Remaining Entitlement
Veterans who had a VA loan before may
still have "remaining entitlement" to use for another VA
loan. The current amount of entitlement available to each eligible
veteran is $36,000. This was much lower in years past and has been
increased over time by changes in the law. For example, a veteran
who obtained a $25,000 loan in 1974 would have used $12,500 guaranty
entitlement, the maximum then available. Even if that loan is not
paid off, the veteran could use the $23,500 difference between the
$12,500 entitlement originally used and the current maximum of $36,000
to buy another home with VA financing. An additional $24,000, up to
a maximum entitlement of $60,000 is available for loans above $144,000
to purchase or construct a home.
Most lenders require that a combination
of the guaranty entitlement and any cash down payment must equal at
least 25 percent of the reasonable value or sales price of the property,
whichever is less. Thus, in the example, the veteran's $23,500 remaining
entitlement would probably meet a lender's minimum guaranty requirement
for a no down payment loan to buy a property valued at and selling
for $94,000. The veteran could also combine a down payment with the
remaining entitlement for a larger loan amount.
Restoration of Entitlement
Veterans can have previously-used entitlement
"restored" to purchase another home with a VA loan if:
The property purchased with the prior VA loan has been sold and the
loan paid in full, or
A qualified
veteran-transferee (buyer) agrees to assume the VA loan and substitute
his or her entitlement for the same amount of entitlement originally
used by the veteran seller. Remaining entitlement and restoration
of entitlement can be requested through the nearest VA office by completing
VA Form 26-1880.
The
entitlement may also be restored one time only if the veteran has
repaid the prior VA loan in full but has not disposed of the property
purchased with the prior VA loan.
Contact Allie Mae for additional advice.
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