VA Loan Eligibility Questions
In order for VA loan applicants to be approved for a VA insured mortgage, they must first establish eligibility with the Department of Veterans Affairs. This is required so that the VA can verify the borrower has met requirements including time in service, and other factors.
Once a borrower’s eligibility has been established, the lender can proceed with the VA home loan process. But what happens when a borrower has used his or her eligibility for a home loan and wants to get it restored again later for another mortgage?
Borrowers can apply for restored eligibility once they have sold the property or otherwise paid off the mortgage in full. On a one-time basis the VA will restore a borrower’s VA loan eligibility once the loan has been paid off on a property the borrower still owns.
There are other scenarios, too. For example, a borrower sells the property he or she purchased with a VA loan using a loan assumption arrangement. Can the borrower have VA loan eligibility restored to use for a new loan?
According to the VA official site, “In this case the veteran’s eligibility can be restored only if the qualified assumer is also an eligible veteran who is willing to substitute his or her available eligibility for that of the original veteran. Otherwise, the original veteran cannot have eligibility restored until the assumer has paid off the VA loan.”
In cases where a borrower’s prior VA home loan was foreclosed upon or the borrower entered into a deed-in-lieu agreement, and the VA paid a compromise claim, there are special rules. According to VA.gov, “In either case, although the veteran’s debt was waived by VA, the Government still suffered a loss on the loan. The law does not permit the used portion of the veteran’s eligibility to be restored until the loss has been repaid in full.”
In cases where the borrower can’t or doesn’t wish to apply for restored eligibility but still has a portion of unused VA loan eligibility, the VA rules state, “If a veteran has already used a portion of his or her eligibility and the used portion cannot yet be restored, any partial remaining eligibility would be available for use. The veteran would have to discuss with a lender whether the remaining balance would be sufficient for the loan amount sought and whether any down payment would be required.”