Can You Use Your VA Loan Again in Colorado If You Still Own Your First VA Home?
Yes, you may be able to use your VA home loan benefit again while you still own the home you bought with it. How it works depends on whether that first loan is still open, paid off, or sold and paid off. Each one changes how much entitlement is left for a Colorado purchase.
This matters most if you're renting after a move, or renting out that first VA home and wondering if your benefit is tied up. Knowing which situation you're in before you shop saves you from guessing about what you can buy.
What entitlement is and why it matters for a second VA loan
Entitlement is the part of your VA benefit that backs the guaranty your lender relies on. VA's guaranty protects your lender if a loan isn't repaid. When you use the benefit, the entitlement used for that loan is charged against you until it's restored.
Your Certificate of Eligibility, or COE, shows what's been used. VA lists prior loans in a table called "Prior Loans charged to entitlement," with the amount used in the Entitlement Charged column. That table is the first thing to look at before you plan a second purchase.
Three ways to restore entitlement you already used
VA's home loan eligibility page says you may be able to restore entitlement used in the past if you continue to meet the eligibility requirements and at least one of these is true:
- You sold the home and paid that loan in full.
- A qualified Veteran-transferee assumes your loan. They agree to substitute their entitlement for the same amount you used originally.
- You repaid the prior loan in full but kept the home. VA says you can only do this once.
You can request a COE with an entitlement restoration online, ask your lender to submit the request for you, or fill out VA Form 26-1880 and send it to the VA address on the form.
If you still own the home and still owe on it
Owning your first VA home with the loan still open doesn't automatically end your benefit. If none of the restoration paths fit, VA says you may still have remaining entitlement to buy another home with a VA-backed loan.
Full and remaining entitlement work differently. With full entitlement, VA says you don't have a loan limit, as long as you can afford the loan and the appraisal supports the price. Without full entitlement, your remaining entitlement is figured from the county loan limit where you're buying, minus what you've already used.
That means the Colorado county you shop in can change how much your remaining entitlement covers. VA's entitlement and loan limits page walks through the calculation, and it points to the FHFA conforming loan limits for each county. Because those limits differ by county, look up the current figure for the county where you're buying.
If your remaining entitlement doesn't cover enough of the loan you want, VA says your lender may require a down payment. Your lender will need to determine what your COE and the county limit allow for your file.
Paid off but kept: the one-time option
If you paid off the first VA loan and still own the home, you may be able to restore that entitlement once. That can be useful if you want to keep the home after a move. Because VA limits this to one time, it's worth thinking about your longer plans before you use it.
The new home still has to be your home
A second VA loan is for a home you'll live in. VA's purchase loan page says you must meet VA's and your lender's standards for credit, income and other requirements, and that you will live in the home you're buying with the loan.
So if you're keeping your first VA home as a rental and buying in Colorado, the Colorado home is the one you plan to live in. Your lender will need to determine whether you qualify based on your full financial picture.
Costs that can change on a second use
The VA funding fee is a one time payment on a VA-backed loan, and VA's chart lists separate rows for first use and after first use. On some loans the fee after first use is higher. VA also lists exemptions, including Veterans receiving VA compensation for a service-connected disability, so check whether one applies to you.
Your next step
Pull your current COE and look at the Entitlement Charged column. Then decide which situation fits: sold and paid off, paid off but kept, or still owed. If you're relocating, our guide to buying in Colorado from out of state covers the rest of the move.
You can also read more about VA loans in Colorado, or book a time with Diane to walk through what your COE shows. You can call Diane at 719-687-2112.
Diane also helps buyers in Arizona, Montana and Florida.
Diane Beaumont, Mortgage Loan Originator, NMLS #247026. Benchmark Mortgage, a dba of Ark-La-Tex Financial Services, LLC, NMLS #2143. Equal Housing Lender. Not a commitment to lend.