Twin Cities Military & Veterans Divorce Real Estate: Understanding VA Loan Remaining Entitlement When Selling a Home
For military service members and veterans in Minneapolis, St. Paul, and throughout Minnesota, navigating divorce while selling a home with a VA loan comes with distinct financial and logistical considerations. One critical yet often overlooked aspect is VA loan entitlement, which directly impacts eligibility for future VA home purchases.
Recognizing how divorce affects your VA loan entitlement and understanding the necessary steps to restore it can be essential in preparing for your next home purchase and facilitating a more seamless transition in your real estate journey.
How Selling a Home Affects Future VA Loan Eligibility
The VA loan program provides service members and veterans with a valuable home financing option, including zero down payment, competitive interest rates, and no private mortgage insurance (PMI). However, when a home purchased with a VA loan is sold, the loan’s remaining entitlement may be affected in the following ways:
If the VA loan is paid off in full, entitlement is typically restored, allowing the veteran to use a VA loan for a future home purchase.
If the home is sold but the VA loan is assumed by a non-VA-eligible borrower, the entitlement remains tied to the loan until it is paid off.
If a divorce agreement allows one spouse to retain the home, and the VA loan remains in both names, the service member's entitlement may remain encumbered, limiting future VA loan eligibility.
Before moving forward with selling a VA-financed home in a divorce, it’s essential to determine whether your full entitlement will be restored or if only partial benefits will be available.
Steps to Restore VA Loan Entitlement After Selling
If you plan to purchase another home using a VA loan, follow these steps to restore your VA loan entitlement after selling a home:
Ensure the VA Loan is Paid Off in Full
To qualify for full entitlement restoration, the original VA loan must be paid in full at the time of sale. This includes:
Paying off the remaining mortgage balance with proceeds from the home sale.
Ensuring all loan-related fees, including prepayment penalties (if applicable), are settled.
Submit a Request for VA Loan Entitlement Restoration
Once the loan is paid in full, submit VA Form 26-1880 (Request for a Certificate of Eligibility) to the U.S. Department of Veterans Affairs. This form allows the VA to review and confirm entitlement restoration.
Confirm the VA Loan Was Not Assumed by a Non-Veteran
If the VA loan was assumed by a buyer who is not VA-eligible, a portion of your entitlement will remain tied to the original loan, reducing the benefits available for future home purchases. To fully restore entitlement, the assuming borrower must be a VA-eligible buyer who substitutes their entitlement for yours.
Verify Partial vs. Full Entitlement Availability
If your original VA loan was for an amount less than your full entitlement, you may still have remaining eligibility for a second home purchase. However, partial entitlement may affect:
Loan limits on your next VA purchase.
The need for a down payment if the remaining entitlement does not cover the new home’s price.
Seek Guidance from a Military Real Estate Specialist and Veterans Certified Real Estate Agent
Due to the complexities of entitlement restoration and VA loan guidelines—particularly in a divorce-related sale—hiring a knowledgeable professional is essential. Shannon Lindstrom, a Military Residential Specialist (MILRES), Veterans Certified Real Estate Agent, and Certified Divorce Real Estate Expert (CDRE®) with RE/MAX Results, offers the expertise and guidance needed to navigate these intricacies effectively.
Selling a home during a military or veteran divorce demands careful consideration of VA loan entitlement to safeguard future homeownership opportunities. By following the proper steps—such as paying off the loan, applying for entitlement restoration, and consulting with a knowledgeable military real estate professional—you can protect your VA loan benefits and confidently navigate the next chapter.
If you’re a veteran or active-duty service member in Minnesota facing a divorce and need expert assistance with selling your home, working with a military-friendly Realtor® who is also a Certified Divorce Real Estate Expert (CDRE) can provide the specialized guidance needed to navigate the process effectively.
Shannon Lindstrom, Realtor®, CDRE®, CREDS, GREEN, MILRES, MRP, VCA
RE/MAX Results
7373 Kirkwood Court No, Ste. 300
Maple Grove, MN 55369
Direct: 612-616-9714
Lindstrom_S@msn.com
Shannon@ShannonLindstromRealtor.com
www.ShannonLindstromRealtor.com
www.ShannonLindstrom.info
https://www.ilumniinstitute.com/cdre/shannon-lindstrom
www.MNDivorceRealEstateExpert.com
