Did you know that you can have more than 1 VA home loan at a time? Did you know that you are entitled to 2 different home loan benefits? And they can be used separately or combined!
Among the endless counts of financial misconceptions, one of the most commonly confused subject matters is what can and cannot be done with a VA home loan entitlement, and how frequently it can be used. For instance, most veterans are unaware that you can use your VA home loan entitlement more than once, provided that you are eligible. This is something called Bonus Entitlement. To help understand this a bit further, the VA entitlement can be broken up into two parts your Basic and your Bonus.
Whether you are active military, a veteran, or the spouse of one of these, you may be eligible for the VA home loan program. If you have never used this product before, then you have access to both Basic and Bonus VA entitlements. You may see this Basic portion of entitlement on your Certificate of Eligibility (COE), often shown as $36,000.
Using Both Entitlements At Once
The Basic entitlement provides a 25% guarantee for loans up to $144,000. However, many veterans and military members find that they need “more house” to fit their families and daily living styles. This is where the Bonus entitlement comes to play. For loans exceeding the Basic limit of $144,000, an additional guarantee of up to $68,250 is allowed as a Bonus entitlement. This allows customers to qualify for any VA loans between $144,000 and the conforming limit (generally $417,000 depending on geographical location) with zero down payment. Borrowers can exceed their eligibility amount, applying for a loan with a down payment that equals at least 25% of the difference between the purchase price and eligibility amount.
As a general rule of thumb, the max loan amount for loans over $144,000 is 4x’s the amount of full entitlement, looking something like this:
- Basic Entitlement is $36,000 (VA guarantee) x 4 = $144,000 (Loan Amount)
- Bonus Entitlement is $68,250 (VA guarantee) x 4 = $273,000 (Loan Amount)
- Add these together, $144,000 + $273,000 = $417,000 (Max Loan Value w/o a Down Payment)
- Loans can often exceed these amounts with applicable Down Payment
Some of the great advantages of using your bonus entitlement include:
- A lower or zero down payment
- Very limited loan fees
- In some cases, much more lenient credit guidelines than conventional loans
Using Entitlements Separately or Combined
A common question from VA loan borrowers who have purchased a home is whether or not they would be able to use their entitlement a second time and get a second VA home loan. So what does it mean to have more than one VA loan? This is where many eligible customers can optimize their VA entitlements by either using their VA home loan benefits more than once, or by having two VA loans at the same time.
A common scenario for this occurrence is when a service member has purchased a home using their VA home loan entitlement and then has a Permanent Change of Station (PCS). Often times, the borrower will want to keep their first purchase to be rented out or for other reasons entirely. In this case the VA eligible borrower could use any remaining Bonus entitlement benefits to purchase a new home at his/her relocated station. If little or no entitlement is left, the VA borrower could still receive the second VA loan by making a down payment, oftentimes for far less than would be required in other financial loan products. This is truly a great asset for all of our respected service men and women both in and out of the country.
VA Bonus Entitlement options are not nearly as complicated as they are made out to be, however you should discuss your possibilities with a VA loan expert. Give us a call today to see how you can optimize your entitlements.
