Understanding Partial Eligibility
Many borrowers may think that once they have used their VA Loan eligibility for their first VA loan that they are no longer eligible in the future. This is not the case. It is important for qualified individuals to understand that there are circumstances in which they can qualify for a VA loan even after they have obtained their original loan.
One circumstance in which an eligible veteran may qualify for an additional VA loan is if they have paid off their previous VA loan and disposed of the property for which the loan was obtained. In this case, the veteran should receive full eligibility on another loan. Veterans will, however, need to present proof that their VA loan has been paid in full, as well as proof that they disposed of the property.
For homeowners who have yet to sell or pay off their first VA Loan, there is a one-time exception to the “must-sell” mandate, giving the borrower an opportunity to keep the first home and seek a new VA loan for another home. Borrowers who choose to utilize the “one-time restoration” allowance will have to dispose of all property in the future if they again seek restoration of entitlement.
Another consideration could be that the individual did not borrow the full amount to which they were entitled on their first VA loan, which means partially eligibility may be available for the unused amount. The unused amount will serve as the second VA loan; borrowers must understand, however, that the leftover guaranty may not be enough to cover the entire amount requested for the second loan.
While the initial VA loan often requires no down payment, the down payment for the second VA loan will have to be negotiated with the lender. Because the partial eligibility loan process can be complex, it is important for borrowers to seek the help and advice of an experienced VA loan representative prior to beginning any paperwork for the second VA loan.
Be prepared for changes in closing fees and funding fees also alter when applying for a second loan. Generally the funding fee is higher on the second VA Loan.