VA loan entitlement can be a confusing subject. Here we break down the entitlement types and how that affects your maximum loan amount.
The concept of VA entitlement is often a confusing one.
You can think of it as something you're entitled to given your service to our nation. This is certainly a hard-earned and well-deserved benefit. But that's not what it really means, at least in practical terms.
Veterans who are eligible for a VA loan have an entitlement, which is basically a dollar amount the VA promises to repay back to a lender in the event you default on your mortgage. Check out our detailed look at the VA loan process here.
The basic, or primary, entitlement is $36,000.
The VA in most cases pledges to repay up to a quarter of the loan amount, which is a financial guaranty. Math was never my strong suit, but it's pretty easy to see that $36,000 x 4 = $144,000. That would seem to be the maximum loan amount for most borrowers.
That amount can purchase a good-sized house in some parts of the country. But not all. So, to stay competitive and ensure veterans across the country had access to homeownership, the VA started to link its guaranty amounts with the conforming loan limit for conventional financing, which is $453,100.
Remember, the VA promises to cover a quarter of the loan amount in most cases. A quarter of $453,100 is $113,275. In order to meet that mark, the VA essentially created a secondary entitlement amount ($113,275 - 36,000 = $77,275). That additional layer of entitlement comes into play anytime a veteran purchases a home for more than $144,000.
It's important to understand that there's no maximum amount on a VA loan. You can get as much as the lender is willing to give you. But the VA only extends its guaranty so far.
Some of the country's most expensive areas have loan limits that exceed the conforming level of $453,100. Think parts of California, New York, Virginia, Hawaii and a handful of other states. In these places even $453,100 may not be enough to ensure a VA borrower can compete in the market.
The VA has higher loan limits in those high-cost counties that can range up to $679,650 and more. In those cases, the VA limits its guaranty to whichever is less:
The VA loan limits are subject to change every year, reference this loan limit calculator to see your 2017 loan limits.
The concept of secondary entitlement is what allows qualified veterans to have two VA loans in play at the same time. I wrote about this topic recently, so check out our article on secondary entitlement if you're interested in learning more about this opportunity. There are restrictions and requirements.
You can also check out our Comprehensive VA Home Loan Guide for additional resources.
A Veterans United Home Loans specialist can help you determine your entitlement. Talk to a loan specialist at 855-870-8845 or start your home loan quote today.
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