You are entitled to a VA loan and that’s a good thing. But is there a limit on reusing it? Some people assume it’s a one-time deal. Luckily, that’s not the case as long as certain things fall into place. We discuss these requirements below.
The Actual Limit for Reusing a VA Loan Benefit
In reality, there is no limit for reusing your VA loan benefit. You can use it over and over again as long as you pay the loan in full and sell the house. It’s that simple. This is often the case with veterans that plan to move. They put their home up for sale, find a buyer and sell their home. They use the proceeds of the sale to pay off the mortgage. The slate is clean and they start over.
All that you have left to do is restore your entitlement. This means completing VA Form 26-1880. This is the application to restore your entitlement. The VA will verify that you sold your current home and paid off the mortgage. You then receive your full entitlement again.
What if the VA Loan Still Exists?
The above scenario was what happens in a perfect world. What if you don’t sell your current home, though? Can you still reuse your VA benefits? You can, but only to a point. You don’t have the ability to use your entire amount of entitlement. Right now, this means $424,100. The VA guarantees 25% of that, so $106,025.
You can take out another VA loan for the amount of the entitlement you have remaining. Let’s say your current mortgage is for $200,000. You have $224,100 left. Technically, the VA states you can only use your entitlement once at a time. But, they may grant a one time exception.
The exception occurs if you are reassigned or relocated. If your current home is too far away from your new location, it might not be convenient to commute. In this case, the VA might allow you to use your remaining entitlement without selling your current home.
What if you Foreclose on a VA Loan?
If you foreclose on your VA loan, you technically forgo your VA entitlement. However, if you did not use all of the entitlement, you may use what you have left. In this case, you can only use the remaining entitlement. You can’t reinstate entitlement that you defaulted on. But, if you only used half of your original entitlement, you might be lucky enough to get a second chance.
VA Loan Assumptions and the VA Limit
A unique aspect of VA loans is that t hey are assumable. A veteran may be able to take over your loan where you left off. This can only occur if the bank approves the transaction, though. In other words, the lender must approve the borrower.
If this does happen, there are two possible scenarios:
- The buyer assume the loan and uses your entitlement for the loan
- The buyer assumes the loan and uses his own entitlement for the loan
The only way you can resume your entitlement based on the VA limit is if the buyer uses his own entitlement. In other words, he replaces your entitlement with his own. This works just like you paying off your mortgage and selling the home. You can apply for reinstatement of the entitlement.
The number of times you can use your VA loan really depends on your situation. If you are unsure if you can reuse the entitlement you have, talk to your local VA office. They can walk you through the steps to see what you have available. Each situation is different. You can’t assume that you can use your benefits. Find out straight from the source to make sure you handle your mortgage in the best way possible.