As a veteran, you likely know you are eligible for some VA benefits. But, knowing exactly what they are and how they pertain to a mortgage can be confusing.
Basically, there are two types of entitlement. The standard VA entitlement amount is $36,000. This doesn’t mean that you can only get a $36,000 loan, though. There’s more to it. In addition, there’s bonus entitlement, which is equal to $77,275.
We’ll discuss each entitlement and how they pertain to you below.
Understanding the Basic Entitlement Amount
Each veteran gets the standard or basic entitlement amount of $36,000. The VA guarantees 25% of a veteran’s loan amount, up to the maximum. This makes the $36,000 benefit worth $144,000 in loan dollars. This is the amount a veteran can borrow without making a down payment.
What if a veteran cannot find a home for $144,000? This is when the bonus entitlement kicks in for them. Each veteran has up to $77,275 in bonus entitlement they can use. This translates into $309,100. Again, this doesn’t mean you are entitled to that amount automatically. However, the limits are there if you need it.
Basically, a veteran can buy a home worth up to $453,100 with no down payment using both the standard and bonus entitlement amount.
Maximum Loan Amounts Don’t Exist
Notice something very important we stated above. The maximum loan amount a veteran can get is $453,100 with no down payment. This isn’t to say that a veteran cannot buy a home worth more than $453,100.
If a veteran has money to put down on the home, he can buy a home worth more than the standard limit. Generally, the VA requires veterans to put down 25% of the difference between the home’s purchase price and the veteran’s entitlement. Of course, the veteran must qualify for the higher loan amount as well as find a willing lender.
Holding Two VA Loans at Once
The bonus entitlement amount also comes into play when a veteran needs two VA loans at once. While this isn’t the point of the VA loan, there are exceptions to the rule.
Generally, veterans can only use VA funding for their primary residence. However, things happen and sometimes veterans need to buy a different home. If they wish to keep their current home for one reason or another, they may be able to use their secondary entitlement.
This is the entitlement they have left after buying their first home. Each veteran has a total of $113,275 of entitlement. This gives them the ability to secure a loan up to $453,100. But, once they use up some of that entitlement, it’s not available for use. However, the entitlement that is left may be used for another home. The most common reasons the VA allows use of secondary entitlement is as follows:
- Veterans that were relocated whether with their job or the service and have to commute more than 50 miles one way
- Veterans whose family outgrew their current home and needs a larger or different type of home
If the veteran qualifies for both VA loans, they can use their remaining entitlement. If the home costs more than the entitlement they have available, they will have to put down 25% of the difference between the home’s cost and the available entitlement.
The VA entitlement amount can seem confusing, but it’s a simple process. Work with a reputable VA lender that understands your benefits and you should get through the process seamlessly. The VA loan allows you to secure a home with little to no money down and affordable terms, making home ownership easy as a veteran of our country.