Restoring VA Home Loan Entitlement

VA home loans come with a guarantee also known as an entitlement. Having a VA loan entitlement allows for the government to help in paying back a portion of the borrower’s mortgage to the lender if the homeowner in a result of a loan default. Often times, borrowers have the option to have their entitlement restored.

Along with the benefits of a VA mortgage purchase loan, military borrowers are entitled to a certain amount of money that they can use for a first time purchase as long as it is paid back to lender. The loan is guaranteed by the Department of Veteran’s Affair in the event that a loan should go into default.

VA Loan Restoration

So what exactly is a VA loan entitlement restoration?

The VA entitlement can only be restored under certain circumstances and is in accordance with VA regulations. If the borrower is able to restore their entitlement, they can then purchase again under that entitlement as long as the loan has been repaid back in full and the property has been sold. However, if the loan is paid back in full and the property remains unsold, obtaining a restoration on an entitlement is possible as well. Keep in mind that this may only be a one time ability in doing so.

Here are the conditions that a VA borrower has to meet in order for restoration of entitlement:

• The property must be sold.
• The loan must be paid back in full.
• The loan has been sold to an eligible VA borrower and agrees to assume the outstanding balance.
• The VA borrower must agree to use their entitlement for the amount was originally used.

In order for the new VA borrower to be eligible to assume an existing VA mortgage, they must meet all VA credit, occupancy and income requirements. But if the borrower cannot find a VA eligible borrower to assume the loan, then the original entitlement will not be restored unless the homeowner refinances. Once a refinance is completed, the rest of the proceeds would be used to help pay off the rest of the original VA loan entitlement.

VA loan entitlement restorations must be requested by the borrower by applying for it. Trying to obtain a restoration can take some time, so it is wise to apply for one before you try and make a purchase on a new home as it can take longer than expected.

The whole restoration process of a VA entitlement can be complicated, especially if you are learning about it while in the process of attaining one. Speaking with a VA loan specialist is usually the best route to take and you can be sure that it will be done properly.