If you served our country whether during wartime or peacetime, you are likely rewarded with access to VA benefits. Among those benefits is the ability to purchase a home with no down payment and flexible guidelines. In order to buy that home, you have to use what’s called your VA loan entitlement. This entitlement gives you access to loans without a down payment.
Many veterans worry that their entitlement will expire and they won’t be able to use it. Luckily, this isn’t the case. Keep reading to learn what you need to know about VA loan entitlement.
It Never Expires
First and foremost, VA loan entitlement doesn’t have an expiration date. If you earned it, which you can do by serving 90 consecutive days during wartime or 181 days during peacetime, you won’t lose it just through expiration. You can use your entitlement as soon as you get it or 20 years down the road – it’s up to you.
It’s important to note that once you use your entitlement, though, it does remain tied to your current home. In other words, you can’t reuse your entitlement unless you sell the home and pay off the loan in full.
What Happens When You Use Your Entitlement?
If you use your entitlement, as we stated, it remains tied to the home you bought with it. If you didn’t use all of your entitlement, you may have some remaining for future use. Again, this entitlement doesn’t expire.
Here’s how you may have some entitlement left:
Each veteran receives enough entitlement to purchase a home up to $484,350, which is the current conforming loan maximum. If you buy a home for $484,350, you would not need a down payment and you would not have any entitlement remaining.
Now, if you bought a home for $300,000, you would only use $300,000 of your entitlement. This would leave you with $184,350 in unused entitlement. You may be able to use that entitlement down the road (we’ll discuss that in detail below). The $300,000 that you did use will remain tied up in the home. This entitlement lets a lender know that if you defaulted on your loan, the VA would pay them 25% of the loss, which in this case means up to $75,000.
Using Your Remaining Entitlement
Typically, the VA allows you to use your entitlement once. But if you sell the home and pay the mortgage off in full, you can reuse your entitlement or use any unused portion. You just have to verify that you’ll live in the home as your primary residence. The VA doesn’t guaranty loans for homes that are for anything other than your primary residence.
There’s a one-time exception, though. If you find that you need to move, but don’t want to sell your current home, you can refinance it with the VA streamline refinance. This removes the requirement that you must live in the home as your primary residence. You can then use your remaining entitlement to purchase another home that you do certify that you will live in as your primary residence.
In the end, your entitlement never expires. You can use it as much as you want or leave it untouched for as long as you want. There aren’t any rules governing how and when you must use your entitlement. The rules that are present, though, govern what you can do with your entitlement and when you can reuse it, if you have that chance.