As a veteran, you are provided with a specific amount of VA entitlement. You can use this entitlement to buy a home with no down payment. Today, the maximum amount a veteran can borrow without making a down payment is $453,100. Once you use it, though, it’s gone. The only way to reuse it would be to pay off the loan in full and sell the home.
But, restoring entitlement isn’t an automatic process. You don’t get to reuse it just because you sold your home and paid off the loan. Instead, you have to request it. Keep reading to learn the procedure to make it happen.
Proving the Home Was Sold
Even though you paid your VA loan off, the VA might only know about the loan’s status; they may not be aware that you sold the home too. It’s up to you to update the VA about this occurrence. You can do so by completing VA Form 26-1880. This is the Request for Certificate of Eligibility. You’ll want to pay close attention to Section 10. This is where you let the VA know that you no longer own a VA home. You will have to provide them with proof of the sale of the home, which you can do with your Settlement Statement.
Once the VA approves the fact that the home was sold, you’ll receive your entitlement back. If you used the entire amount to obtain a $453,100 loan, you’ll receive the full amount back. If you only used part of your entitlement, you’ll receive the amount back that you used. You are also able to use the unused portion of your VA entitlement if you wish to do so.
Other Situations for Restoring VA Entitlement
What if you don’t sell your VA home but want to restore your entitlement? There are a few situations where you can make this happen.
- One-time exception – If you decide to keep your current home but rent it out and buy another home, you may be able to get a one-time restoration of your entitlement. As long as the loan is paid off and you can prove this to the VA, you may be able to get your entitlement restored for the purchase of a larger home or a home that is more than 50 miles away.
- Cash-out refinance restoration – If you want to stay in your home but want to refinance to take cash out of the home, you can apply for a cash-out refinance restoration. This usually doesn’t require much work, as long as you have enough entitlement to cover the higher loan amount.
- VA IRRRL – If you just want to refinance to get a lower rate and aren’t going to touch the equity in your home, you can check the box for the VA IRRRL. Technically, this doesn’t require restoration, but the VA still needs to know what you are doing.
Restoring VA entitlement is on a case-by-case basis. As long as you are on good terms with the VA and you have not defaulted on any federal loans, you should be in good shape to restore your entitlement. Make sure you provide ample evidence of your loan being paid off and home being sold in order for the VA to properly process your request in a timely manner.