Restoration Of Entitlement And Simultaneous Closings
Sorry for the perhaps confusing headline. We too are all aware of the lingo the military uses thats specific to service but as it relates to home loans and being VA home loan eligible, both terms deserve some explanation. Restoration of Entitlement isnt exactly an everyday term but you will use and hear that term maybe two or three times during your years of home ownership and is used in relation with the VA home loan approval process. At the same time, the usage of a Simultaneous Closing is also relatively rare but is not reserved just for a VA loan but can be an occurrence with any mortgage used to purchase a home. Lets look together a little further and see what these terms mean and what you can expect.
Restore Your Va Entitlement By Paying Off Your Mortgage
Another option for restoring your entitlement is to pay off your VA loan balance. This almost instantly puts back whatever entitlement you originally had, usually $36,000.
With a 30 year mortgage, you will pay off your mortgage balance over three decades. Or, if you happen to come into a windfall , you could pay down your loan early without penalty. All of these options will restore your VA entitlement and allow you to buy a new home with a VA loan .
Why Can’t I Get My Va Loan Eligibility Restored
If your restoration application is rejected, it may be due to an outstanding balance on your original loan. For example, if you foreclosed on your original loan and still have a remaining balance due, or if you gave up the deed to the home instead of foreclosing, you may be ineligible for full restoration.
If this is the case, dont forget to check if you have remaining entitlement money if you didnt use your entire entitlement on your first home, then you can put it towards a second loan.
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What Do I Do Once Ive Got My Certificate Of Eligibility
Once youve received your COE whether through the Department of Veterans Affairs or through your lender you can begin the process of finding a home to purchase and getting approved for a VA loan.
Once youve found your home, your lender will work with you to get your loan approval and complete the steps needed to close on a loan if youre approved.
Getting A Va Loan After Divorce
You can get a VA loan after a divorce, but keep in mind what a divorce can do to your credit, income and entitlement.
During a divorce settlement, it’s common to stop paying debt obligations. Typically, spouses may disagree on who pays what and let them fall through the cracks.
If at all possible, do not do this. It is in the best interest of you and your spouse to agree on paying debts until the divorce reaches a settlement. Otherwise, your credit may take a hit and put you below the threshold to obtain financing directly after the divorce.
Another consideration affecting affordability is your income. Alimony or child support factors into your income picture with VA lenders and may decrease your buying power. Additionally, if you counted your spouse’s income on the first loan, you won’t be able to do that with future loans.
The last piece is VA entitlement. We’ve already covered that briefly, but if the non-military spouse receives the home, your VA entitlement will be wrapped up in that home until it gets refinanced or sold.
Diminished VA entitlement doesn’t mean you can’t get a VA loan, but your $0 down buying power may be limited.
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Restore Your Va Entitlement By Refinancing
One option is to refinance the mortgage on your existing home to a non-VA mortgage like a conventional loan or one backed by the FHA or USDA. You could then use your existing home as an investment property and buy a different one using your restored VA entitlement.
Remember that if you use a VA loan to purchase a home, you must live in it as your primary residence .
How To Remove Your Spouse From A Va Loan After Divorce
The easiest way to remove your spouse from a VA loan and restore your entitlement is typically through refinancing.
Refinancing typically has upfront costs but is worthwhile in the long run if you plan to reuse your VA loan benefits. For example, if your spouse receives the home in a divorce settlement and doesn’t refinance, your VA loan entitlement is wrapped up in the home until they refinance it or sell and pay the loan in full.
Without paying the loan in full, you’ll have reduced VA entitlement and potentially not enough entitlement remaining for a future $0 down purchase.
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Refinancing To Restore Va Loan Entitlement
Restoration looks different when we talk about refinance. The big reason why is that you aren’t disposing of the property when you refinance.
A VA homeowner can refinance into a non-VA loan and pay off their original VA loan in full. But because you’re holding onto the property instead of handing it over to a new buyer, entitlement restoration options get narrower. Otherwise, VA buyers could potentially purchase home after home, refinancing each new VA loan and fully restoring their entitlement each time.
The VA loan program is meant to help veterans purchase primary residences they live in full time, rather than amass a bunch of investment properties.
To that end, the VA allows veterans a one-time opportunity to refinance their loan, keep their home and fully restore their entitlement, which we’ll explore in the last section.
One Loan At A Time: Restore Your Full Entitlement
If youve previously had a VA loan that youve already paid off, youll typically also have to sell the home to have your full entitlement restored.
However, the VA allows for a one-time restoration of full entitlement for homeowners who have paid off their VA loan but still own the property they used the loan to purchase. This can be used in circumstances where youve either finished paying off your VA loan and now own your home outright or youve refinanced your VA loan into a different loan type, such as a conventional loan.
Youll have to apply for entitlement restoration through the VA. You can only use this type of restoration once in the future, youll have to follow the standard rule of selling the property before you can have your entitlement restored.
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Can You Have Two Va Loans In The Same City
You cannot obtain two VA loans in the same city at the same time. The issue lies in the primary residency requirement attached to VA loans. When you take out a VA loan, youll need to live in the property. With that, it would be difficult or impossible to take out two VA loans in the same city without repaying the initial loan.
Restoring Your Va Loan Eligibility
Lately weve gotten several questions about restoring VA loan eligibility. Some readers want to know if they need to restore their eligibility or if its done automatically once a VA home loan has been paid in full.
Others want to know if they need to have eligibility restored if they got a VA Certificate of Eligibility , never used it, but now cant find the form to use the first time. Still others want to know how to apply for their eligibility or restoration of it.
Applying for eligibility or restoration of it can be as simple as working with the lender. A borrowers eligibility is still available even if a replacement form or electronic proof of it is requireda borrower who got his or her COE but never used it would still have the eligibility to work withthe lender will need proof of eligibility, but its definitely still available if it has not been used.
What do VA home loan rules say about getting VA loan eligibility restored after first-time use? In VA Pamphlet 26-7, we find the following under the heading, Restoration of Entitlement. In essence, VA loan eligibility can be restored for a borrower to purchase another home with a VA mortgage if the following applies:
How do you request VA loan entitlement restoration? Remaining entitlement and restoration of entitlement can be requested through the VA Eligibility Center by completing VA Form 26-1880.
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Can I Use A Coe I Used Before
You may be able to restore an entitlement you used in the past to buy another home with a VA direct or VA-backed loan if you meet at least one of the requirements listed below.
At least one of these must be true:
- Youve sold the home you bought with the prior loan and have paid that loan in full, or
- A qualified Veteran-transferee agrees to assume your loan and substitute their entitlement for the same amount of entitlement you used originally, or
- Youve repaid your prior loan in full, but havent sold the home you bought with that loan
To request an entitlement restoration, fill out a Request for a Certificate of Eligibility and send it to the VA regional loan center for your state.
Can I Have A Co
Yes, but who can be a co-borrower is somewhat limited. Generally speaking only a spouse of the Veteran, or another Veteran can be co-borrowers on a Department of Veterans Affairs mortgage. There is a program called a Joint Veteran Mortgage that allows for a co-borrower who is not a Veteran or a spouse, but the underwriting requirements are complicated and most lenders do not offer the program.
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Youve Paid Off Your Previous Va Loan
If you have used a VA loan in the past and youve paid off your entire mortgage, then you should have no trouble getting another VA loan. Youll still have to go through the entire application process, and you will have to restore your entitlement .
It is important to note you need to restore your entitlement before you can apply for another VA loan.
You May Also Be Determined Eligible If:
A surviving spouse who remarries on or after age 57 and on or after December 16, 2003, may be eligible for the home loan benefit. However, a surviving spouse who remarried before December 16, 2003, and on or after age 57, must have applied no later than December 15, 2004, to establish eligibility.
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Do I Have To Have A House I Want To Buy Before I Get Pre
No, in fact it is better to get pre-qualified before you find a house you want to buy. The reason for this is through the pre-qualification process your Mortgage Specialist will be able to tell you how much you are pre-qualified for, and that way you will know what price range of houses you should be looking at.
Next Steps For Applying For A Va Loan
The process of applying for a VA Loan may seem daunting to some borrowers. However, it becomes easier to comprehend the process when broken down into simple steps.
- Make sure your lender is VA-approved
- You need to get a Certificate of Eligibility
- Check your loan amount pre-qualification
- The lender orders a VA appraisal and processes the application
- Getting Your Loan Closed
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Entitlement On Va Mortgage After Prior Va Loan Foreclosure
Every veteran gets a base entitlement of $36,000 once they have served the required time frame parameters.
- Once veterans receive their entitlement they have what is considered full entitlement or $36,000
- If veteran borrowers do foreclose on any home, their credit scores will suffer
- The amount of drop of credit scores is usually at least 80 points and up to 165 points depending on the veterans credit profile
- Of course, that credit score hit hurts but more importantly than a VA loan foreclosure, veteran homebuyers can lose entitlement
- Entitlement dictates the amount the VA will guaranty for a new VA home loan
- The number of entitlement veterans will lose after defaulting on a VA loan depends on how much money the U.S. Department Of Veteran Affairs lost during the VA foreclosure process
- Veteran Home Buyers can always check their current certificate of eligibility to see exactly how much entitlement they have remaining
Contact us at Gustan Cho Associates at 262-716-8151or text us for a faster response for instructions on how to obtain VA certificate of eligibility. Or email us at
Bonus Entitlement & Tier 2 Entitlement
The VA uses terms like bonus entitlement and tier 2 entitlement when working with lenders. These describe guarantees that the VA provides to the lender, above and beyond the basic $36,000.
These are generally internal terms and youre unlikely to need to know them. The VA website says, We use these terms when we communicate with lenders about VA-backed loans over $144,000. You wont need to use these terms when applying for a loan.
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Eligibility Criteria For Va
Eligibility is often the underlying question for many veterans and servicemembers considering using a VA-backed loan. So how do you find out if youre eligible?
The most simple and direct answer is to reach out to the VA. They can confirm your eligibility either by having you complete a VA Form 26-1880 or, alternatively, by contacting a VA Loan Technician at 877-827-3702. Additionally, the VA outlines much of the qualifying information on a Fact Sheet available through their website: VA_Guaranteed_Home_Loans Fact Sheet
In short, though, most active duty personnel and honorably discharged veterans qualify for VA-backing in the home loan process. A VA-backed loan can be used, depending on circumstances, to purchase a single-family home, certain condos, or a manufactured home. It can also be used for the refinancing of an existing mortgage or financing modifications/repairs to an existing property.
Active duty personnel with at least 90 days of wartime service or over 180 days of peacetime service generally quality. Reservists and Guardsmen require lengthier periods of service. In addition to being able to request a Certificate of Eligibility via the VA Form 26-1880 confirmation of eligibility can often be obtained from a private lender.
Forfeiting Your Va Loan Entitlement Forever
Its possible for you to lose your VA loan entitlement permanently. This can happen if you default on your VA loan, the lender forecloses and sells your home for less than you owe, and the VA has to reimburse the lender.
In this scenario, the VAs payment to the lender is deducted from your entitlement, and you cant get it back. This is also true of a short sale, in which your home is sold at a loss.
Unfortunately, you cant use your one-time restoration of entitlement benefit in the case of a short sale or foreclosure.
However, you can regain your entitlement if you pay the VA back the losses from the foreclosure or short sale, Atapour adds.
With additional reporting by Erik Martin.
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Getting A Va Loan After Foreclosure
Going through a foreclosure can devastate your credit score, but it doesn’t mean you have to wait years and years, let alone a decade, to buy another home after experiencing a foreclosure.
According to credit scoring firm FICO, consumers could see their scores plummet by as many as 160 points following a foreclosure. It can take years, even a decade, for a prospective borrower’s credit profile to fully recover.
In most cases, there is a required waiting period.
For VA buyers, the good news is the VA loan’s more flexible credit requirements allow qualified veterans to bounce back significantly faster after a foreclosure than buyers seeking conventional financing.
Foreclosure & Va Loan Entitlement
VA loans continue to exhibit one of the lowest foreclosure rates on the market. But defaults do occur.
Borrowers who’ve lost a VA loan to foreclosure will have reduced VA loan entitlement, which will limit how much they can borrow without making a down payment. But that previous foreclosure doesn’t automatically preclude them from using this hard-earned benefit again once they’re past the two-year mark.
Some borrowers may have some basic VA loan entitlement remaining, while others may be able to purchase again using their second-tier entitlement.
When the time comes, lenders will consult a borrower’s Certificate of Eligibility to help determine how much entitlement is remaining.
That, along with where in the country you’re buying, will help lenders calculate how much you can borrow before possibly needing a down payment.
Veterans United loan specialists can help you with post-foreclosure financing. You can contact a loan specialist at 855-259-6455 or fill out this VA loan application to see what might be possible for you to move forward from default.
Chris Birk is the author of The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.
An award-winning former journalist, Chris writes about mortgages and homebuying for a host of sites and publications. His analysis and articles have appeared at The New York Times, the Wall Street Journal, USA Today, ABC News, CBS News, Military.com and more.
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