Borrowers who have purchased a home using their VA mortgage loan benefits may decide one day that they would like to purchase a new property with another VA loan. When you use your VA loan benefits the for the first time, you have 100% of your entitlement available to you. In many cases most or all of that entitlement may be used to purchase a typical suburban home. Is it possible for borrowers to get that entitlement back and use their VA loan benefits a second time?
The short answer is yes, but with conditions. VA borrowers are permitted under the right circumstances to apply for their VA loan entitlement to be restored. Restoration is not automatic and borrowers should not assume their entitlement has changed just because the meet the criteria. And what is that criteria?
Borrowers who have paid their first VA mortgage off in full following the sale of the property can apply for restoration, and borrowers who meet certain conditions of a VA loan assumption can, too. According to the VA officials site, those conditions are as follows:
“A qualified Veteran-transferee (buyer) agrees to assume the VA loan and substitute his or her entitlement for the same amount of entitlement originally used by the Veteran seller.”
In addition to the above, there’s also a one-time only offer from the Department of Veterans Affairs for those who have paid off their original VA loan in full but have NOT sold their home.
“The entitlement may also be restored one time only if the Veteran has repaid the prior VA loan in full, but has not disposed of the property purchased with the prior VA loan. Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880.”
There is also a type of VA loan situation where a borrower does not need to apply for VA loan restoration-when a borrower wants to refinance the property he or she bought with a VA mortgage loan. If the borrower is applying for a VA Interest Rate Reduction Refinancing Loan (VA IRRRL), no VA loan eligibility restoration is required. According to the VA Lender’s Handbook:
“No additional charge is made to the veteran’s entitlement for an IRRRL; such as, the amount of the veteran’s previously used and available entitlement remains the same before and after obtaining the IRRRL. The new IRRRL loan amount may be equal to, greater than, or less than, the original amount of the loan being refinanced. This may impact the amount of guaranty on the new loan, but not the veteran’s use of entitlement.”
Speak to your loan officer about how to go about getting your entitlement restored or the VA IRRRL loan option if you’re interested in refinancing.