How to Get Your VA Loan Eligibility Restored

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If you are a member of the military who has already used your VA eligibility for the purchase of a home, you may be able to have this eligibility restored. If you have sold your home and decide that you want to buy a new one, you will need your eligibility in order to be able to finance the new home with a VA loan.

Disqualifications from Eligibility

Before you try to have your VA loan eligibility restored, you should be aware of what constitutes an automatic disqualification. If you know that you will not qualify in advance, you will save some time since you will not need to go through the trouble of searching for a new home and then applying for a VA loan that will just be declined.

Here are the reasons for automatic disqualification:

  1. Your previous VA loan was foreclosed on by the lender, and you have a balance remaining on the loan.
  2. You have surrendered the deed to the lender, instead of going through a foreclosure.
  3. The VA has approved you for a compromise claim.

Since the government incurred a loss from the VA guarantee made to the lender of your VA loan, any of the above reasons will disqualify you from eligibility.

Restoring Your Full Eligibility

If you are able to pay off the remaining balance on your VA loan, you can then get your eligibility restored, since the government will have recovered the amount that was lost from the guarantee paid to your lender. Once your eligibility is restored, you can then begin the process of applying for another VA mortgage loan.

The form required in order to restore your eligibility is VA Form 26-1880. In addition, you must provide the VA with proof that your loan was paid off. You can have your lender give you a satisfaction of mortgage document to use as proof of your repayment.

Partial Eligibility

You may have partial eligibility left, depending on your individual situation. For example, if you did not borrow the full amount you are entitled to when you obtained your first VA loan, you may be eligible to apply the unused amount toward your next VA loan.

You should contact your lender to see if the partial eligibility amount will fulfill the down payment requirement for your new loan. If it does not, you will have to put down the remaining funds out of pocket. If you do not have enough saved to put down on the loan, you will at least know the amount your lender requires. You can then adjust your budget accordingly, so you will  have a timetable for when you will be able to obtain your next VA loan.

If you are confused about your partial eligibility, before you go through the application process with your lender, you should call your local VA office and set up a time to discuss your questions.