Restoring Entitlement

It is possible for Orange County Veterans to use their VA benefit for a home loan more than once. And there are a couple of ways to do it. What many Veterans don’t realize is that the VA home loan is not strictly for first time home buyers. In high cost counties like Orange county and Los Angeles county where the 100% financing limits in 2013 are $668,750, it is common for move up buyers to use their VA eligibility to purchase their dream home. But what happens when a Veteran has already used their Entitlement on a home? Learn how Restoring Entitlement works.

How Restoring Entitlement works

Restoring Entitlement is fairly easy, as long as certain conditions have been met. A VA Entitlement is the basic amount that VA will insure or guarantee for a loan. VA has an interesting formula that is based on a standard Entitlement of $36,000. But the easiest way to think about it is like this – VA will guarantee 25% of the home loan up to a limit that is set by VA each year. In 2013 most of the country has a 100% financing limit of $417,000. So VA will insure 25% of $417,000, or $104,250. This guarantee makes is possible for a lender to take the risk on the remaining $312,750, which means the Veteran is able to buy a $417,000 with $0 down payment. In Orange county, where the limit is $668,750, VA will guarantee $167,187 of the loan. But what happens if the Veteran bought a home with a VA loan 2 years ago? Or even 30 year ago? Well, it depends on what happened with that property and the loan. Below are a few possible outcomes.

• If the home was sold and the loan was paid off through the close, then the Veteran can apply to restore their Entitlement. A VA home loan officer can help with this process. A VA Form 26-1880 will need to be completed and submitted to VA, along with the signed and certified Final Closing Statement for the sale of the home. VA will then verify the information, and if it all pans out, then restoring Entitlement to 100% is possible.
• If the home was sold but the seller assumed the VA loan, and the balance is still outstanding, then restoring entitlement will be more difficult (at least to 100%). However, this is not the end of the world. In many cases there is still a partial Entitlement available. If that’s the case, then it may still be possible to buy a new home with either $0 down payment, or possibly with a smaller down payment. At least smaller than what a Conventional loan program would allow. To find out for sure, have a lender help with retrieving the Certificate of Eligibility which will have the details on remaining Entitlement.
• If the Veteran still owns the home but paid off the loan, then they can apply for a One Time restoration of Entitlement. By using the same VA Form 26-1880, along with proof of the disposition of the loan, the Veterans Entitlement can be restored back to 100%.

Work on Restoring Entitlement Before Making an Offer

It is important to retrieve your Certificate of Eligibility (COE) before making an offer on a home. A direct VA lender can help not only with quickly getting the COE or restoring entitlement, but can also do the VA home loan Pre-Approval, a critical step in the home buying process. Veteran’s looking to buy a home in Orange County should find an Orange County VA Loan specialist who can not only handle retrieving the COE and doing the Pre-Approval, but also prepare custom VA loan scenarios with details on the purchase price, loan amount, payment, and closing costs involved in the loan process. Also, the VA loan officer would be easy to contact when questions arise and should be able to educate the VA buyer on the process.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com