross income and whether you meet the IRS's definition of a real estate professional.
Mortgage Interest and Property Tax Deductions
The Tax Cuts and Jobs Act of 2017 limited deductions for primary residences, but on rental properties, 100% of mortgage interest and property taxes are deductible business expenses on Schedule E. This makes rental properties a lot better for investors in higher tax brackets when it comes to taxes. If you pay $15,000 a year in mortgage interest and $6,500 a year in property taxes on your rental, that's $21,500 in deductions that will lower your rental income. If you bought your main home with a VA loan, you can still deduct mortgage interest on loan amounts up to $750,000 ($375,000 if you file separately) and property taxes up to $10,000 a year. However, these are itemized deductions on Schedule A, not business deductions. You will only benefit if your total itemized deductions are more than the standard deduction ($14,600 for single filers, $29,200 for married filing jointly in 2026).
Capital Gains Considerations
If you sell a property that was your primary residence for at least two of the past five years, you can exclude up to $250,000 in capital gains ($500,000 for married couples filing jointly) under Section 121 of the tax code. This is one of the most powerful wealth-building provisions in the tax code, but converting to rental status affects the calculation.Here's the tricky part: if you lived in a property for two years then rented it for three years before selling, you may qualify for partial Section 121 exclusion. The IRS prorates the exclusion based on qualified use. In this example, you lived there for 2 of the past 5 years (40% qualified use), so you could exclude 40% of the $250,000 or $500,000 thresholds. Additionally, you'll owe depreciation recapture tax (currently 25%) on all depreciation you claimed during the rental period. If you claimed $38,000 in depreciation over three years, you'll pay roughly $9,500 in depreciation recapture taxes when you sell, regardless of your capital gains tax situation.
Professional Tips for Maximizing Your VA Multi-Property Strategy
Let me share what separates veterans who successfully build multi-property portfolios from those whose plans collapse at the underwriting stage.
Start with Perfect Credit and Clean Finances
Veterans who want to buy a second property should aim for credit scores of 680 or higher. However, if you want the best rates and the most freedom with lenders, you should aim for 720 or higher. Pay off your credit card balances so that they are less than 30% of your total credit limit (less than 10% is even better). Don't open any new credit lines within six months of when you plan to buy something. Any credit checks you made in the 90 days before you applied will show up on your credit report and need to be explained in writing. Two to three months before you apply, clean up your bank statements. Lenders pay close attention to big deposits and strange transactions. If you're selling stocks to get money for a down payment or getting money as a gift, make sure to keep clear records of where the money came from. Unexplained $5,000 deposits kill more VA loan applications than you'd think. Underwriters think there is undisclosed debt or income that can't be verified.
Work with VA-Specialized Lenders and Loan Officers
Not all lenders handle VA loans equally well, and not all loan officers understand the nuances of partial entitlement, rental income qualification with the 25% vacancy factor, and multi-property strategies. Interview loan officers specifically about their experience with veterans buying second properties. Ask how many second-tier entitlement loans they've closed in the past 12 months, and request references from veteran clients who've done similar transactions.VA-specialized lenders also have relationships with VA regional loan centers and understand how to work through occupancy waivers for active duty members or navigate the one-time restoration documentation. Your brother-in-law's mortgage company that does 90% conventional loans might offer you a VA product, but they'll learn on your transaction—and learning curves cause delays and denials.
Get Preapproved with Full Documentation
Prequalification letters mean nothing in competitive markets. Full underwriter-reviewed preapprovals with verified income, assets, and credit give you negotiating power and prevent surprises. For second property purchases where you're using rental income for qualification, provide everything upfront: signed leases or property management agreements, Schedule E from the past two years if you have rental history, and market rent analyses for properties you're converting to rentals.Don't wait until you're under contract to discover your rental income won't offset enough of your PITI or that you're $15,000 short on reserves. These issues surface in full underwriting, not prequalification, so invest the time and documentation effort before shopping seriously.
Consider Professional Property Management from Day One
Even if you plan to self-manage eventually, hiring professional management for your first rental property (especially if required for qualification) provides critical learning time and documentation. Property managers charge 8-10% of gross rents plus lease-up fees (typically half to one month's rent), but they handle tenant screening, lease enforcement, maintenance coordination, and evictions if necessary.For veterans using multifamily strategies, property management becomes almost essential. Managing three units in a fourplex while occupying the fourth requires significant time and expertise. A single problematic tenant can consume 20-30 hours monthly, and mishandling security deposit returns or fair housing laws creates expensive legal liability. Factor management costs into your cash flow projections—if the property barely breaks even with 10% going to management, it's not a good investment.
Frequently Asked Questions
Yes, but only if you have enough remaining entitlement or you make a down payment to make up the difference between your remaining guarantee and the lender's required 25% coverage. You will also need to qualify by showing that the rental income from your first property is enough to cover its mortgage payment, minus 25% for vacancies. You can't buy the new property as a vacation home or investment property; it has to be your main home. Most lenders want you to have lived in your first home for at least a year before you can rent it out.
Whether it's your first time using the VA benefit or not, making a down payment lowers your funding fee. The fee goes down for future use: from 3.30% with no down payment to 1.50% with 5–9.9% down, or 1.25% with 10% or more down. If you buy something for $500,000, you can pay $16,500 with no money down, $7,500 with 5% down ($25,000), or $6,250 with 10% down ($50,000). Do the math to see if the savings on the funding fee are worth the upfront cash and lost buying power from the down payment. In most cases, it still makes sense to finance 100% with the higher fee if you have good ways to use that money.
The VA doesn't require you to wait a certain amount of time between buying loans. Most lenders, on the other hand, won't approve another VA loan to turn your first home into a rental property until you've lived there as your primary residence for at least 12 months. If you're moving for work or military service, you might be able to buy two things in a row if you have the right paperwork. The real problem isn't time; it's your remaining entitlement, income qualification with the rental offset, and reserve requirements.
Yes, technically, but you should check your local zoning laws and HOA rules first to make sure you can do it. Many cities and towns limit short-term rentals by requiring licenses or banning them altogether. Lenders usually don't trust short-term rental income as much as they do long-term leases because it's less stable. If you want to buy a second home with short-term rental income, you'll need at least two years of documented Schedule E history showing steady Airbnb income. Lenders may also use a higher vacancy factor than the standard 25%. When you want to get another loan for a short-term rental, you may need to hire a professional property manager.
Once the loan is paid off through the VA system, which usually takes 30 to 45 days, you will automatically get back your full entitlement. In this case, you don't need to use your one-time restoration option. That option is only for when you want to keep a paid-off property while buying another home with a VA loan. If you're buying and selling at the same time, make sure your lender carefully coordinates the closing of both transactions. You'll need the entitlement from the sale to be available for your new purchase.
The VA doesn't say how many properties you can own; in theory, you could own more than one VA-financed property at the same time if you have enough entitlement and can afford it. But there are some practical limits. You can't have more entitlement than the county conforming loan limit for each property (for partial entitlement scenarios), and you must live in each property as your main home when you buy it. Because of entitlement limits, reserve requirements, and the fact that it's hard to qualify for multiple mortgage payments, even with rental offsets, most veterans can only have 2–3 VA-financed properties at a time.
If both you and your spouse are veterans who are eligible for VA benefits, you each have your own benefits that you can use separately or together on a single purchase. This is great for strategies that involve more than one property. Each of you could buy a property with your own rights. But if you're married and both of you are on the loan application, the rules about community property and income mixing may make this approach harder. Talk to a lender who works with the VA and maybe even a real estate lawyer about how to buy property separately. This is especially important in community property states where spousal debts must be counted even if the spouse isn't on the loan.
Lenders want to see Schedule E from your last two years of federal income tax returns. This should show rental income and expenses from properties you own and manage. The Schedule E needs to show that you have been renting consistently, not just for one month, but for the whole year. If you've been renting out rooms in your main home, Fannie Mae's HomeReady and Freddie Mac's Home Possible programs let you count this "boarder income" if you can show that you've been paying rent for 12 months. However, standard VA rules are stricter and usually don't count boarder income. If you don't have the two-year history, a signed property management agreement with a licensed professional management company can take its place. However, you will need to include the management fees (usually 8–10% of gross rents) in your cash flow calculations.
The Second Home Reality Check for VA Borrowers in 2026
I've talked to hundreds of veterans in the Dallas-Fort Worth area who want to use their VA benefits to buy real estate. Here's what I tell them all: yes, you can use VA loans to buy more than one property, but no, you can't buy a vacation home or an investment property directly with VA financing. You must plan to live in the property as your main home within 60 days of closing, with very few exceptions for active duty deployment or properties that are being renovated. The steady rise in loan limits to $832,750 for standard counties makes 2026 especially interesting for VA borrowers. The Federal Housing Finance Agency said in November 2025 that this is a 3.3% increase from the 2025 limit of $806,500. However, the increase is smaller than in previous years, which is a sign that home prices are rising more slowly in most markets. These limits don't stop veterans with full entitlement from borrowing money. Lenders make their own rules, and many will approve loans that are much higher than the conforming limits with no down payment. Most veterans shouldn't be asking "can I buy a second home with a VA loan?" Instead, they should be asking "how can I use my VA benefit to buy multiple properties over time?" That's exactly what this guide will help you do.
Understanding VA Loan Entitlement and How It Affects Second Home Purchases
If you don't pay back your loan, the Department of Veterans Affairs will pay your lender the amount of your VA entitlement. This is the VA's promise to pay up to 25% of your loan amount. That's why lenders can offer such good terms, like no down payment, no monthly mortgage insurance, and low interest rates. The basic entitlement of $36,000 covers loans up to $144,000. However, the bonus entitlement lets qualified veterans borrow much more than that, which is what most buyers care about.
Full Entitlement vs. Partial Entitlement
If your Certificate of Eligibility (COE) shows $36,000 in available basic entitlement, you have full entitlement. This means the VA doesn't impose any loan limits—you can borrow as much as a lender will approve based on your income, credit, and the property appraisal. According to Veterans Affairs guidelines, full entitlement status is available to veterans who either have never used their VA benefit, have paid off a previous VA loan and had their entitlement restored, or used their benefit only to purchase a manufactured home.Partial entitlement occurs when you have an existing VA loan that hasn't been paid off, when you've used your benefit on a property you still own, or if you previously defaulted on a VA loan and haven't satisfied that obligation. The calculation for partial entitlement gets technical—it's the lower of either 25% of your county's conforming loan limit minus your used entitlement, or 25% of your intended loan amount. For example, in a county with the 2026 standard limit of $832,750, veterans with $100,000 in used entitlement would have $108,188 in remaining entitlement (25% of $832,750 = $208,188 minus $100,000), which typically translates to roughly $432,750 in zero-down buying power.
The Seven Legal Strategies for Using VA Loans to Build a Multi-Property Portfolio
Here's what I've learned from closing deals with veterans who've successfully used their VA benefits multiple times. These aren't loopholes or gray areas—these are legitimate, VA-approved strategies that work within the program's occupancy requirements.
Strategy 1: The Paid-Off Property with One-Time Restoration
Let's say you bought your first home with a VA loan five years ago and you've paid it off completely. The VA allows a one-time entitlement restoration without selling the property—you can literally restore your full $36,000 basic entitlement once during your lifetime, even while keeping ownership of the paid-off home. You'll file VA Form 26-1880 or have your lender request restoration electronically, which typically processes within a few days through the VA's WebLGY system.When you buy a new primary residence with your restored VA benefit, your paid-off home automatically becomes your second home or rental property. This is the best part of this strategy. You're not breaking any occupancy rules because you lived in the first home as required and are now living in your new home as your main residence. The only restriction is that you can only do this once. After that, you'll have to either sell properties to get your entitlement back or work with partial entitlement.
Strategy 2: The Partial Entitlement Purchase
Most veterans don't know that they can use their VA benefit again without paying off their first loan, as long as they still have enough entitlement. The most important thing is to know your county's loan limits for 2026 and work your way back from there. If you have $200,000 in used entitlement in standard counties, you still have $8,188 left over ($208,188 maximum minus $200,000 used). This means you have about $32,750 in buying power with no down payment. It's not much, but it is there. But if you're willing to put down a down payment to make up the difference between the lender's required 25% guarantee and your remaining entitlement, you can buy at higher prices. Let's look at a real-life example: You want to buy a $600,000 house in a regular county, and you already have $100,000 in used entitlement. The lender wants $150,000, which is 25% of the loan. You still have $108,188 left to claim. The difference is $41,812, so to get VA financing, you would need to put down about 7% of that amount ($41,812 divided by $600,000). This is still much better than regular loans that require 10–20% down, and you're building equity in a second property.
Strategy 3: The Relocation Exception for Active Duty and Veterans
Active duty military members who get Permanent Change of Station (PCS) orders can buy a new main home with a VA loan while keeping their old VA-financed home. The VA knows that military service often means having to move quickly, so forcing a sale would not be fair. The VA allows this situation, where your old home becomes a rental property out of necessity, not choice. Many veterans don't know that civilian relocations also qualify, but the rules for underwriting are stricter. If you're moving for work, like taking a new job in Austin while your current VA-financed home is in Dallas, lenders will want to see proof of your job, proof of your move, and proof that the commute from your current home would be unreasonable (usually more than 50 miles). Your lender will also want to see that the rental income from your old property, minus the normal 25% vacancy factor, either covers or offsets the PITI payment, or that you have enough money to keep both properties without help from renters.
Strategy 4: The Multifamily House Hacking Approach
You can buy properties with up to four units (duplex, triplex, or fourplex) through the VA, but you must live in one of the units as your main home. This is the best way to hack a house: you can live in one unit and rent out the other units, all with no down payment if you have full entitlement. Chapter 4 of the VA Lender's Handbook says that rental income from units that aren't occupied can help pay your mortgage under certain conditions. If you can show that you've been a landlord for two or more years (on Schedule E of your tax returns), lenders can use 75% of the market rent from the non-occupied units to help you qualify for a loan. If you don't have that experience, you'll need to hire a property management company that is licensed and give them a signed management agreement and a projected rent roll. The loan limits for multifamily properties in 2026 are higher: $1,066,300 for duplexes, $1,289,050 for triplexes, and $1,602,250 for fourplexes in normal counties. In high-cost areas, they are $1,599,625, $1,933,600, and $2,403,375. You can move to a new primary residence with another VA loan after living in one unit for the minimum amount of time required by most lenders, which is 12 months. Your old multifamily property is now a pure rental investment that makes money from all four units.
Strategy 5: The Assumption Transfer Strategy
A buyer can take over your VA loan, including your interest rate and remaining balance. This is called "assumable." In a rising rate environment, this is very useful. For example, if you locked in a 3.5% rate in 2021 and rates are now 7%, that assumable loan is a huge selling point. If an eligible veteran takes over your loan, they take over your entitlement, which means you get your full VA benefit back right away without having to pay off the loan or sell the property in a normal way. In 2020, you bought a house for $350,000 with a 2.75% interest rate. You want to buy a second home in 2026, but you don't want to lose the great rate on your first home. You find a qualified veteran buyer who takes over your loan. They take over the $315,000 you still owe at 2.75%, replace their entitlement with yours, and your entitlement is fully restored. You can buy a new main home right away with a VA loan at the current 2026 rates, and your buyer will save a lot of money by taking over your low-rate loan. The veteran who is taking over must meet the lender's requirements for income and credit, and there is usually a 0.50% VA funding fee on assumptions (in our example, $1,575 on a $315,000 assumption). Not all buyers will be able to use the VA, but this strategy works really well in places with a lot of veterans, like military towns and areas near bases.
Strategy 6: The Post-Occupancy Rental Conversion
Most veterans will find this to be the easiest way, but it does take time. With your VA loan, you buy a home and live in it as your main home for the length of time required by your loan contract (usually at least 12 months, but some lenders require longer). After that, you can buy a new main home with either your remaining entitlement or a new VA loan. Your first property becomes a rental. Timing, paperwork, and qualifying for rental income are the most important parts. Most lenders want to see that you've really moved into your primary residence. This means changing your driver's license, registering to vote, updating your mailing address, and actually living in the home. After the occupancy period is over, you will need to show that the property can be rented by giving a market rent analysis or a signed lease agreement. This is usually done with a licensed appraiser's Form 1007 or 1025 rent schedule. Don't forget the 25% vacancy factor: if your property rents for $2,000 a month, lenders only count $1,500 toward paying off your PITI on that property. The rental income doesn't count toward your income for qualification purposes; it just pays for the housing payment on the property you're leaving. If your PITI on the rental property is $1,800 and you're getting $1,500 in rental offset (75% of $2,000), you'll need to show that you can handle the $300 monthly shortfall in your debt-to-income ratio. Many lenders also want you to have 3 to 6 months' worth of PITI reserves just for the rental property. This means having enough cash saved up to cover 3 to 6 months' worth of principal, interest, taxes, and insurance payments.
Strategy 7: The VA Cash-Out Refinance Transition
This is a plan that helps you manage your portfolio and build your wealth at the same time. You can do a VA cash-out refinance after living in your VA-financed home and building equity. This pays off your current mortgage and gives you the difference in cash. You can then use this money as a down payment on a second property with conventional financing or another VA loan if you still have entitlement. The cash-out refinance has a higher funding fee (2.15% for first-time VA cash-out use, 3.30% for subsequent use), but it frees up money while keeping your original property's good VA loan terms. The smart move is to use the cash-out money to either (a) make a down payment on an investment property with regular financing, leaving your VA benefit open for a future primary residence, or (b) make a down payment to fill in entitlement gaps on a second VA loan purchase. For instance, you have $150,000 in equity in your first home. You get a VA cash-out refi, take out $100,000, use $50,000 as a down payment on an investment property with regular financing, and keep $50,000 in savings. If you're moving to a new primary residence, your old home can become a rental. If you're not moving, your old home stays your primary residence and you make money from the investment property. The most important thing to do is to make sure that the cash-out refinance closing happens before or at the same time as the purchase of your second property. If you take out cash and can't explain what you did with it, or if your reserves suddenly disappear, lenders will want to see the whole transaction. This raises red flags in underwriting.
What's Different About VA Second Home Strategies in 2026
Veterans looking to buy more than one property in 2026 will face both challenges and opportunities in the lending market. The Federal Housing Finance Agency's data from November 25, 2025, shows that the conforming loan limit rose to $832,750, which is a 3.3% increase from 2025. This is a big drop from the 5.2% increase seen the year before. This means that home prices are rising more slowly in most U.S. markets, which changes VA strategy in two ways.
First, slower appreciation means that veterans who bought homes in 2024 or 2025 may not have built as much equity as they thought they would have. This affects cash-out refinance strategies and the ability to carry two mortgages if rental income falls short. Second, and in a good way, lower prices make it easier for people to buy a second home. Veterans with partial entitlement or those using traditional financing for investment properties have less competition and may have more negotiating power than they did in the crazy markets of 2021 and 2022.
Conventional mortgage rates have stayed between 6.5% and 7.5% in late 2025 and early 2026. VA loans, on the other hand, are always 25 to 50 basis points lower because of the VA guarantee. This difference makes VA financing even more appealing to veterans who are eligible. The funding fee structure is the same as it was in 2023: 2.15% for first-time use with no down payment, 3.30% for subsequent use with no down payment, and discounts for down payments of 5% or more. About one-third of VA borrowers can get funding fee exemptions if they have a disability rating of 10% or higher, are a Purple Heart recipient, or are a surviving spouse.
Real-World Examples: How Veterans Built Second Home Portfolios in 2026
Example 1: The Dallas Relocation with Partial Entitlement
Mike, an experienced software engineer, bought his first home in Fort Worth in 2021 for $285,000 with a VA loan that had a 3.0% interest rate. In 2026, he still owes $265,000, which means he has used up $71,250 of his entitlement (25% of his original loan). He takes a job in downtown Dallas that requires him to move, but he will lose that great 3.0% rate if he sells his Fort Worth home. Mike's plan is to keep the Fort Worth property as a rental and use the rest of his entitlement to buy a home in Dallas. The 2026 conforming limit for Tarrant County (Fort Worth) and Dallas County is $832,750 (standard county). His remaining entitlement calculation: $832,750 × 0.25 = $208,188 maximum entitlement minus $71,250 used = $136,938 remaining. Most lenders will let Mike borrow up to four times the amount he still owes without a down payment. This gives him about $547,750 in buying power with no money down. He finds a Dallas townhome for $485,000. He still has $136,938 left, which is more than 25% of the loan amount ($121,250), so he can get the loan with no money down. To qualify, his lender needs to see proof that the Fort Worth property can rent for enough to cover its PITI. The property is worth $1,900 a month in rent on the market. With the 25% vacancy factor, that's $1,425 less in rent. Mike's Fort Worth PITI is $1,680, which is $1,200 for principal and interest, $380 for taxes, and $100 for insurance. This means he has a $255 monthly shortfall that adds to his debt-to-income ratio. Mike makes $9,500 a month. He only owes $350 for his car. He will pay about $3,200 a month for his Dallas home. His DTI is 40.0% because he has $3,200 in Dallas PITI, $255 in Fort Worth shortfall, and $350 in car payments. Mike gets approved because he has good credit (730 FICO) and $35,000 in savings. He pays the 3.30% fee for using the money again ($16,005 added to the loan), and within 60 days he is living in Dallas and making money from renting out his Fort Worth property.
Example 2: The One-Time Restoration Success
Using a VA loan, Jennifer, a nurse with a lot of experience, bought a condo in 2019 for $200,000. She paid extra on the principal, and by 2026, she will own the property free and clear. She wants to buy a single-family home for $475,000 and keep the condo as a rental. The condo is worth $285,000 now. Jennifer's plan is to file VA Form 26-1880 for one-time entitlement restoration, which is approved in five days. She gets back her full $36,000 basic entitlement, even though she still owns the condo. She can borrow as much as she wants because she has full entitlement, as long as the lender allows it and she can qualify. Jennifer is using 100% VA financing with no money down to buy the house for $475,000. Her funding fee is 2.15% ($10,213) because this is the first time she is using her current entitlement (the condo loan was paid off and restored). Jennifer reports the $1,800 a month rent from the condo on Schedule E of her taxes. This rental income doesn't count toward her main income, but it does show that she knows how to manage cash flow. The nurse who works for Jennifer makes $7,200 a month. Her new home PITI will cost $3,100. She doesn't owe anyone else money. Her DTI is 43.1% ($3,100 ÷ $7,200), which is a little higher than the normal 41% limit. But she has some strong reasons to be compensated: a credit score of 780, $62,000 in retirement accounts, and 14 months of PITI reserves. Her underwriter approves the loan because the VA's unique affordability measure shows that she has $2,500 left over each month after all her bills are paid for a family of one in the South region. This is much more than the $441 VA residual income requirement.
Example 3: The Fourplex House Hacking Graduate
In 2024, Carlos, a veteran and first-time home buyer, bought a fourplex in San Antonio for $580,000 with no money down using his VA benefit. He lived in one unit and rented out the other three. Carlos has been managing properties well for 18 months, as shown by his tax returns and lease agreements. He now wants to buy a single-family home for his growing family and keep the fourplex as a rental property. Carlos's plan for 2026: His fourplex is now worth $615,000, and he still owes $565,000 on the loan, which gives him $50,000 in equity. He has $145,000 in used entitlement, which is 25% of his original $580,000 loan. The standard limit for 2026 in Bexar County (San Antonio) is $832,750. He still has $208,188 - $145,000 = $63,188 left, which gives him about $252,750 in buying power with no down payment. Carlos wants to buy a single-family home that costs $395,000. The lender wants $98,750, which is 25% of the loan. He still has $63,188 left, which is $35,562 less than what he needs. Carlos needs to put down 9% of the total cost ($35,562 ÷ $395,000) to fill the gap. He takes money out of his savings. The fourplex's total monthly rent is $6,200, or $1,550 per unit, which is the minimum amount needed to qualify. That means $4,650 less in rental income after the 25% vacancy factor. Carlos has a positive cash flow of $550 a month from the fourplex PITI, which he can add to his income because the rental income is higher than the PITI. Carlos makes $6,800 a year from his job. His qualifying income goes up to $7,350 ($6,800 + $550 positive cash flow from the fourplex). He will pay $2,600 for his new home PITI. He has to pay $425 a month on his student loan. His DTI is 41.1%, which is ($2,600 + $425) ÷ $7,350. Carlos gets approved because he has proof of being a landlord (Schedule E shows rental income from a fourplex for more than 18 months), has good credit, and the fourplex is doing well financially. He pays the 3.30% fee for subsequent use on the $359,438 loan amount (the purchase price minus the down payment), which adds $11,861 to the loan.
Common Mistakes Veterans Make When Pursuing Second Properties
After working with hundreds of VA borrowers attempting multi-property strategies, I've seen the same errors repeatedly. Avoid these pitfalls to save time, money, and stress.
Violating Occupancy Requirements
The biggest mistake is thinking that the VA occupancy requirement is a suggestion instead of a rule. Veterans who buy a home with the clear intention of renting it out right away, without ever actually living there, could face serious consequences. The VA can ask for the loan guarantee back, which means you would lose the good loan terms and could even be charged with fraud. Even if you get away with it at first, problems come up years later when you try to refinance or sell the property and lenders check the occupancy history. Always live in the property as your main home for at least the amount of time stated in your loan documents, which is usually at least 12 months.
Underestimating Rental Income Qualification Challenges
A lot of veterans think that the market rent for their rental property will completely cover their old mortgage payment for the purpose of qualifying. People are often surprised by the 25% vacancy factor. Your DTI calculation shows that you are short $550 a month because your property would rent for $2,000 a month but your PITI is $2,200. This is because $2,000 × 0.75 = $1,500 rental offset and $2,200 PITI - $1,500 = $700 shortfall. If you haven't planned for enough income to cover the gap, this could ruin your approval. Also, veterans who want to manage their own properties but don't have any documented landlord experience often find out too late that lenders won't accept their rental income projections unless they have either two years of landlord history or a signed property management agreement. If you're a first-time landlord, keep track of your rental experience right away by filing Schedule E taxes. Include property management costs, which are usually 8–10% of gross rents.
Forgetting About Funding Fees and Reserve Requirements
A lot of veterans are surprised by the 3.30% fee for subsequent use funding. If you buy a second home for $500,000, that's $16,500 added to your loan balance. This isn't a deal-breaker, but it does raise your monthly payment by about $105 to $110, depending on your interest rate. Veterans often get so caught up in the idea of a zero down payment that they forget about closing costs (which are 2–5% of the purchase price) and reserve requirements. For rental properties, most lenders want you to have 3 to 6 months' worth of PITI reserves. If your property has a monthly PITI of $2,000, you'll need to show that you have $6,000 to $12,000 in cash after closing. This is in addition to your down payment (if you have partial entitlement) and closing costs. Make sure you have enough money after closing—many deals fall through in the last few days when borrowers realize they don't have enough cash on hand.
Misunderstanding Entitlement Restoration Rules
Veterans often mix up paying off a VA loan with automatically getting their benefits back. You can't get your entitlement back just by paying off your loan. You have to fill out Form 26-1880 or have your lender ask for restoration online. You only have partial entitlement until the VA officially processes your restoration. People also often get the one-time restoration benefit wrong. If you pay off the VA loan on your property, you can restore your entitlement once without selling it. This is different from the unlimited restorations you get when you sell a VA-financed property and pay off the loan. Don't use your one-time restoration on a situation where selling the property would work just as well. Save it for times when keeping ownership of the paid-off property will save you a lot of money.
2026 VA Funding Fees: Complete Breakdown
The VA funding fee is a one-time charge that supports the loan program, allowing the VA to continue offering zero-down financing without requiring monthly mortgage insurance. According to the Department of Veterans Affairs, the funding fee rates effective since April 7, 2023 remain current through 2026. Most borrowers finance the fee into their loan amount rather than paying at closing.
Purchase Loan Funding Fees
For first-time VA loan users with zero down payment: 2.15% of the loan amount. On a $400,000 purchase, that's $8,600 added to your loan balance. For subsequent use with zero down payment: 3.30% of the loan amount. On that same $400,000 purchase, second-time users pay $13,200.Making a down payment reduces your funding fee significantly. With 5-9.9% down, both first-time and subsequent users pay 1.50% (saving $2,600 or $7,200 respectively on a $400,000 loan). With 10% or more down, the fee drops to 1.25% for all users, representing $3,125 on $400,000—a $5,475 savings compared to the first-time zero-down fee or $10,075 savings compared to subsequent-use zero-down.
Refinance Funding Fees
The VA Interest Rate Reduction Refinance Loan (IRRRL), commonly called a streamline refinance, carries a 0.50% funding fee regardless of prior VA usage. This makes IRRRLs incredibly cost-effective for veterans seeking to lower their rate on an existing VA loan. On a $350,000 streamline refinance, the fee is just $1,750.Cash-out refinances, however, carry the same fees as purchases: 2.15% for first-time VA cash-out use, 3.30% for subsequent use, with no reduction for equity or LTV ratio. If you do a $450,000 cash-out refinance and you've done a VA cash-out before, you'll pay $14,850 in funding fees. This is the same whether you're pulling out $10,000 or $150,000 in equity—the fee is based on the new loan amount, not the cash withdrawn.
Exemptions from Funding Fees
About one out of three VA borrowers can get a full funding fee waiver. Veterans Affairs says that you don't have to pay if you get VA benefits for a service-connected disability that is rated at 10% or higher, if you are a Purple Heart recipient, or if you are the surviving spouse of a veteran who died in service or from a service-connected disability. Your COE will clearly say if you're not required to pay the funding fee. Look for language that says you're not required to pay the fee. Once the VA has your disability rating on file, the exemption happens automatically. If you get a disability rating after closing a VA loan with a funding fee, you might be able to get your money back if the rating goes back to before your closing date. If you want to know if you can get a refund, you should call the VA directly. Don't expect your lender to tell you this right away.
Tax Implications of Multiple VA-Financed Properties
Converting your primary residence to a rental property or operating a multifamily investment creates significant tax implications that affect your overall return on investment. Understanding these rules helps you maximize deductions and avoid costly mistakes.
Depreciation on Rental Properties
You can write off the building's value (not the land) over 27.5 years after it becomes a rental. If your property is worth $450,000 and the land is worth $100,000 (which is a typical 22% of the total value), your depreciable basis is $350,000. You can claim $12,727 in annual depreciation deductions against your rental income on Schedule E if you divide by 27.5 years. This depreciation is a "paper loss" that lowers your taxable income but doesn't change the amount of cash you have on hand. Your net rental income would be $6,000 if your property rents for $24,000 a year but costs $18,000 a year to maintain (mortgage interest, property taxes, insurance, maintenance, and property management). If you add in $12,727 in depreciation, you have a $6,727 loss on paper. This could lower your other income, depending on your modified adjusted gross income and whether you meet the IRS's definition of a real estate professional.
Mortgage Interest and Property Tax Deductions
The Tax Cuts and Jobs Act of 2017 limited deductions for primary residences, but on rental properties, 100% of mortgage interest and property taxes are deductible business expenses on Schedule E. This makes rental properties a lot better for investors in higher tax brackets when it comes to taxes. If you pay $15,000 a year in mortgage interest and $6,500 a year in property taxes on your rental, that's $21,500 in deductions that will lower your rental income. If you bought your main home with a VA loan, you can still deduct mortgage interest on loan amounts up to $750,000 ($375,000 if you file separately) and property taxes up to $10,000 a year. However, these are itemized deductions on Schedule A, not business deductions. You will only benefit if your total itemized deductions are more than the standard deduction ($14,600 for single filers, $29,200 for married filing jointly in 2026).
Capital Gains Considerations
If you sell a property that was your primary residence for at least two of the past five years, you can exclude up to $250,000 in capital gains ($500,000 for married couples filing jointly) under Section 121 of the tax code. This is one of the most powerful wealth-building provisions in the tax code, but converting to rental status affects the calculation.Here's the tricky part: if you lived in a property for two years then rented it for three years before selling, you may qualify for partial Section 121 exclusion. The IRS prorates the exclusion based on qualified use. In this example, you lived there for 2 of the past 5 years (40% qualified use), so you could exclude 40% of the $250,000 or $500,000 thresholds. Additionally, you'll owe depreciation recapture tax (currently 25%) on all depreciation you claimed during the rental period. If you claimed $38,000 in depreciation over three years, you'll pay roughly $9,500 in depreciation recapture taxes when you sell, regardless of your capital gains tax situation.
Professional Tips for Maximizing Your VA Multi-Property Strategy
Let me share what separates veterans who successfully build multi-property portfolios from those whose plans collapse at the underwriting stage.
Start with Perfect Credit and Clean Finances
Veterans who want to buy a second property should aim for credit scores of 680 or higher. However, if you want the best rates and the most freedom with lenders, you should aim for 720 or higher. Pay off your credit card balances so that they are less than 30% of your total credit limit (less than 10% is even better). Don't open any new credit lines within six months of when you plan to buy something. Any credit checks you made in the 90 days before you applied will show up on your credit report and need to be explained in writing. Two to three months before you apply, clean up your bank statements. Lenders pay close attention to big deposits and strange transactions. If you're selling stocks to get money for a down payment or getting money as a gift, make sure to keep clear records of where the money came from. Unexplained $5,000 deposits kill more VA loan applications than you'd think. Underwriters think there is undisclosed debt or income that can't be verified.
Work with VA-Specialized Lenders and Loan Officers
Not all lenders handle VA loans equally well, and not all loan officers understand the nuances of partial entitlement, rental income qualification with the 25% vacancy factor, and multi-property strategies. Interview loan officers specifically about their experience with veterans buying second properties. Ask how many second-tier entitlement loans they've closed in the past 12 months, and request references from veteran clients who've done similar transactions.VA-specialized lenders also have relationships with VA regional loan centers and understand how to work through occupancy waivers for active duty members or navigate the one-time restoration documentation. Your brother-in-law's mortgage company that does 90% conventional loans might offer you a VA product, but they'll learn on your transaction—and learning curves cause delays and denials.
Get Preapproved with Full Documentation
Prequalification letters mean nothing in competitive markets. Full underwriter-reviewed preapprovals with verified income, assets, and credit give you negotiating power and prevent surprises. For second property purchases where you're using rental income for qualification, provide everything upfront: signed leases or property management agreements, Schedule E from the past two years if you have rental history, and market rent analyses for properties you're converting to rentals.Don't wait until you're under contract to discover your rental income won't offset enough of your PITI or that you're $15,000 short on reserves. These issues surface in full underwriting, not prequalification, so invest the time and documentation effort before shopping seriously.
Consider Professional Property Management from Day One
Even if you plan to self-manage eventually, hiring professional management for your first rental property (especially if required for qualification) provides critical learning time and documentation. Property managers charge 8-10% of gross rents plus lease-up fees (typically half to one month's rent), but they handle tenant screening, lease enforcement, maintenance coordination, and evictions if necessary.For veterans using multifamily strategies, property management becomes almost essential. Managing three units in a fourplex while occupying the fourth requires significant time and expertise. A single problematic tenant can consume 20-30 hours monthly, and mishandling security deposit returns or fair housing laws creates expensive legal liability. Factor management costs into your cash flow projections—if the property barely breaks even with 10% going to management, it's not a good investment.
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