Buying a home with your VA entitlement is a well-deserved benefit of having served our country.
VA home loans are guaranteed by the U.S. Department of Veterans Affairs and are a great way for Veterans and active military members to purchase a home. The VA entitlement is established by the Veterans Administration. Entitlement is the dollar amount the VA would be willing to guarantee a lender on behalf of a qualified VA-eligible borrower. This guarantee protects lenders in the event of a default which tends to encourage lenders to make VA loans.
What is Your VA Entitlement Amount?
There are two components to entitlement – basic and bonus. Let’s break it down.
Your basic entitlement is $36,000. This covers home purchases up to $144,000. For home loans more than $144,000 (which is most home loans), bonus entitlement is available and would kick in.
Bonus entitlement varies across the country. It is based on the county loan limits established each year by FHFA. The loan limits are the amount a qualified veteran with full entitlement (basic and bonus) may be able to borrow without making a down payment.
The county loan limits can change yearly. Locate your county loan limits here. In Texas, the 2017 loan limit is $424,100.
Calculating Bonus VA Entitlement
To calculate bonus entitlement, take 25% of the loan limit for your area. Then subtract the basic entitlement from that figure. The remainder is your bonus entitlement. Here’s the math:
$424,100 loan limit in DFW
$106,025 total basic and bonus entitlement
-$36,000 basic entitlement
$70,025 bonus entitlement
The intent of entitlement is not to cover the entire purchase price of your home. So if you are wanting to buy a $400,000 home and you have full entitlement (basic and bonus) of $106,025, no worries! It is designed for a 25% guarantee.
If you have used some of your entitlement and it has not been restored, and will not be restored, then you can still use the remaining entitlement. If the remaining entitlement does not cover 25% of your new home purchase price, then you will need to make a down payment.
Your entitlement details are spelled out on your Certificate of Eligibility. For assistance in determining how much you can borrow and what your entitlement will cover, please don’t hesitate to reach out to me.
With great honor, I am here to serve our military with their home financing needs!