Sep 30 2014
This is a follow up to our previous posts about VA Loans. It is an accumulation of questions we have seen over the years covering various personal circumstances and dual eligibility. We hope you find these helpful.
Entitlement…What is it? Entitlement can be explained as the amount of money available to you from the VA to use as a guarantee for the lender providing your VA Loan in the event that you default.
Why is it important? Entitlement is the reason you can have a 100% loan with no down payment. When the VA gives a guarantee of your entitlement to the lender, it is kind of like a down payment to the lender. No money is exchanged, but there is a written guarantee from the VA that if you default the VA will pay the lender that specified amount.
Here are some common questions about VA entitlement:
Q – I purchased a home with my VA loan. I am now divorced but my ex-husband still lives there. Can I get another VA loan?
A – Yes, in most cases you can. You would use 2nd tier entitlement. Please see the article specifically addressing it here.
Q – When I was married my husband used his VA loan to purchase our home but we have since divorced. I have VA eligibility as well based on my service. Can I assume the mortgage in my name only?
A – Yes you certainly can. You also have the option of refinancing the home in your name only and substituting your entitlement for his. You would still need to credit qualify in either instance.
Q – We purchased a home using my eligibility for a VA loan. Both my wife and I have eligibility. We have to move and would like to purchase a new home but I don’t have enough entitlement without selling the old one. Is there any way to still get a new home?
A – Yes, you would use dual entitlement. That means you could use a portion of each of your entitlements to get the home. Or you could use your wife’s eligibility of entitlement.
Q – Both my wife and I have entitlement. Can we use both to double our county limit buying power?
A – No. The VA guarantees only up to the county limit even if there is more entitlement available.
Q – Ten years ago my VA financed home was foreclosed on. How does that affect me today?
A- This is the instance mentioned in the beginning of this article. It means that the VA paid out to the lender a specific amount of money and that money was then charged against your entitlement unless you repaid it. To find out the exact amount of money charged against your entitlement you would need to obtain a copy of your certificate of eligibility. That amount would then be deducted from the amount of entitlement you have available today based on the county/state you are purchasing or refinancing in.
You are purchasing in TX with a $104,250 of entitlement available to you. That is reduced by the $36,000 paid out by the VA to the lender for your foreclosure which leaves an entitlement of $68,250. $68,250 x 4 = $273,000 which would be the maximum 100% loan (zero down payment) amount available.
Q – I heard that you can only have your entitlement restored only one time, is that correct?
A- No. If you sell the home you financed with your VA entitlement, you can apply for restoration of your entitlement as many times as you would like. If you still own a home that is now PAID OFF that you used your VA entitlement to buy, then you may ask for a one time restoration to purchase another home. However once you purchase another home with that one time restoration, you would not be able to use the VA loan again until you sold the original “paid off” home.
Remember, this only applies to a paid off home, meaning you own it free and clear. If you own a home that has a VA loan on it still, you can more than likely qualify for 2nd Tier Entitlement and have a 2nd VA loan.