For many veterans and active service members, a VA loan is an invaluable benefit, providing the opportunity to secure a home with competitive terms, low interest rates, and no down payment requirements.
But when you sell a home financed with a VA loan, it’s essential to understand how to reinstate your VA loan entitlement to use the benefit again.
Whether you’re looking to move, upgrade, or simply reapply your VA benefits, here’s what you need to know about reinstating your VA loan eligibility after a home sale.
What is VA Loan Entitlement?
Your VA loan entitlement is essentially the amount that the Department of Veterans Affairs (VA) guarantees to lenders on your behalf. When you secure a VA loan, part of this entitlement is used. If you sell your home and the loan is paid in full, your entitlement may be restored, allowing you to reuse it on another home purchase.
According to VA’s guidelines, there are two types of entitlement:
- Basic Entitlement: Usually $36,000 for loans up to $144,000.
- Bonus Entitlement: Additional funds available for homes above the basic entitlement limit.
Steps to Reinstate Your VA Loan Eligibility after Selling a Home
1. Pay off Your VA Loan in Full
To restore your entitlement, you must first ensure the original VA loan is paid in full. This usually occurs during the sale of your home, as the proceeds go towards settling the mortgage.
2. Submit a VA Form 26-1880 for Restoration
After the loan is cleared, you’ll need to submit VA Form 26-1880 (Request for a Certificate of Eligibility) to the VA to reinstate your entitlement. This process can often be completed online or by mailing the form to the VA’s regional loan center.
“Applying for restoration of your VA loan entitlement is straightforward, but getting guidance from your lender can simplify it,”
3. Request a One-Time Restoration if Needed
In certain cases, veterans may use a one-time restoration option, which allows you to use your VA loan benefits on a second property without selling the first. This can be useful if you plan to hold onto your initial property as an investment.
| Restoration Option | Description |
|---|---|
| Full Entitlement Restoration | Available after paying off and selling the home. |
| One-Time Restoration | Allows purchasing a new home without selling the previous one. |
Understanding the Benefits of VA Entitlement Restoration
Restoring your VA loan entitlement opens up the ability to buy again with VA loan benefits, giving you access to the competitive financing advantages available through the VA loan program.
- Zero Down Payment: Restoring your VA loan eligibility allows you to buy a home without a down payment.
- Low-Interest Rates: VA loans typically offer lower rates than conventional loans, saving thousands over the life of the loan.
- No Private Mortgage Insurance (PMI): VA loans do not require PMI, reducing monthly costs.
“For veterans looking to move or invest, restoring VA eligibility after a sale is key to leveraging one of their most valuable financial benefits,”
How Long Does the Restoration Process Take?
The timeline for VA loan entitlement restoration can vary but generally takes a few weeks. If you’re planning to purchase a new property shortly after selling, it’s best to initiate the restoration process promptly.
| Steps in the Process | Estimated Time |
|---|---|
| Submission of VA Form 26-1880 | 1-2 weeks |
| VA Review and Approval | 1-2 weeks |
| Total Estimated Time | Approximately 2-4 weeks |
Most delays come from incomplete applications or missing documentation, so ensure you have all required paperwork in order before submitting your restoration request.
Partial VA Entitlement
Partial entitlement in VA loans allows veterans to use any remaining VA benefits even if they haven’t fully restored their entitlement from a previous loan. This option is especially valuable for those who may have experienced foreclosure or wish to retain a VA-financed property while purchasing a new home.
What is Partial Entitlement?
Partial entitlement is the portion of VA loan benefits available after a previous VA loan. If a veteran hasn’t fully repaid the original loan or chooses to keep the initial property, they can still apply for another VA-backed loan based on their remaining entitlement.
How Does Partial Entitlement Work?
- Calculation:
- For loans under $144,000, the basic entitlement is typically $36,000. If part of this was used, the remaining balance can be applied to a new loan.
- For higher-priced homes, “bonus” entitlement may cover amounts beyond the basic limit, allowing veterans to secure more substantial financing.
- Application Scenarios:
- Foreclosure or Retained Property: If a veteran’s previous home was foreclosed or retained as a rental, they may still qualify for a new VA loan using partial entitlement, though a down payment might be required if the loan amount exceeds the entitlement limit.
- Example: Suppose a veteran used $24,000 of their $36,000 basic entitlement. They can still use the remaining $12,000 toward a new home, possibly combining it with bonus entitlement for higher loan amounts.
Benefits and Considerations
- Flexibility: Veterans can pursue new homeownership opportunities without needing to wait for full entitlement restoration, particularly useful for those with foreclosed or retained properties.
- Down Payment Requirement: Since partial entitlement may limit the loan guarantee, a down payment could be necessary if the loan exceeds the VA’s guaranteed amount.
Practical Tips
- Calculate Remaining Entitlement: Veterans can check their Certificate of Eligibility (COE) or consult with a VA lender to see how much partial entitlement is available.
- Consider Loan Amounts: If purchasing a higher-priced home, veterans may need to supplement VA financing with a down payment or alternative financing options.
Partial entitlement allows veterans to continue leveraging VA loan benefits, providing flexible financing opportunities even if their previous entitlement hasn’t been fully restored. Understanding this can empower veterans to navigate the VA loan system effectively and reach their homeownership goals despite prior financial challenges.
Current Housing Market Conditions
The current housing market dynamics can influence your decision to reinstate your VA eligibility:
- Rising Mortgage Rates: With average 30-year fixed rates hovering around 7%, veterans using a VA loan benefit from competitive interest rates, often lower than conventional loans.
- Demand for Affordable Housing: Home prices continue to increase in many regions, making VA loans with zero down payment an attractive choice.
- Reduced Inventory: Limited housing supply in many areas means a restored VA loan can help you remain competitive in a tight market.
These factors make it worthwhile to understand and utilize VA loan benefits effectively, especially if you’re considering re-entering the market.
Final Thoughts
Reinstating your VA loan eligibility after a home sale offers an invaluable advantage for veterans looking to reinvest in property.
Understanding how entitlement restoration works ensures you can continue leveraging VA loan benefits with confidence. Whether you’re purchasing your next home or investing in a property, the VA loan remains a powerful tool for veteran homeowners.
“Making use of your VA benefits through entitlement restoration is essential for maximizing homeownership opportunities,”
By following these steps and keeping up with the housing market, you can make informed choices about when and how to utilize your VA loan entitlement.
FAQs on VA Entitlement Restoration
How Do I Check My Remaining VA Entitlement?
You can check your remaining entitlement by contacting the VA or your lender. Many lenders offer online portals to view entitlement status and history.
Can I Use My VA Loan Benefits More Than Once?
Yes, you can use your VA loan benefits multiple times, provided you restore your entitlement after each sale.
Is There a Fee for Restoring VA Entitlement?
No, there is no cost for restoring entitlement after a home sale, although a funding fee applies to any new VA loan.
What If My Entitlement Is Not Fully Restored?
Partial entitlements can still be used for subsequent loans, but limitations on loan amounts may apply.
Does One-Time Restoration Affect Future Use of VA Loan Benefits?
No, the one-time restoration is a temporary option and does not affect the standard process of full restoration after future sales.
What are the VA loan entitlement limits?
The basic entitlement limit is $36,000, with bonus entitlement available for higher loan amounts.
Can I keep my VA loan if I move?
Yes, with a one-time restoration, you can use your VA loan benefit again while keeping the initial property as an investment.
Is VA Form 26-1880 mandatory for entitlement restoration?
Yes, submitting VA Form 26-1880 is required to restore your VA loan entitlement fully.
Are there restrictions on the type of home I can buy with a restored VA loan?
No, as long as the home is intended for personal occupancy, you can purchase various types of properties with a VA loan.
How does the funding fee work?
The funding fee is a percentage of the loan amount, usually around 2.3% for first-time use, and is required for all VA loans.
