Restore Your VA Home Loan Entitlement
Many people believe that the VA loan benefit can only be used once, when in fact, a veteran can obtain a VA loan over and over again as long as there is ample entitlement. The reason for this is that VA entitlement can be restored. Entitlement is the amount the VA will guaranty for each veteran – usually about 25 percent of the amount of the maximum loan amount. Entitlement for each veteran can vary depending on past usage and where you live. And, entitlement may need to be restored from a previous loan in order to cover a new loan being sought.
There is more than one way to restore entitlement. One way is for a VA borrower to sell the home and pay off the VA Loan with proceeds from the sale. In this instance VA entitlement will likely be restored.
But, what if a homeowner doesn’t want to sell the property? Can entitlement still be restored? There is a one-time entitlement restoration for each VA borrower for properties retained and loans paid in full. In this scenario, a veteran may have lived in a home long enough to have made all the mortgage payments or may have made extra payments toward principal to shorten the duration of the military home loan. In any case, payment in full will likely mean restoration of entitlement. And, as long as the borrower has not retained a VA loan financed property in the past, he or she can keep the home.
Another way to restore entitlement happens when a VA mortgage is assumed. A veteran buyer can substitute his or her entitlement for that of the veteran seller. For this to occur, all of the following must be met:
1. The veteran buyer must occupy the property and complete VA Form 26-8106
2. The veteran buyer must have enough entitlement to replace the seller’s
3. Both buyer and seller must prove eligibility
When all three are met, the result is a release of liability (ROL). The veteran seller’s entitlement that was used for VA loan being assumed will be restored and can then be used again.
Sometimes entitlement cannot be restored like when a VA loan is assumed, but entitlement is not replaced. And, if the assumer defaults on the loan, VA would likely end up paying a claim to the lender. The entitlement used by the original borrower will not be restored until VA has been reimbursed for the loss. Also, if a borrower forecloses on a VA loan and gives deed instead of foreclosure, the VA may likely still pay a partial claim to the lender which is still considered a loss. The borrower’s entitlement cannot be restored until the loss is paid in full.
Only when a VA mortgage is paid off, or when an eligible qualified veteran assumes a VA Loan and substitutes his or her eligibility for the seller, can entitlement be restored — if and only if the VA loan is paid in full.
Restoration of entitlement is not automatic. Once a VA Loan is paid in full, the borrower must complete VA Form 26-1880 to let the Department know that he or she intends to have entitlement restored. As long as he or she provides proof of payment in full, and in many cases sale of property, restoration of entitlement is typically given.
Entitlement can vary per veteran, so check with your loan specialist to find out how much entitlement you have and whether your previously used entitlement can be restored.
Author: Isacc Davis
Article Source: EzineArticles.com
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