Your VA entitlement is a one-time benefit in most cases. It is what you need in order to be eligible for a VA loan and is granted to most people that serve our country both during wartime as well as non-war times. The time frame you must serve varies depending on the circumstances of the world at the time. For example, if you serve during wartime, you only need to serve 90 consecutive days in order to be eligible for a VA loan. If you serve during a non-war time, you must serve 181 days in order to be eligible. There are certain extenuating circumstances that allow you to obtain the loan, including being injured during service and being unable to continue; no matter where or when you served, however, one rule stands – you can only use the benefit once, except for the following situations.
VA IRRRL Refinance
The VA IRRRL is the VA Interest Rate Reduction Refinance Loan. This is a loan that allows you to refinance from one VA loan to another strictly to reduce the interest rate on your loan. When you use this program, essentially, you are using your entitlement again rather than using it a second time. The lender that processes your refinance will obtain your original Certificate of Entitlement and use it for the new loan. Because you are not taking out any cash out of the home or moving into a different home, you can use the same entitlement and save yourself some money every month.
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Sell your Home
If you use your VA entitlement on a home, it is tied up until you sell that home. Once you do sell it and pay off the VA loan, though, your entitlement is restored. This means you are free to use it on a subsequent home. This is obviously different than purchasing a second home while you still own the first home – that is not allowed. The home you have the VA loan on should be owner-occupied in order to obtain VA financing as it is not allowed on second homes or investment homes. The only way to get around the occupancy requirement is if you have to go on active duty and be away from the home. In this instance, your spouse must live in the home in order for the occupancy requirements to be filled.
Assuming the VA Loan
VA loans are among the only loans available for assumption. What this means is that someone can “take over” your loan right where it is at rather than starting a new loan to purchase the home from you. Typically, this means that your entitlement is still being used since the loan was not paid off. If, however, the person that assumes the loan is also a veteran, your entitlement can be released and his entitlement used for the assumption of the loan. Assuming a loan still requires the buyer to undergo the underwriting process in order to qualify for the loan, so the underwriter just goes through the entitlement process all over again as he did for your original loan. This way you are free to use your VA benefits on a new home that you purchase for yourself.
Using your VA entitlement a second or third time is not always easy, but it can be done. The key is making sure you follow all of the VA rules to avoid having your VA rights taken away from you. The biggest thing to be careful about is that you follow the occupancy rules as VA loans were not created to help borrower purchase investment homes or even vacation homes – it is a program strictly for primary residences. As long as the occupancy requirements are met initially, even if your circumstances change down the road, you will remain in good standing with the VA and be able to reuse your entitlement subsequent times.
