Prospective military homeowners learn a bunch of terms and phrases when looking for a VA home loan. Entitlement plays a key part in determining how much you can borrow before a down payment enters the equation. The Certificate of Eligibility holds the key to your entitlement picture.
For the VA, entitlement refers to how much money it will guarantee repayment to lenders in the event that a borrower defaults. Often, the VA guaranty is 25 percent of the loan, which provides most of the country with a standard entitlement figure.
But the structure of the entitlement equation enables military borrowers to have more than one VA loan at a time or even qualify for a VA loan after foreclosure. Ignore claims that foreclosing on a VA loan certainly disqualifies you from receiving a second one, or that you cannot have two VA loans at once.
There are two types, or tiers, of entitlement. The first, basic entitlement is $36,000. In most of the U.S., borrowers can receive a secondary entitlement of $77,275. That’s a total entitlement of $113,275 for borrowers in a bulk of the country.
Qualified borrowers with full entitlement ($113,275) can borrow up to $453,100 on a VA loan without worrying about a down payment in most parts of the U.S. It is possible to borrow above the VA county loan limit, but then down payments become a factor.
There is no maximum on VA loans, only plateaus at which borrowers will then need to put down payment. In more expensive counties of the U.S., the VA increased entitlements so borrowers can be competitive in the market and still avoid down payments.
Borrowers in high-cost counties could get a VA home loan for up to $679,650 before a down payment is needed. Honolulu County has a VA loan entitlement of $180,262, meaning qualified borrowers can receive loans up to $721,050 before facing a down payment.
If a borrower does not use all their entitlement in one VA loan, he or she typically has leftover entitlement. A VA loan for $175,000 with a maximum VA guaranty of 25 percent generally means utilizing $43,750 in entitlement.
Well that’s not all of the $113,275 that borrower could have used if he or she had a VA loan worth $453,100. That difference of $69,525 ($106,025 - $43,750) is what the borrower could possibly put toward another VA home loan in a regular cost county. They’d have even more entitlement available in a county with a higher loan limit.
Even after foreclosure, because of secondary entitlement, it’s possible to have leftover entitlement and the financial strength to qualify for another VA loan.
It’s important that military and veteran borrowers know about VA home loan entitlement, especially secondary entitlement. It allows borrowers the flexibility to avoid down payments, or carry two VA loans at once, or even get a VA loan after a foreclosure. Entitlement is a versatile tool in the VA home loan program.