A VA entitlement is a guarantee that the government will repay a portion of the mortgage to the lender in the event of a default. Many homeowners have used their VA entitlement for the purchase of a first home. However, at some point, they may wish to use their entitlement again for another home purchase. There are specific rules that must be followed in order to obtain entitlement restoration for a VA loan.
According to the VA, entitlement may be restored under certain circumstances. Once it is restored, it then can be used for another VA loan. If a property with a VA loan has been sold and the loan has been paid in full, an entitlement can be restored.
Also, when a home with a VA loan has been sold to an eligible veteran who agrees to assume the outstanding balance on the VA loan and use his/her entitlement for the amount that was originally used, entitlement can be restored. This is an assumed VA loan which requires that the veteran meet all of the requirement guidelines established for occupancy, income and credit. If the loan is not assumed with the buyer’s entitlement, the original VA entitlement will stay in place until the buyer refinances at which time the entitlement can be restored.
Entitlement restoration can also be obtained when the VA loan has been paid in full, but the property has not been sold. In this situation, the veteran can request a restoration of entitlement in order to make another home purchase. However, this can only occur one time. The veteran’s Certificate of Eligibility will reflect this one time restoration. Any other restorations of entitlement will require that the property be sold.
When refinancing an existing VA loan for which a veteran’s entitlement was already used, the proceeds from the refinance will pay off the original VA loan and the entitlement will be restored and used with the new refinance.
VA loan entitlement restoration does not happen automatically. The borrower must apply for and request it. Since there is no set time to how long this can take, borrowers are often advised to apply for entitlement restoration prior to looking for a new home or to visit the VA loan center that handles the area where the home purchase will take place.
Entitlement restoration can sometimes be confusing for the borrower, but a good VA lender can assist with this process. It is often quicker and easier for the VA lenderwho specializes in VA loans to obtain the restoration for the veteran.
My loan process was very easy and quick. Not to mention a great loan rate. I couldn't be happier!
Capt Sam T. - US Army
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