VA Loan Entitlement
Since their creation in 1944, VA loans have been backed by the federal government, which provides a financial guaranty on every loan. The guaranty is like a form of insurance, where the VA pledges to repay a portion of the loan if a veteran defaults. It’s typically 25 percent of the loan.
That financial guaranty is reflected in a dollar amount known as “entitlement.” Your amount of entitlement can vary depending on how you’ve used the VA loan benefit.
There are two layers of entitlement, a basic entitlement and secondary entitlement. The basic entitlement is $36,000. The second layer of entitlement is linked to the VA loan limit for your particular county.
If you’ve never used the benefit, or if you don’t have any active VA loans right now and you’ve never lost a VA loan to default, then you would have your full VA loan entitlement available to use. And that’s a big deal, because with your full entitlement, there’s no limit on how much you can borrow without a down payment. The VA’s loan limits do not apply to borrowers with their full VA loan entitlement.
But they do come into play for veterans with less than their full entitlement. And that can mean needing a down payment for what’s otherwise a $0 down program.
So if you have an active VA loan or if you’ve lost one to foreclosure, you can still look to reuse this benefit. Lenders will calculate your remaining entitlement based on your county’s loan limit and the amount you’ve used or lost on previous loans.
That remaining entitlement is how qualified borrowers can look to have two or more VA loans at the same time. It’s also how VA buyers who lose a home to foreclosure can purchase again using the program.
Entitlement can get confusing and complicated in a hurry. Talk with a loan officer in detail if you have questions about your entitlement situation and what it means for your purchasing power.
One important thing to know is your Certificate of Eligibility will not clearly reflect your secondary layer of entitlement. That means you may be able to obtain another VA home loan even if your COE indicates $0 entitlement.
The bottom line is this: The VA loan program isn’t a one-time benefit. Once you earn this, it’s yours for life.
As long as they have sufficient VA loan entitlement available, veterans who use a VA loan can absolutely seek another, either to refinance their current mortgage or buy again. What many buyers and other stakeholders may not know is that it’s even possible to have more than one VA loan at the same time, or to reuse this benefit after losing a previous VA loan to default.
Talk with a Veterans United loan officer at 855-259-6455 to take a closer look at your entitlement situation and what might be possible.