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One of the most common questions from borrowers who have purchased a home with a VA loan is if they are able to use their benefit again. Fortunately, there is no limit on the number of times a veteran can use the loan program. This is a life-long benefit for those who have served our country. Securing another VA loan requires looking into a borrower’s VA Loan entitlement. But what exactly does that mean?
Every veteran and active service member who meets the VA's eligibility requirements has something called entitlement. Entitlement can be a bit confusing, even for those working in the mortgage industry, but the most common definition is that it’s a specific amount the VA pledges to repay to a lender if the borrower defaults on the loan. This is part of the VA Loan guaranty.
Eligible veterans in most parts of the country have a primary entitlement of $36,000 and a secondary entitlement of $68,250, which is used when a veteran purchases a home for more than $144,000. There are can be higher entitlement amounts in more expensive areas. When a qualified borrower purchases a home through the VA loan program, they are using some or all of their entitlement. The VA typically guaranties a quarter of the loan amount, so borrowers will typically utilize a quarter of their entitlement when purchasing.Get Started with Your VA Loan Today!
One of great parts of the VA home loan program is that eligible service members have the benefit for life. Even if a veteran has used most or all of their entitlement to purchase a home, that entitlement can be fully restored once the loan is repaid in full. Just submit an application requesting your entitlement be restored.
In order to fully restore entitlement, a VA borrower must sell the home and pay off the loan in full. But there is one exception. If the mortgage is paid off, it is possible to use a one-time restoration benefit and keep the home for use as a rental property or vacation home.
It's possible to have more than one VA loan at the same time. One of the most common scenarios is when a service member purchases a home using a VA loan and then has to PCS. They may choose to retain their primary residence, often to be rented out. The VA borrower may have enough remaining entitlement to purchase a new home without a down payment at the new duty station.
Using this second layer of entitlement, often referred to as second-tier entitlement, is also what allows veterans who've lost a VA loan to foreclosure to purchase again using the program. A borrower's Certificate of Eligibility will detail how much entitlement remains. VA borrowers without sufficient entitlement may still be able to obtain a VA loan by making a down payment, often for less than what would be required for other types of financing. Plus, VA loans do not carry any type of mortgage insurance.
The government charges and receives the VA Funding Fee to help keep the loan program afloat. This fee is a percentage of the loan amount, and can vary based on the loan type, your military service and how many times you've used the program.
Veterans using their VA loan benefits for a second time and purchasing with $0 down typically have a funding fee of 3.3 percent of the loan amount. The VA Funding Fee will be slightly less for those borrowers purchasing with money down. VA borrowers with a service-connected disability are exempt from paying this fee. You can find more information on funding fees here. You can find more information about refinancing an existing loan here.
Specialists here at VA Mortgage Center can address your questions and concerns about the VA Home Loan program, whether you are a first-time borrower or are looking to use your benefit again. You can contact a VA Mortgage Specialist online, or call us at 800-405-6682.