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.
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.
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.
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.
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 $766,550 (this exceeds $1,149,825 in high-cost counties). That means most Veterans have $191,637.50 in VA entitlement ($766,550 / 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.
It's a lot of math, but fortunately, your lender can run all these calculations for you.
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.
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:
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.
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.
No, VA loan entitlement doesn't expire. The only way to lose your VA loan entitlement is from not paying off prior VA loans.
No, the dollar figures above only relate to the amount the VA will guarantee against loss.
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.
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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† ICB Solutions is a division of Neighbors Bank, which is an affiliate of Mortgage Research Center, LLC dba Veterans United Home Loans.