Qualified buyers with their full entitlement can purchase without a down payment, regardless of how much they’re borrowing. But Veterans who have utilized a VA home loan before may have some or none of their entitlement remaining when the time comes for them to seek another VA purchase.
The VA home loan program allows eligible veterans and servicemembers to purchase a home with no down payment. One of the key benefits is that you can use your VA home loan eligibility over and over again if you restore your entitlement.
Restoration of entitlement refers to the process of reinstating your full eligibility to reuse the VA home loan benefit for another purchase. Here’s everything you need to know about VA restoration of entitlement
What is VA Restoration of Entitlement?
VA restoration of entitlement allows veterans who have previously used their home loan benefit to take out a new VA mortgage with no down payment and no loan limit.
Restoration of entitlement restores your certificate of eligibility so that you have full access to VA home loan benefits again, as if it was your first time using the program.
Why Restoring VA Entitlement Matters
VA entitlement makes it possible to get a no down payment loan with no limit on the loan amount. This entitlement is essentially a VA guarantee to pay the lender up to 25% of the loan amount if you default.
Having full entitlement means you can access the complete VA home loan benefit. But if you have an existing VA loan, you have “reduced” or “partial” entitlement remaining.
With reduced entitlement, you may need to make a down payment or have a lower maximum loan amount on your next VA purchase. Restoring entitlement gives you back full eligibility.
How to Restore VA Home Loan Entitlement
There are three main ways to restore VA entitlement:
- Selling the property tied to your previous VA loan and repaying it in full
- Having another eligible veteran assume your existing VA mortgage
- Refinancing into a non-VA loan and using the one-time restoration
Restoration is not automatic – you must notify the VA by submitting form VA 26-1880 after taking steps to restore entitlement.
Selling to Restore Entitlement
Selling the home and repaying your VA loan in full is the simplest way to restore eligibility. This involves:
- Making enough on the sale to pay off the VA mortgage
- Officially disposing of the property through sale or VA loan assumption
With an assumption entitlement is only restored if the new borrower substitutes their entitlement.
Restoring Entitlement After Foreclosure or Short Sale
If you lost your home to foreclosure or short sale, you can only restore entitlement by repaying the associated debt to the VA. You’ll likely need to save up for a down payment rather than repaying the entitlement charge.
There is also a 2 year waiting period before getting a new VA loan after foreclosure or short sale.
Using Refinancing to Restore Entitlement
Refinancing your VA loan into a non-VA product repayes the loan in full. However, this alone doesn’t restore entitlement since you still own the home.
Veterans are allowed a one-time restoration exception that makes it possible to refinance the VA loan, restore eligibility, and purchase another home before selling the original property.
This one-time method comes with limitations:
- You must live in the property for the life of the loan or refinance out of the VA program
- You can only use the one-time restoration once
- After using it, you’d have to sell any home bought with a VA loan to restore entitlement again
How Many Times Can You Restore Entitlement?
There is no limit on the number of times you can restore VA eligibility, provided you meet the requirements. However, you can only use the one-time restoration method once.
When Can Entitlement Not Be Restored?
It may be difficult or impossible to restore VA entitlement if:
- Your service eligibility status changed due to a dishonorable discharge
- You are trying to keep your current home and get another VA loan
- You defaulted on a previous VA loan that has not been fully repaid
Consult with a VA lender if you need clarification on your specific entitlement situation.
The Restoration of Entitlement Process
Here are the steps to restore VA home loan eligibility:
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Take action to reinstate entitlement, such as selling, refinancing, or having another veteran assume your loan.
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Submit VA form 26-1880, specifying the details about your previous VA loan in section III.
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The VA will review and update your certificate of eligibility to reflect restored entitlement.
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Work with your lender to apply for a new VA mortgage once entitlement is reinstated.
A VA-approved lender can guide you through the application and entitlement restoration process. In some cases, it may be possible to sell a home, restore eligibility, and purchase a new property within the same day.
Why Restoration of Entitlement Matters
Being able to reuse the VA mortgage benefit over and over again is invaluable. A few key benefits include:
- Purchasing with no down payment and no monthly mortgage insurance
- Getting lower interest rates than conventional loans
- Avoiding strict credit score and debt-to-income requirements
- Having flexible underwriting that considers your full financial picture
Restoring your VA entitlement opens the door to these savings each and every time you need to purchase or refinance.
Alternatives if You Can’t Restore Entitlement
If you can’t fully restore your VA home loan eligibility, you may consider:
- Making a down payment to cover the 25% guaranty not available through entitlement
- Lowering your purchase price or loan amount to stay within your remaining entitlement
- Looking into other zero-down programs like USDA or FHA loans
While not as flexible or affordable as a VA loan with full entitlement, these options may help you buy again as an eligible veteran.
The Bottom Line
VA entitlement restoration allows you to reuse the VA home loan guarantee to its full advantage over and over again throughout your lifetime.
Understanding the nuances of entitlement and restoration empowers you to tap into the substantial benefits of the VA loan on every purchase and refinance.
One-Time Restoration of VA Entitlement
A one-time restoration of entitlement allows borrowers to get a VA loan for a new home without selling their current one.
This one-time exception to the “must-sell” mandate makes it possible to buy a home that eventually becomes a vacation home or a rental property and then turn around and restore your full VA loan entitlement for another purchase. Without the one-time VA restoration of entitlement, you’d either have to get rid of the property or rely on your remaining entitlement to get a new VA mortgage.
But there are a couple of big caveats with one-time restoration. Here’s what you should keep in mind:
- You can only seek one-time restoration if you’ve fully repaid the original VA loan
- You must either live in the home until you repay the entire mortgage (often 15 or 30 years) or refinance the VA loan into another loan type
- Once you use the one-time restoration, if you want to restore your VA loan entitlement again in the future, the VA requires borrowers to get rid of all properties obtained with a VA loan.
Once you obtain the one-time restoration, your Certificate of Eligibility will always have a notation about it. That means you’d have to sell any and all future homes you’ve purchased using the benefit.
How many times can you restore VA entitlement?
This is a benefit Veterans have earned for life. There’s no limit to the number of times you can restore your VA loan entitlement, provided you meet guidelines and requirements. You can only restore your entitlement through the one-time restoration method once.
How to Restore Your VA Mortgage Eligibility Easily
FAQ
Can a Veterans VA entitlement be restored?
How to restore VA entitlement after short sale?
What does paid in full no restoration mean on VA certificate of eligibility?
What does entitlement mean for VA home loan?
How do I restore my VA loan entitlement?
To restore your VA entitlement, you usually need to pay off the existing VA loan or sell the property and provide documentation to the VA for review and restoration of your entitlement. What are today’s VA loan rates? Many eligible buyers don’t know about VA home loan benefits, or they mistakenly think that conventional loans are superior.
What happens if I use a one-time restoration on a VA loan?
Once you use the one-time restoration, if you want to restore your VA loan entitlement again in the future, the VA requires borrowers to get rid of all properties obtained with a VA loan. Once you obtain the one-time restoration, your Certificate of Eligibility will always have a notation about it.
What is a VA restoration of entitlement?
A VA restoration of entitlement allows borrowers who have previously used their VA loan benefit to take out a new VA mortgage with 0% down and no loan limit. VA entitlement is what makes it possible to get a $0 down payment on a VA mortgage with no limit to how large the loan is.
Can a VA mortgage be restored?
1. Restoration of entitlement when you keep your current home You can pay off the VA mortgage either with cash or with a non-VA loan and keep the home. In this case, you can have your entitlement restored to buy another property while continuing to own the first one. You can apply to have the entitlement restored one time only. 2.