Understanding Your VA Loan Entitlement

On an almost weekly basis, I encounter veterans with questions about how their VA loan entitlement works. For most veterans, understanding their VA loan entitlement is simply not pertinent, but for many others it is very important. Understanding your VA home loan entitlement is necessary if you are buying a home after a foreclosure or short sale, want to buy or refinance a home over the county loan limit or if you need to have multiple VA loans. If you are one of these veterans (a spouse) or are just curious, read on to help you better understand how your VA loan entitlement works.

Basic VA Loan Entitlement

While all eligible veterans have a basic VA loan entitlement of $36,000 as shown on their Certificate of Eligibility, this amount only provides the lender a 25% maximum loan guarantee on a purchase or cash out refinance up to $144,000. Ginnie Mae, Fannie Mae and Freddie Mac all require a minimum of a 25% guaranty through a combination of guaranty, down payment or home equity. For larger loan amounts, VA bonus entitlement was given to all eligible veterans through The Veterans Improvement Act of 2008.

Bonus VA Loan Entitlement

The Veterans Benefits Improvement Act of 2008 provides additional entitlement for loan amounts in excess of $144,000. The bonus or “hidden” VA loan entitlement amount is on top of the basic entitlement amount of $36,000. As a result, the bonus entitlement allows veterans to buy or refinance a home up to $424,100 without a down payment or required amount of home equity. The VA bonus entitlement amount was extended in 2017 to match the conforming loan limit of $424,100. The current VA bonus entitlement amount of $70,025 is available to all eligible veterans.

Example: ($424,100 x 25% = $106,025) – $36,000 = $70,025 bonus entitlement for 2017

For counties’ whose loan limit exceeds $424,100, the bonus VA home loan entitlement is more.

VA Loan Entitlement Calculations

For help with determining your available entitlement, use the formula(s) below to help with your VA loan entitlement calculation. Examples are provided for a previous foreclosure/short sale with a VA loan, a purchase or refinance over the VA county loan limit and multiple VA home loans. In some cases, you may need to use more than one VA loan entitlement calculation to determine your maximum VA loan amount.

Foreclosure/Short Sale Calculation

Use the calculation below if you have had a previous foreclosure or short sale with a VA home loan.

(County Loan Limit x 25% = Total entitlement) – Entitlement amount used = Remaining entitlement

Foreclosure/Short Sale Example

($424,100 x 25% = $106,025) – $32,695 = $73,330

$73,330 x 4 = $293,320 new maximum VA loan amount

Purchase Calculation

The calculation below will help you determine the amount of down payment required when the purchase price exceeds the VA county loan limit.

Purchase Price – VA County Loan Limit = Difference, Difference x 25% = veteran down payment requirement

Purchase Example

$700,000 – $595,700 = $104,300, $104,300 x 25% = $26,075 veteran down payment requirement

Refinance Calculation

Home Value – County Loan Limit = Difference, Difference x 25% = Required home equity amount, Home Value – Required home equity = maximum VA loan amount

Refinance Example

$500,000 – $424,100 = $75,900, $75,900 x 25% = $18,975, $500,000 – $18,975 = $481,025 maximum VA loan amount

Multiple VA Loans Calculation

(County Loan Limit x 25% = Total entitlement) – Entitlement amount used = Remaining entitlement

Multiple VA Loans Example

($424,100 x 25% = $106,025) – $27,000 = $79,025

$79,025 x 4 = $316,100 new maximum VA loan amount(s)

In conclusion, I hope the information above has provided you with a better understanding of your VA loan entitlement. Knowing how to calculate your VA loan entitlement will help you maximize your VA loan benefit to buy or refinance a home.

If you have additional questions about your VA loan entitlement, please comment below or contact me by phone or email through my contact page.