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VA loans are reusable, so eligible veterans and servicemembers can buy more than one home or refinance with the same benefit. Whether it’s restoring entitlement after selling a home or leveraging leftover entitlement, the VA program provides versatility.
Knowing how to handle this process guarantees you’ll take full advantage of these benefits. Our experts at Sprint Funding can provide you with more information about the VA loans, so for more questions, please give us a call.
Key Takeaways
- VA loan entitlement allows veterans to obtain loans with no down payment and can be used more than once for different homes.
- Basic entitlement guarantees up to $104,250, or 25% of the loan amount, and unused entitlement can be carried over for future use.
- Bonus entitlement provides extra coverage for homes above county loan limits, enabling purchases in higher-cost areas.
- Veterans can reuse their VA loan by restoring entitlement, usually by selling, refinancing, or utilizing partial entitlement or a one-time exception.
- Active duty members with PCS orders can hold multiple VA loans to meet relocation requirements.
- VA loans support downsizing after retirement or overcoming challenges like high property taxes or credit score issues.
Understanding VA Loan Entitlement
VA loan entitlement is a benefit guaranteed by the VA that allows veterans to secure a loan without making a down payment. This keeps the veteran on a more flexible financial basis. Once the previous entitlement terms are satisfied, the veteran can always utilize the entitlement. However, it is important to understand how a veteran can fully benefit from using VA loan benefits.
Basic Entitlement
The basic entitlement is a standard guarantee from the VA, currently covering up to approximately $104,250 (25% of the conforming loan limit), which allows veterans to secure loans without down payments within conforming limits.
For example, with the current conforming limit of $766,550 in most areas, the basic entitlement provides a guarantee of approximately $191,637 (25% of the loan amount). Any unused basic entitlement can be used for future loans.
Bonus Entitlement
Bonus entitlement offers additional coverage beyond the basic amount, useful for high-cost areas where home prices exceed local loan limits. For example, in a $500,000 market, bonus entitlement enables veterans to avoid down payments.
Calculating Your Power
To find your remaining entitlement, subtract any prior usage from your total entitlement. This figure helps determine your buying power and the maximum loan amount available without a down payment.
For instance, with a $50,000 entitlement balance, you could potentially access up to $200,000 in VA guarantee coverage (as the VA guarantees 25%), though actual loan approval depends on income, credit, and debt-to-income ratios meeting lender requirements.
Using VA loan calculators can help clarify affordability and guide your purchasing decisions, ensuring you stay within loan limits.
How to Reuse Your VA Loan
VA loans are built with flexibility, which means that eligible veterans can reuse their benefits time and time again. With knowledge of entitlement management, restoration options, and special provisions, borrowers can maximize this great benefit.
Full Restoration
Restoration in full allows veterans to regain their entire VA loan entitlement, typically by selling their home and repaying their VA mortgage.
After the loan is paid off, the borrower must submit VA Form 26-1880 to the VA to restore their entitlement, which can then be used for future purchases. For instance, the proceeds from the sale of a starter home can be applied to fully restore the entitlement, enabling the financing of a larger property.
Partial Entitlement
Partial entitlement enables borrowers to access the full amount of their entitlement without the complete restoration of the loan. Veterans who wish to purchase a primary residence with a VA loan can benefit greatly from this.
A down payment may be required if the loan is over the amount of remaining entitlement. For example, a veteran may utilize the remaining entitlement to buy a new property while renting out his previous home.
One-Time Exception
Veterans can petition for a one-time entitlement restoration after fully paying off their VA loan, however, without selling the property. It, therefore, carries some leeway for different special cases, such as refinancing a VA loan into a non-VA product, thereby allowing entitlement on another loan for a new purchase without selling the current home.
Loan Assumption
Loan assumption allows veterans an opportunity to transfer their VA loan to another qualified borrower. The borrower will be relieved of entitlement if the loan assumption option is availed in selling a VA-financed home by fulfilling the VA eligibility criteria.
Navigating Multiple VA Loans
The VA loans are flexible, which makes it easy for veterans and active-duty personnel to repeatedly use their benefits. Knowing the guidelines for multiple VA loans is necessary for a veteran and his family during transfers or any change of life.
The PCS Rule
Under the conditions specified in the PCS (Permanent Change of Station) rule, a service member on active duty can obtain a second VA loan. This allows them to move to their new base while still keeping their current home financed with a VA loan as a rental or secondary home.
Both properties must meet VA occupancy regulations, and partial entitlement can be used if full entitlement is tied up in a previous loan.
Downsizing Needs
Downsizing is very common for veterans who are retiring or changing their lifestyle. A second VA loan will provide for the purchase of a property that is easier to manage, thus reducing the cost of housing.
Because the value of the partial entitlement allows borrowing based on remaining entitlement and local loan limits, housing decisions can align with long-term financial goals.
Financial Hurdles
There are several key financial factors that a borrower must take into consideration when managing multiple VA loans.
- Entitlement: Remaining or partial entitlement affects loan size.
- Credit Score: A strong credit score earns better interest rates.
- Budgeting: Include property taxes, insurance, and maintenance in your budget.
- Income/Debt Ratio: Ensure that income can support multiple mortgages.
Steps for Veterans
- Check entitlement through the Certificate of Eligibility.
- Consult a VA loan expert about second-tier entitlement.
- Plan housing based on relocation or family needs.
- Budget for additional costs and maintain a strong credit.
Learn How to Maximize Your VA Loans with Sprint Funding
The benefits of VA loans extend beyond their initial use; they can adjust to the changes in your life. Your VA loan can be reused for purchases, refinancing, or managing multiple properties affordably.
We’re here to help you understand entitlement restoration, second-tier options, and any challenges you face. Contact us today to discuss your dreams and how to leverage your VA loan benefits.
