Tips & Special Topics
The Facts About the Restoration of Entitlement for VA Loans
Added November 20, 2007 | Updated January 23, 2008
If a veteran has used his/her VA entitlement on a VA guaranteed mortgage loan, there may be “more” entitlement available, or, if the loan has been repaid, it could be restored. One of the greatest benefits of a VA loan is that the entitlement can be restored to purchase another home with VA financing.
1. Is there an unused portion of the veteran’s entitlement? A veteran who has obtained a VA home loan may still have a remaining amount of entitlement that can be used to obtain another VA loan. Currently, the amount of entitlement that each eligible veteran receives is approximately $36,000. In past years, this figure was considerably lower. For example, in 1974, a veteran who obtained a $25,000 loan would have only $12,500 guaranty entitlement; the maximum amount then available.
Using that example, if the 1974 loan has not been paid off, the veteran could still use the $23,500 difference between the entitlement originally used and the current maximum amount to purchase another home through VA financing. An additional $14,759 to a maximum $50,750 is available on a loan that is over $144,000. This money can be used either to purchase or construct a home. VA home loans are designed to constantly help a veteran receive financing for a home.
Often, a mortgage company will require that the down payment and guaranty entitlement, added together, must equal at least 25% of the sales price of the property or its reasonable value. To better understand this, one could say that the veteran’s $23,500 remaining entitlement would, usually, meet a mortgage company’s minimum guaranty on a no down payment loan to buy a home selling for $94,000. If the veteran wanted to purchase a more expensive home, then a down payment would have to be combined with the available entitlement.
2. Restoration of Previously Used Entitlement. With VA mortgage loans or VA home loan refinance, a veteran may have previously used an entitlement that is restored to purchase another home with a VA loan. This is only true if the property that was purchased with the original VA loan has been sold, and the loan has been paid in full. A second condition applies if the buyer, a qualified veteran, agrees to assume the VA loan, therefore substituting his or her entitlement for the same amount of the entitlement that was used by the seller.
A veteran can request restoration of entitlement or remaining entitlement by filling out a VA Form 26-1880 at their local Veterans Administration. The VA entitlement may be restored only once if the veteran has repaid their original VA loan, but still has the property that was purchased with the original VA loan. The Veterans Administration is knowledgeable in all areas of VA loans and can answer any questions you may have.
VA home loans are a great way for a veteran to receive financing to purchase a home. A VA loan allows a veteran to save thousands of dollars on their first home purchase and their second. VA loans are the ultimate way to thank those who served in the Armed Forces.
