VA Entitlement Restoration is vital for veterans wanting to reuse their VA home loan benefit multiple times throughout their lives. The “entitlement” represents the dollar amount the Department of Veterans Affairs (VA) guarantees to lenders, which allows veterans to secure favorable mortgage terms, including typically zero down payment.
How VA Entitlement Works
When a veteran uses a VA loan to buy a home, that entitlement is tied up in the loan until it is paid off. Restoration of entitlement allows the veteran to “recharge” this guarantee after repaying the original VA-backed mortgage, making it possible to buy another home with a VA loan.
Methods to Restore VA Entitlement
1. Selling the Property and Paying Off the VA Loan: The most straightforward method is selling the home purchased with the VA loan and paying off the mortgage in full. After the loan is satisfied, veterans apply for restoration using VA Form 26-1880, Request for a Certificate of Eligibility. This form notifies the VA to restore the full entitlement, readying the veteran for a new VA loan.
2. Assumption and Substitution of Entitlement: If another eligible veteran assumes your VA loan, they can substitute their entitlement for yours. This tactic frees your entitlement, letting you purchase a new home with a VA loan. Learn more about this process at our VA Assumability article.
3. One-Time Restoration: This option lets you restore your entitlement once while keeping your original home, usually by refinancing the VA loan into a conventional mortgage. After paying off the VA loan, you can restore your benefit to buy a new primary residence. This one-time restoration is a valuable strategy for building real estate investment portfolios.
Entitlement After Foreclosure
If a VA loan goes into foreclosure, the VA covers the lender’s loss by paying a claim. In this case, the entitlement used is limited until the veteran repays the VA for that claim. Until then, full restoration is not possible.
Important Considerations
- Restoration is not automatic; you must apply through VA Form 26-1880.
- You can restore and reuse your entitlement multiple times, provided previous VA loans are paid off.
- The one-time restoration option is a unique opportunity to keep your home and still use your VA loan benefits elsewhere.
- Partial or “remaining entitlement” might be available if you didn’t fully utilize your entitlement on your first VA loan.
Veterans interested in applying for VA Entitlement Restoration should consult their VA-approved lender and complete the necessary paperwork early in the home buying process. The VA typically processes restoration requests as part of the loan application, making it straightforward when purchasing a new home.
For detailed guidance, refer to the U.S. Department of Veterans Affairs official site.