For many veterans, their VA benefits will cover the entire cost of their home financing, meaning it’s possible to purchase a home outright with no money down.
If you're shopping around for a new home and looking at both traditional options and VA loans, you may be wondering if there are any restrictions on how to use your VA loan benefits—and whether you can reuse them in the future.
That said, it's essential to find out ways to reuse your VA loan benefits. So this article will cover everything you need to know about reusing your benefits, including selling/keeping your home and buying again, as well as buying after a foreclosure. Read on to learn more!
Can You Reuse Your VA Loan Benefits?
Yes, it's possible! You can reuse your VA loan benefits. There are multiple ways you can use them repeatedly, even if you already own a home. The first step in doing so is deciding what you'd like to do after your original loan term has ended. This can be anything from moving up in home value or size, buying a new property, upgrading your home, or refinancing your current loan.
If you had a VA foreclosure and are wondering if you can reuse your benefits, it's essential to consult with an expert. While many lenders will allow you to use your home loan eligibility again, it doesn't mean they'll rubber-stamp your application. You may be required to reapply with full underwriting again or prove that financial circumstances have changed for the better.
Note: If your VA foreclosure was due to circumstances beyond your control or there were extenuating circumstances involved in your situation that contributed to what happened, there may be hope for getting another home loan after a foreclosure.
Selling Your Home and Buying Again
When it comes time to sell your home and buy again, you’ll have a valuable resource available—your VA loan benefits. The lender will lend up to 100% of your base entitlement amount (the original value of your loan) and generally costs little or nothing for borrowers in good standing. This means you can move into a larger home without any upfront costs, but first, you must resale your home and clear your loan in full.
Paying off your loan in full will allow the Department of Veteran Affairs to restore your VA eligibility and full entitlement for a new home purchase. However, the restoration of entitlement involves lots of paperwork, but luckily it's an easy and quick process to navigate. Swiftness can be essential, especially if you're looking to sell your old home and buy a new one around the same period. Unfortunately, if you fail to pay off your loan in full, you may encounter a few restrictions and $0 down purchasing power.
Keeping Your Current Home and Buying Again
With housing prices still high, many homeowners who have already refinanced their homes with a VA loan are wondering whether it makes sense to keep their existing home and use their benefit again or whether they should sell it and move into a new home. The answer is yes, but it will require special attention and financial considerations. One of the primary considerations is entitlement. When you keep your current home rather than sell it, the original loan entitlement will remain tied up in that home. You can't use it. However, you may be eligible to purchase again, perhaps with $0 down using a new VA loan.
If you qualify for a new VA loan but want to keep your existing one as well, you can do so. That is, if you're willing to pay two monthly payments. The biggest challenge here is handling and affording two mortgage payments. Keep in mind the consequences of missing mortgage payments or late payments. Another trick is that your lender will likely require you to refinance your original loan into a new one at a different interest rate and term length.
Buying After a VA Foreclosure
If you have a VA loan foreclosure, you may still be able to use your VA loan benefits to finance a new home purchase. These loans have a few unique stipulations that can make purchasing after foreclosure smoother than with most conventional loans. However, you'll have to wait for two years from foreclosure before pursuing a new VA loan.
All the requirements and caveats from your previous loan will apply, from additional entitlement in high-cost regions to the minimum loan amount, etc. Additionally, you’ll have to rely on the remaining amount of loan entitlement from your previous mortgage. Your lost entitlement will help you estimate your pristine $0 down buying power.
Did you know that nearly 30% of veterans who have used their first VA loan don't take full advantage of reusing their VA benefits? If you fall into this category, you could be leaving thousands of dollars on the table! If you're a veteran and you've used your first VA loan benefits, the opportunity to use them again might be an enticing prospect. However, this can be a little complex, as specific rules and conditions must be met to reuse your VA loan benefits again and again!