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What You Should Know About VA Loan Bonus Entitlement

VA borrowers may wonder if it's possible to purchase a home, move in and use the property as the full-time residence, but later on choose to purchase another home in another area and use VA loan benefits to purchase that home.

A quick glance at the VA Lender’s Handbook and you might get the idea that it’s not possible--after all, VA loan rules state that the borrower must own and occupy the home purchased with a VA loan as the primary residence without the intent to establish a new primary residence elsewhere.

However, even in light of those rules, there’s an important detail borrowers should know--VA loan rules are interpreted by the VA to mean that the VA law on occupancy is fulfilled once the borrower closes the deal and moves into the property in good faith. That means the borrower’s intent at closing time should be to own the home and use it as the primary residence.

So when a borrower decides, later down the line, to consider purchasing another home using the VA loan option, it is possible to do so. They can even look to hold onto the first home and purchase another one at the same time.

What’s more, it’s even possible to do so when the borrower has used up all of his or her basic VA loan entitlement. How is this possible?

VA Loan entitlement comes in two forms--your basic VA loan entitlement, and something known as “bonus” entitlement. This bonus entitlement can be used with any remaining VA loan basic entitlement or on its own to help the borrower purchase a house.

This may be done in cases where the borrower certifies that he or she will take possession of the new home as the primary residence and where the loan amount exceeds $144,000.

The loan must exceed $144,000 in order for bonus entitlement to be used. That loan amount can include the VA Funding Fee. In some circumstances a full VA loan guaranty will be available to the borrower and there would be no down payment required. In other cases depending on circumstances, the borrower may not be able to reach the full VA loan guaranty amount even with bonus entitlement and a down payment would be required. A down payment would typically be 25 percent of the difference between the purchase price and where the buyer’s entitlement caps out.

How much entitlement a borrower has will depend on how much was used or lost on a previous loan and in which county the borrower will be purchasing. Speak to your loan officer about your specific needs and whether a down payment would be required based on the amount of the loan and the availability of a full VA loan guaranty.

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