How to Restore VA Entitlement for Your Home Loan

VA entitlement is a guarantee to the lender by the U.S. Department of Veterans Affairs.  It guarantees to repay your home loan in the event of default.  The entitlement is a specific dollar amount available to veterans and active military members.  It can be found in your Certificate of Eligibility.

As a first time user of the VA benefit, you have full entitlement available.   You can read more about your VA entitlement in this post.  If you have obtained a VA home loan before, your entitlement is reusable depending on the circumstances.

Restoration Basics

Homeowners are able to apply to restore VA entitlement for a new home loan.  But only after the first loan has been paid in full and the property has been sold. Sound tough?  If you are simultaneously selling and purchasing a new home with a VA loan, it can be done simultaneously.  It is possible to sell your home, restore VA entitlement and close on the new home purchase all in the same day.  As your lender, we can take care of this for you.  It’s easy to do.

Restore VA EntitlementThe good news is there is no specific waiting period between the time you first use your VA entitlement and its subsequent use.   You can buy your first home one year, then if you’ve outgrown it a year later, sell and buy another home.  This can be done using your VA entitlement (assuming you have restoration or enough left over).

There are a few scenarios when your entitlement will not be restored.  If you have paid off your VA home loan yet still own the property, your entitlement is not restored.  In addition, if you refinance your VA home loan into a conventional loan, your entitlement is not restored. And in a divorce, if the non-veteran is keeping the home, the entitlement will remain tied up unless the home is refinanced or sold.

The only way to have it fully restored is to pay the loan in full and dispose of the property, with one exception…

On a one-time only basis, you may have your VA entitlement restored.   This can be done if your prior VA loan has been paid in full but you still own the propertyBe very cautious in exercising this.  Once you do, you cannot do it again.

VA Assumptions

What happens if you sell your home on an assumption?  If your home carries a VA loan, your eligibility can be restored only if the qualified assumer is also an eligible veteran.  The eligible veteran must be willing to substitute his or her available entitlement for the original veteran. Otherwise, you cannot have entitlement restored until the one assuming has paid off the VA loan.

Restore VA Entitlement

To restore VA entitlement, you will need to complete some paperwork.  Submit VA form 26-1880 along with a copy of the final HUD-1 or Closing Disclosure to your Regional Loan Center.  Once your application has been processed and your entitlement restored, you can move forward with a new VA home loan.

NOTE:  If you have already used a portion of your entitlement and it cannot yet be restored, any partial remaining entitlement would be available for use.  If this is the case, contact me to discuss whether the remaining balance would be sufficient for the loan amount sought and if any down payment would be required.

 

 

About Elizabeth Rose

Elizabeth has over 30 years in the financial and mortgage industry. In tune with the mortgage market, she provides refreshing, unrivaled knowledge leveraging expert resources and delivering results.
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