VA entitlement restoration comes up every time a veteran who used a VA loan wants to purchase again. Most MLOs know it is possible but fewer understand the mechanics well enough to advise a veteran before the loan application is submitted. The nuances matter: restored entitlement, remaining entitlement, and bonus entitlement each affect how much the veteran can borrow without a down payment.
Full Restoration After Payoff
A veteran who sells the property securing a prior VA loan and pays off the VA loan in full is entitled to have their entitlement fully restored upon application to the VA. The veteran must submit VA Form 26-1880 with proof of the payoff and property disposal. This is a one-time administrative process. Once restored, the veteran has the same entitlement as if they had never used a VA loan.
One-Time Restoration Exception
- ✦A veteran who has paid off a prior VA loan but still owns the property may apply for one-time restoration of entitlement
- ✦This allows the veteran to use VA financing on a second property without selling the first
- ✦The original property must be the veteran's principal residence at the time of the original VA loan
- ✦This is a one-time benefit: a second request for restoration while still owning both properties is not permitted
- ✦After the one-time restoration, the veteran's remaining entitlement on the original property is gone
Remaining Entitlement and Bonus Entitlement
When a veteran used a VA loan that was not paid off, any remaining VA entitlement (the portion not tied to the existing loan) can still be used. The VA's basic entitlement is $36,000, but the bonus entitlement (sometimes called second-tier entitlement) brings the total available entitlement to 25% of the county loan limit. A veteran with remaining entitlement can purchase a new property, but any loan amount that exceeds 4x the remaining entitlement will require a down payment. Obtain a Certificate of Eligibility to verify the exact remaining entitlement before structuring the transaction.
Aria can calculate remaining VA entitlement for any scenario and identify the maximum loan amount available without a down payment. Ask at vicariointel.com.
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