VA Loan Eligibility
VA Loan Eligibility: What Does “Paid In Full, No Restoration” Mean?
Some VA loan applicants choose to request a VA Certificate of Eligibility (COE) themselves, others choose to have the lender help them.
In either case, the borrower’s information is submitted to the Department of Veterans Affairs and the COE is sent back with details on the borrower’s eligibility for a VA home loan including how much entitlement the borrower has to use.
For those who are eligible but have never applied for a VA loan before, the COE will show 100% of the borrower’s entitlement available. For those who have applied for a VA loan, but haven’t used all entitlement (but haven’t met conditions for full entitlement restoration or applied to get that entitlement restored), the COE shows how much entitlement the borrower has left.
For some borrowers, a COE will show ““Paid in full, no restoration” which means that a borrower’s previous VA home loan has been paid off, but the Department of Veterans Affairs does not have information regarding the disposition of the property. Does the borrower still own that home? Has the home been sold?
Borrowers can pay off a VA home loan in many ways. One way is to simply pay the mortgage until the term of the loan ends or when the borrower has fully paid off the mortgage. Another way is to sell the property and pay off the loan with the proceeds of the sale. When the home is sold or the loan is paid off, the borrower should not assume their eligibility for a new VA home loan is automatically restored–it’s not.
Borrowers must apply for restored eligibility. In the case of a COE which reads, “paid in full, no restoration,” there are ways to update the COE so that it properly reflects current information. According to the VA official site, VA form 26-1880 must be filled out with special attention to Section 8. The form should be completed to indicate whether the home has been sold or not.
Borrowers who have not sold their property but who have paid off the loan can apply for a one-time restoration of VA loan eligibility. We’ll cover that issue in another blog post.