Restoration
of VA Loan Entitlement
Veterans
who had a VA loan before may still have
"remaining entitlement" to use for another
VA loan. The current amount of entitlement
available to each eligible veteran is
$36,000. This was much lower in years
past and has been increased over time
by changes in the law. For example, a
veteran who obtained a $25,000 loan in
1974 would have used $12,500 guaranty
entitlement, the maximum then available.
Even if that loan is not paid off, the
veteran could use the $23,500 difference
between the $12,500 entitlement originally
used and the current maximum of $36,000
to buy another home with VA financing.
An additional $14,750, up to a maximum
entitlement of $50,750 is available for
loans above $144,000 to purchase or construct
a home.
Most
mortgage companies require that a combination
of the guaranty entitlement and any cash
down payment must equal at least 25 percent
of the reasonable value or sales price
of the property, whichever is less. Thus,
in the example, the veteran's $23,500
remaining entitlement would probably meet
a mortgage company's minimum guaranty
requirement for a no down payment loan
to buy a property valued at and selling
for $94,000. The veteran could also combine
a down payment with the remaining entitlement
for a larger loan amount.
Veterans
can have previously-used entitlement "restored"
to purchase another home with a VA loan
if: The property purchased with the prior
VA loan has been sold and the loan paid
in full, or 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.
Remaining
entitlement and restoration of entitlement
can be requested through the nearest VA
office by completing VA Form 26-1880.
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.
