Restoring VA Home Loan Entitlement

Restore va eligibilityMany Veterans don’t realize that the VA home loan program can be used more than once. Not only is the VA loan great for first time home buyers but it’s also great for move up buyers, especially in high cost California counties like Orange County, Los Angeles, San Francisco, Marin, Contra Costa, Alameda and San Mateo, where the VA loan limits are high. Which leads to a common question, “How do I restore my Entitlement so that I can use VA financing on my next home?”

It is Possible to Have More Than One VA Loan at a Time

Before we get into how to restore VA Entitlement it is important to note that it is possible to carry two VA loans at a time. When a Veteran moves from a home that is financed with a VA loan and wants to keep it as a rental the Veteran can have a lender pull an updated Certificate of Eligibility. The updated COE will show the amount of Entitlement used for the loan on the current property. The lender can then determine if there is Entitlement remaining for the purchase of another home. This is especially possible if the Veteran is moving from a smaller home (small loan) to a more expensive property in a high cost county. To find out if this is possible in your situation contact a VA lender who can check your Certificate of Eligibility and run the numbers based on the county loan limit for the county you plan to move to. In some situations a down payment may be required. But still, the down payment may be less, and with no mortgage insurance, than other types of financing.

Process for Restoring Entitlement

In the a situation where the Veteran plans to sell their home to buy another, the VA needs to be notified once the first home is sold. Even if you sold your home years ago, if VA was not notified properly then your Certificate of Eligibility may show “Paid in full, no restoration”. The first part of that statement, “Paid in Full” just means the lender notified VA that the VA loan was paid off. But this is only half of it, because VA wants to know what happened to the property. If it is still owned, but with non-VA financing or even free and clear, then it could affect the Veterans ability to use VA financing on another home.  If the property is still owned, then the Veteran can apply for a “One Time restoration” of Entitlement. But if the Veteran had sold the property then using VA financing again is not a problem. As a matter of fact, there is no limit to how many times a Veteran can restore Entitlement if they always sell the previously VA financed home. In order to prove the disposition of the property is sold a Final HUD, stamped and certified by the closing agent,  needs to be provided.

Notification to VA is done by completing and sending in the VA Form 26-1880, or Request for Certificate if Eligibility. Specifically, Section 8 of this form deals with restoring the benefit after the sale and/or pay off of a VA loan. The easiest and quickest way to send this form into VA is with the help of a California VA lender who deals with this every day. VA is surprisingly quick at restoring entitlement, especially in situations of a “concurrent closing”. A concurrent close happens when a Veteran is selling a VA financed home and immediately buying a new home to be financed with a VA loan. From my experience, restoration can take between 24 and 36 hours from the time the 26-1880 form (and Final HUD) is sent to VA.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.