Borrowers who use their VA home loan entitlement to purchase or refinance a home with a VA mortgage may wonder if they can make another purchase in the future with VA loan entitlement. Others may wish to know if they can refinance a VA mortgage with a new VA loan.
VA loans require the borrower to use some or all of their entitlement on most transactions except for VA Interest Rate Reduction Refinancing loans. But the leftover entitlement can be used,and under certain circumstances previously used entitlement can be restored to use again.
Restoring previously used entitlement is covered in chapter two of the VA Lender’s Handbook. It says:
“Entitlement previously used in connection with a VA home loan may be restored under certain circumstances. Once restored, it can be used again for another VA loan.”
“Restoration of previously used entitlement is possible if the property which secured the VA-guaranteed loan has been sold, and the loan has been paid in full, or an eligible veteran-transferee has agreed to assume the outstanding balance on a VA loan and substitute his or her entitlement for the same amount originally used on the loan. The assuming veteran must also meet occupancy, income, and credit requirements of the law.”
In some cases even if a borrower has used some or most of the original VA loan entitlement, a new VA mortgage may be possible thanks to what’s known as “bonus entitlement”. This is done in cases where a qualified VA loan applicant is applying for a loan in excess of $144,000.
In situations like these, the standard VA loan occupancy requirement applies, so the borrower must certify he or she will use the home to be purchased with the VA loan as the primary residence.
Borrowers who purchased a home with a VA mortgage previously and want to refinance with a cash-out refinancing loan may do so because the original entitlement used on the mortgage may be restored. According to the VA Lender’s Handbook, “The veteran must have sufficient available entitlement for the loan. If an existing VA loan on the same property will be paid off by the refinancing loan, the entitlement used for that existing loan can be restored for purposes of obtaining the new loan.”
That rule applies to existing VA mortgages being refinanced. If you are refinancing a conventional or other non-VA mortgage, you will need to have sufficient VA loan entitlement for the refinancing loan.
Talk to your loan officer if you have questions about how the VA loan entitlement restoration process works or need to know how to proceed with the restoration of entitlement for a new loan.