Did you know you can reuse your VA benefits?
A VA loan offers ZERO down payment financing options with very flexible underwriting guidelines if you are in the market to move up, or want to keep the home you currently own and purchase a New Primary Home. Unlike more conventional methods of financing a home, VA loans are flexible, can be used multiple times if needed, and can even be used concurrently with another VA loan you have. That is, as long as you’re eligible, you can reuse your VA benefits!
Understanding VA Entitlement
VA loan entitlement is, in short, what the VA will “guarantee” your lender in the event that you default on your loan. In most cases, for single use of your entitlement (Where you do not currently have an outstanding VA loan or will be selling your home secured by a VA loan, prior to the purchase of your next home), there is currently not a posted limit for your maximum loan amount allowed. However, there is a specific formula used, if you have a current outstanding loan using your VA Entitlement. If you have not used all of your entitlement, you can contact your lender, and ask how much you can buy, using your remaining available VA Entitlement. You might be surprised at how much your loan can be, using your VA Entitlement a second time.
How to Reuse Your VA Benefits
Reusing VA benefits gets a little more complicated. For the most part, VA benefits are normally used for one property at a time; however, a great deal of that depends on how much of your entitlement you used, and what you’re willing to do with the property you own.
There are a couple of ways you can reuse your VA benefits, and they’re fairly straightforward but it may take some mental mathematic gymnastics to make sense of them.
Sell Your Current Home
Selling your current home is one way to quickly restore your VA entitlement. As long as the proceeds from your home sale pay off your existing VA loan, your VA entitlement is restored back to 100%. Then you’re back to the No Posted Loan Limit that the VA allows for someone with only 1 Primary Property.
Pay off Your Existing VA Loan
A second, far simpler, way of reusing your VA benefits is to pay off your existing VA loan. By paying off your VA loan you not only absolve yourself from mortgage debt, but you can free up your VA benefits to buy a new home or convert your existing home into an investment property. No matter how you plan on using your VA benefits in the future, this is one of the most sure-fire ways of making sure everything is available to you for your next endeavor.
Refinance your current loan into a Conventional Loan
If you are being transferred to another area or moving up to a bigger home, better neighborhood, or the like, and too much of your VA Entitlement is used, you can explore the option of refinancing that home with a conventional loan, so long as you have the parameters necessary to do so. The VA Allows a 1 Time Restoration option when refinancing out of your current VA loan into a conventional loan, to allow you full use of your VA Entitlement again. (if you are intending to make the current home an investment property, you’ll be subject to investment property parameters and interest rates). For more information on this option, contact us and we can walk you through it.
Using your VA entitlement again, while you still have an outstanding VA loan.
Depending on your area, there is a calculation required to figure out how much you can buy at 100% financing, using any remaining VA entitlement you might have, while you have a current VA loan utilizing part of your entitlement. This formula is just a little cumbersome, but when contacting one of our experts, we can quickly figure out what you have left, and how much you can home you can buy, and if a down payment may be needed.
If you have any questions about VA loans or simply want to apply to get your entitlement benefits, then contact Tidewater Mortgage Services, Inc. Our professionals are experts in helping Enlisted and Retired Military Members in Purchasing or Refinancing your New or Current Home.
