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VA borrowers who use their VA loan entitlement on a home loan can and do use their eligibility a second time once the first property has been paid in full or sold. But getting eligibility restored is nor automatic.

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VA Loan Eligibility Restoration for Second Home Purchases

One commonly asked question about VA home loans goes something like this:

"Our first home was purchased on a VA loan. Since then we have paid off the loan and now own the home. We are interested in purchasing a second home nearby as our primary residence and will be renovating our first home prior to selling. Will we be eligible for a VA loan on a second home?"

There are two basic VA loan rules that come into play here. One rule covers the veteran's VA loan eligibility, and the other covers whether the borrower is able to use a VA home loan for another property when they still own the first home purchased with a VA guaranteed mortgage loan.

VA borrowers who use their VA loan entitlement on a home loan can and do use their eligibility a second time once the first property has been paid in full or sold. But getting eligibility restored is a process the borrower must initiate--it is not automatic.

For some types of VA home loans, restored eligibility is not required. This is true when a borrower wishes to refinance their existing VA mortgage using a VA Interest Rate Reduction Refinancing loan. But in this specific instance--where the borrower wants to apply for a new purchase VA home loan, he or she must apply to get VA loan eligibility restored.

Borrowers who have paid off the VA mortgage on their first home may, on a one-time only basis, have VA loan eligibility restored. According to the VA official site, VA.gov, "...to obtain restoration of eligibility, the veteran must send a completed VA Form 26-1880 to our Atlanta Eligibility Center. To prevent delays in processing, it is also advisable to include evidence that the prior loan has been paid in full and, if applicable, the property disposed of."

This evidence can be submitted in the form of a paid-in-full statement from the former lender. You may also submit a copy (never send the original) of your HUD-1 settlement statement issued when the property is sold or refinanced.

Again, VA loan entitlement may be restored only when the borrower has sold or paid off the first VA home loan. Refinancing loans that require use of a borrower's eligibility may use either the remaining eligibility or could require that the first loan be paid in full by the refinancing as a condition of the restored VA loan eligibility and new loan.