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VA entitlement is one of the more confusing subjects around the VA home loan. However, VA entitlement is also good to understand as it plays a key role in determining how much you can borrow without a down payment.

Key Takeaways

  • The VA typically guarantees 25 percent of each VA loan.
  • VA loan entitlement is the dollar figure the VA guarantees.
  • There are two types of VA loan entitlement: basic and bonus, or secondary, entitlement.
  • Borrowers with full entitlement can borrow as much as they can afford without a down payment.
  • Borrowers with diminished entitlement will encounter VA loan limits and may need a down payment.

For the VA, entitlement refers to how much money it will guarantee repayment to lenders if a borrower defaults. Often, the VA guaranty is 25 percent of the loan, which provides most of the country with a standard entitlement figure.

VA Loan Basic Entitlement

There are two types, or tiers, of entitlement. The first is known as basic entitlement. Basic entitlement for a VA loan is $36,000.

However, you're probably wondering how the math adds up. If the VA guarantees a quarter of each loan at $36,000, does that mean you can only get a $144,000 home ($36,000 X 4)? Thankfully, that's not what it means and is where the following type of entitlement comes into play.

VA Loan Bonus Entitlement

Bonus entitlement picks up where basic entitlement leaves off. For example, if you purchase a home for $700,000, you'll use $175,000 in VA loan entitlement (700,000 / 4).Of the $175,000, $36,000 is basic entitlement, so $175,000 - $36,00 is $139,000 in bonus entitlement.

Those dollars figures may not mean a lot to first-time homebuyers, but those subsequently purchasing a home may need to pay closer attention.

VA Loan Limits and Entitlement

Due to recent legislation, VA borrowers with full entitlement can borrow as much as they can afford without a down payment - essentially meaning, VA loan limits don't matter.

However, if you have diminished entitlement, typically from one or more active VA loans, VA Loan limits come into play, and you may need a down payment.

In either case, VA loan limits aren't a cap on what you can borrow, only on what you can borrow without a down payment. Suppose you don't have sufficient entitlement and you're required to bring money to the table. In that case, the down payment requirement is typically 25 percent of the difference between price and your available entitlement.

The VA loan limit for much of the U.S. is $647,200 (this exceeds $900,000 in high-cost counties). That means most Veterans have $161,800 in VA entitlement ($647,200 / 4).

If you purchase that same home in the example above for $700,000 and are currently using $40,000 of your VA entitlement, you'll need to bring $53,200 to the table.

  • $161,800 - $40,000 = $121,800 in remaining entitlement.
  • $121,800 (remaining entitlement) x 4 (VA gaurantee) = $487,200(max purchase price without a down payment).
  • $700,000 (example home price) - $487,200 = $212,800 (difference between home price and max price without a down payment).
  • $212,800 X .25 = $53,200 required down payment.

It's a lot of math, but fortunately, your lender can run all these calculations for you.

Can I have two VA loans at the same time?

It's uncommon, but in certain circumstances, you may be able to get two VA loans at once. The typical situation is when a homeowner needs to relocate for military service and wants to keep the current home to rent.

Can I restore my entitlement?

If you have used all or part of your entitlement, you can get that entitlement back to purchase another home if the following conditions are met:

  • You sell the property and pay the loan in full, or
  • A qualified Veteran assumes the outstanding balance and agrees to substitute their VA entitlement for yours.
  • You utilize the VA's one-time restoration of entitlement. This is a one-time use where you've paid off the VA loan but decided to keep the property.

One-time restoration of entitlement is not automatic. You must apply for it by completing and returning VA Form 26-1880 to any VA regional office or center.

Restoring VA Entitlement after Foreclosure

It's possible to get a VA loan after foreclosure with your remaining entitlement, but you typically can't restore entitlement lost due to foreclosure without paying off the loan in full.

Does VA loan entitlement expire?

No, VA loan entitlement doesn't expire. The only way to lose your VA loan entitlement is from not paying off prior VA loans.

Does VA loan entitlement provide cash to the Veteran?

No, the dollar figures above only relate to the amount the VA will guarantee against loss.

If both spouses are eligible, can they acquire a property jointly to increase the guaranty amount?

They may acquire property jointly with VA loans, but they can only combine entitlement to the maximum guarantee for their county. There's also no maximum loan amount with VA loans.

Can a Veteran and non-Veteran obtain a VA loan together?

If the two are not married, the guaranty is based only on the Veteran's portion of the loan. The guaranty cannot cover the non-Veteran's part of the loan.

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