The most frequently asked VA loan question is about repeat use of VA loan benefits.
It’s true: VA loan benefits can be used again and again, provided that you meet the qualifications for reuse. Here is a closer look at 3 common scenarios may help some veterans get another VA loan.
Does one of these apply to you regarding your previous VA loan?
- Paid in full and house sold
- Assumed by another veteran
- Balance on mortgage and still own the home
VA loan paid? Restore entitlement using VA Form 26-1880
Often times, a veteran will simply sell the house financed with a VA loan and pay the mortgage in full. This may be the simplest of all scenarios for repeat use of VA loan benefits. When this is done, the VA-eligible borrower must complete VA Form 26-1880 to restore entitlement, the same form used to obtain Certificate of Eligibility (COE). Surviving spouses use VA Form 26-1817. When entitlement is restored the borrower can apply for another VA loan.
VA loan assumed? Entitlement may or may not be restored
VA loan assumption can happen in two ways. The buyer may use the seller’s entitlement to assume the mortgage. Or, the seller’s entitlement may be replaced with that of the buyer’s. If the former occurs, the seller will not be able to restore entitlement until the loan that was assumed is paid in full. If the seller is planning on buying another house with a VA loan after the assumption takes place, then replacing entitlement with the buyer’s is recommended.
VA loan not paid? Multiple VA loans are possible
It doesn’t happen often, but it is possible for a VA borrower to have two VA loans at once. Today, a VA-eligible borrower with full entitlement has enough Dept. of Veteran Affairs’ backing for a loan of $417,000 in most U.S. counties. With the average VA loan around $210,000, most veterans have some entitlement remaining after using their home loan benefits. Though the VA requires that the loan be paid in full and the home disposed of before it will restore entitlement, there is a one-time exception to this rule. In the case of military reassignment, this exception can come in handy. If the borrower has enough entitlement remaining, the borrower can use the remaining VA home loan benefit without selling the previous home or paying off the loan. Of course, the borrower will have to qualify with income and credit.
Tim Lewis, 23-year Army veteran, and VA Loan Purchase Manager at iFreedom Direct® says, “A veteran can qualify for two VA loans simultaneously with Tier 2 entitlement, sometimes called bonus entitlement. Bonus entitlement
can be used for VA loan over $144,000. It’s important to use a seasoned VA loan professional who understands how to arrive at the Tier 2 calculation.”
For help with a second VA loan, call a VA-approved lender.