Simultaneous restoration of entitlement can help veteran homeowners with a VA loan purchase a new home before selling their old property.
How Simultaneous Restoration of VA Entitlement Can Help Your Purchase
To fully understand this topic, we need to take a step back and examine the issue of VA entitlement. The VA has approved a variety of mortgage lenders and organizations to determine whether or not a veteran or service member is eligible for a VA home loan. Lenders make this determination by reviewing the Certificate of Entitlement. This certificate is provided by the VA and can be retrieved by completing certain forms and providing specific documents. The certificate will provide entitlement information, including whether or not you are eligible for a VA home loan and how much you are entitled to.
We won’t dive into the math and specific numbers behind this issue. Just know that the VA provides the lender with a loan guarantee up to a certain amount. For example, you may purchase a home for $200,000 and the VA will guarantee $50,000 of this loan. If the loan goes into default, the VA will repay the lender $50,000. (Default is rare, and VA loans have some of the lowest default rates among all major loan programs.)
Veterans can use their entitlement (the amount that is guaranteed) to purchase a home. If they make a purchase, that entitlement is no longer available until the loan is repaid.
So what happens when a veteran with a VA loan on their property wants to purchase a new home and sell their current property? They won’t repay the VA loan and regain entitlement until the old house is sold. This can create complications when searching for a new property and applying for a new loan.
However, veterans can get a new VA loan for their next home thanks to a process called “restoration of entitlement.”
VA Loan Restoration of Entitlement
To have entitlement restored, the veteran needs to provide a copy of the final signed settlement statement to the VA. This can take time, and the document has to work its way through the various offices and red tape that plagues any government institution. However, the lending professional can help and may be able to facilitate the restoration of your entitlement.
While there are steps you can complete yourself, you’ll likely find that it’s best to work with a lending officer or professional of some kind who understands VA loan restoration of entitlement. Without experienced support, you may have to wait weeks or longer to utilize a VA loan on the next property. This could hold up the purchase process and could result in your seller moving on to a different buyer. In other words, delays could cause you to lose the purchase.
Simultaneous Restoration of Entitlement
Veterans or otherwise, most homeowners who are selling their current property are also in the process of purchasing a new one. However, VA loans are only available one at a time. You are not allowed to have two VA loans at the same time. But what if you are purchasing a new property and then selling your home?
This is the normal process. It’s usually best to purchase your next property first, then sell your existing property. While this can create overlap with mortgages, it helps avoid a potential situation where you have no home. Suppose the process is reversed; you sell your current property first, then purchase a new home. If all goes according to plan, it can work out nicely. But if you can’t find a new house in time, suddenly you are without a property!
Most purchase first, then buy. But if you want to use a VA loan on your next property, there is a chance that you’ll have to overlap mortgages. How can this be done when, according to the rules, you’re not allowed to have two VA loans at once?
So how can you use a VA loan yet again when the VA does not know that your home will be sold and you will be eligible for another VA loan? To do this, you’ll need to sell and purchase in quick succession.
The process is fairly simple. Bring a copy of your settlement statement showing that your home has sold (once it is sold of course) and the previous VA loan is settled. This takes some advance preparation, and you should understand what the lender needs before they can approve the new VA loan.
Simultaneous Restoration: An Example
It often helps to provide an example of the process in action. This may help you understand how simultaneous restoration works and how it can impact your application.
We often see a situation where a borrower is selling a house that has a VA loan on it and buying a new home. The lending officer needs to move recertification of the entitlement of funds to post-closing so the agent can close up the sale and allow for the purchase of a new home. Often sales in red-hot markets need to move quickly and be completed on the same day.
This can be done with almost no issues. It simply needs to go through processing and the agent or loan professional needs to contact the VA to have it expedited. This can result in a veteran moving from one home to another while using a VA loan on their next property.
Let Us Complete Your Simultaneous Restoration of Entitlement!
Need help with simultaneous restoration? Contact our staff today and we’ll make sure you have the right information to complete your new loan. From reliable information to support with simultaneous restoration of entitlement, we are here to suit your needs!