VA loans have a variety of uses and flexible options that make them very attractive for first time h...

1. VA Loans and Second Mortgages
VA loans have a variety of uses and flexible options that make them very attractive for first time
home buyers. But not every VA loan is a traditional home purchase; some buyers have unique needs
that. My team ran into this post that merely had to {be discussed with you. We reviewed it and
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additional consideration. A second mortgage, also known as secondary borrowing, is one option
some qualified VA loan applicants may consider. For this discussion, we'll follow the Department of
Veterans Affairs definition of secondary borrowing, which the VA Lender's Guide says is: "...the
veteran obtaining a second mortgage simultaneously with a VA-guaranteed first mortgage, both
secured by the same property." The VA allows secondary borrowing under specific circumstances.
It's not an "all comers" loan option because of the additional financial burden a second mortgage can
put on the home owner, but the VA will allow such loan applications when "the veteran is not placed
in a substantially worse position than if the entire amount borrowed had been guaranteed by VA".
The VA puts additional restrictions on the transaction by requiring documentation about the second
loan to include the amount and repayment terms. Second mortgages in these cases must be
subordinate to the VA home loan, in what the VA describes as the "junior lien position relative to the
VA loan." When applying for the second mortgage, the VA rules allow interest rates on the junior lien
to be higher than the VA guaranteed loan, but interest rates on the second mortgage may not exceed
industry standards. There area also rules on loan assumption. The VA does not approve of second
mortgages that prevent the borrower from selling the home or having the loan assumed. VA
regulations allow the home to be sold or have the loan assumed by any credit-worthy buyer; the rule
of thumb here is that the second mortgage shouldn't restrict the owner from selling any more than
VA rules covering the first mortgage.