Buy Another Home WIth a VA Loan

Do you feel like you are outgrowing that first home you purchased with your VA home loan benefits? If you need to apply for a new home loan so you can get a bigger house, there are some simple steps you need to take in order to begin. For a start, the Department of Veterans Affairs requires borrowers to apply for a restoration of VA loan entitlement once they have paid off the old property before they can get a new VA mortgage. 

Restoration of VA loan entitlement in full requires the home loan to be paid in full one way or the other. The VA loan rules on this are clear--the borrower must show proof that the original loan was paid in full before entitlement can be restored. 

VA loan coming to maturity--paying the very last mortgage payment and getting the coveted “paid in full” notice in return is one way to go. But remember that  when you sell a home, you also pay off a VA loan in full with the proceeds of the sale, and that situation would also provide paperwork showing the original loan is paid off.

This topic also raises another question--what about the borrower who bought the home with a VA mortgage and paid the loan in full and now wants to purchase another property with a VA loan? Can these people also apply for VA loan eligibility restoration?

The VA loan program allows this one time only. As with the other situations described above, the eligible VA borrower needs to show proof that the home loan was indeed paid off as part of the restored eligibility application. Once VA loan entitlement has been restored, the borrower can apply for a new home loan.

A borrower can also apply for a VA loan using partial entitlement--whatever remains left over after the original loan was taken out--talk to your loan officer about this option. You should also discuss using what the VA describes as “bonus entitlement” which allows you to purchase a home as long as the loan is for $144,000 or higher without applying for a restoration of the old entitlement. Your lender can help you with details on this type of transaction.

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