There are, of course, many common questions about the VA loan program that could be addressed, but there are many questions that directly involve restoring VA entitlement after the initial use. These questions often have different contexts, but involve basically the same question: how? One of the most common involves a borrower selling his or her house that is using their VA entitlement and buying another one and would like to use their VA entitlement for the new home. They are wondering what the turnaround time between the sale of their old home to restoration of their entitlement is, and how to speed up the process if they can. This is a somewhat complicated question, and therefore has a somewhat complicated answer.
The rules to getting your VA entitlement restored aren’t too complicated, but they are very specific. The Pamphlet lists the circumstances that entitlement can be restored, which are when the property for which the original entitlement was used for has been sold, and the other is if the veteran refinances to a non-VA loan on the original loan. In both cases, the VA entitlement will be restored, though the Pamphlet makes a point of mentioning that if the veteran intends to use the entitlement again, he or she must still meet all of the occupancy, income, and credit requirements of the program. From the Pamphlet:
“Entitlement previously used in connection with a VA home loan may be restored under certain circumstances. Once restored, it can be used again for another VA loan. Restoration of previously used entitlement is possible if
● the property which secured the VA-guaranteed loan has been sold, and the loan has been paid in full, or
● an eligible veteran-transferee has agreed to assume the outstanding balance on a VA loan and substitute his or her entitlement for the same amount originally used on the loan. The assuming veteran must also meet occupancy, income, and credit requirements of the law.”
Now, the rules above obviously do not cover every portion of the original question. In regards to turnaround times and ways for borrowers to speed up the process of getting a response, the only thing to do is for the borrower to contact their loan officer and the VA Regional Loan Center that covers their area. Between these two sources, assistance can be provided and the borrower will learn what they can do in their situation to speed up the process. It seems prudent at this point to mention that restoration of VA entitlement is not automatic; it requires action on the part of the borrower. The borrower must apply for restoration, and that is a process your loan officer can best assist you with.
The VA also provides a couple of other scenarios in which a veteran can get restoration of entitlement, “a veteran may obtain restoration of the entitlement used on a prior VA loan under any of the following circumstances:
● the prior VA loan has been paid in full and the veteran has made application for a refinance loan to be secured by the same property which secured the prior VA loan. This includes refinancing situations in which the prior loan will be paid off at closing from a VA refinancing loan on the same property,
● the prior VA loan has been paid in full, but the veteran has not disposed of the property securing the loan. The veteran may obtain restoration of the entitlement used on the prior loan in order to purchase a different property, one time only. Once such restoration is effected, the veteran’s COE will indicate the one-time restoration. It will also advise that any future restoration will require disposal of all property obtained with a VA loan.”
Borrowers who are hoping to reuse their VA loan benefits must do so in accordance with the above policies and make sure they are proactive about applying for restoration. There’s only so much the borrower can do in regards to speeding up the process, but the things you can