Your Certificate of Eligibility lets a lender know that you are eligible for a VA loan. The good news is that you don’t have to be in any hurry to use it – it doesn’t expire.
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You are free to use your entitlement when you are good and ready. You can even reuse your entitlement if you pay your loan off in full and sell the home. As you use your entitlement, the amount of your entitlement will change on your certificate, but the certificate itself never expires.
What is Your Entitlement?
Each veteran starts the VA loan process with entitlement for a home that costs up to $453,100. The VA will guarantee a loan of this amount in your name, assuming you have entitlement. This doesn’t mean that you qualify for a loan of that size though, that’s a completely different aspect of the loan. You must prove on your own that you qualify for the loan.
Your entitlement shows the lender that the VA will guarantee that specific amount. In fact, the VA guarantees 25% of your loan amount. In other words, they pay the lender back 25% of what you default on if you stop making your payments. If you borrowed the full amount of $453,100, the VA would guarantee the lender $113,275.
What Happens When you Use Your Entitlement
If you use your entitlement, it stays with the home. Let’s say you bought a home for $453,100. You would not have any entitlement left. This doesn’t mean that your certificate expires. It just means that you used your entitlement and until you pay the loan off in full and sell the home, the entitlement will remain tied to that home.
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Even if you move out of the home but keep the VA loan, the entitlement remains tied to the home. Just so you know, though, you can’t move away from the home unless you refinance your original VA loan with a VA IRRRL. The VA IRRRL program doesn’t require you to certify that you’ll live in the home as your primary residence, but the purchase VA loan does.
Now, if you sell the home and pay off the loan in full, you can ask the VA to reinstate your entitlement. This will bring your entitlement amount back up to $453,100. You can then try to pursue another VA loan to buy another home.
The one Time Exception
The VA does allow a one-time exception if you want to keep your home, but move out of it. Again, you have to refinance with the VA IRRRL program first. You can then use any remaining entitlement that you didn’t use to buy another home. If you use VA financing to buy that home, you must again certify that you’ll live in the home as your primary residence.
The VA only allows you to do this one time, though. If you want to move again, you’ll have to sell the home and pay off the loan in order to have your VA benefits reinstated. You can do this as many times as you see fit, just remember, you’ll pay closing costs and a VA funding fee every time you take out a new VA loan.
Whether you use all or some of your VA entitlement, it stays tied up with the home you promised to occupy. There are several ways you can use your VA entitlement more than once or even more than once at a time, but you’ll need the guidance of a knowledgeable VA lender that understands entitlement and how to help you make the most of it.
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