What is Restoration of VA Loan Entitlement?

Restoration of VA Loan Entitlement

If you have had a VA loan in the past, you may still be able to obtain a VA loan. You can do this if you have "remaining entitlement" to use. The current amount of VA loan 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 loan entitlement, the maximum then available. Even if that loan is not paid off, the veteran could use the remaining $23,500 to buy another home with VA financing. This $23,500 is the difference between the $12,500 original loan entitlement used and the current maximum loan entitlement of $36,000. Restoration of VA Loan Entitlement can help.

An additional $14,750, up to a maximum loan 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 loan 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 above 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 loan 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 loan entitlement for the same amount of loan entitlement originally used by the veteran seller.

Remaining entitlement and restoration of VA loan entitlement can be requested through the nearest VA office by completing VA Form 26-1880 (be sure to type in 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.

If you have any questions regarding restoration of VA loan entitlement, be sure to contact me. Maybe you know you have entitlement available and are ready to apply. This can be done very easily online.