VA Boot Camp: Entitlement

1.29.15

VA Boot Camp: Entitlement

How It Works

? VA provides each qualified Veteran with at least $104,250 in "entitlement" and extra entitlement in select high-cost counties. ?Entitlement has a 25% rule ?you have to have 25% of the loan amount in entitlement to guarantee the loan.

? When a Veteran obtains a VA loan, a portion of the entitlement is "charged" to the loan as a guaranty to the lender in the event of default

? Veterans can use the VA Home Loan Benefit multiple times

Entitlement Charges

Loan Amount $45,000 or less $45,001 -$56,250 $56,251 -$144,000 Greater than $144,000

How much Entitlement will be charged 50% of the loan amount $22,500

40% of the loan amount up to a max of $36,000 25% of the loan amount

How to Calculate Entitlement

All qualified veterans start out with: ? $36,000 in basic entitlement; and ? $68,250 in bonus entitlement or $120,375 bonus in AK and HI ? Extra entitlement for high-cost counties available to county limit (see chart in GURU) ? Note: Bonus entitlement can only be applied to loan amounts > $144,000

Entitlement + Equity or Down Payment

Full

Reduced

25% of the loan amount Entitlement Entitlement

Loan Amount Value

Entitlement Available Entitlement Required

Equity or Down Payment needed Max Loan Amount

$200,000 $200,000 $104,250 $50,000

$0

$200,000

$200,000 $200,000 $25,000 $50,000

$25,000

$175,000

High-Cost County

(Camden, NJ)

$940,000 $940,000 $235,000 $235,000

$0

$940,000

Non High-Cost County

$940,000 $940,000 $104,250 $235,000

$130,750

$809,250



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VA Boot Camp: Entitlement

More than One VA Loan

A veteran can get more than VA loan if: 1. They can use left-over entitlement that was not charged to a prior loan. 2. They can sell the property to pay off the previous VA loan and restore the entitlement. 3. They can pay off a VA loan (by paying it down or refinancing), and restore the entitlement.

? VA allows entitlement to be restored using this method only once. 4. They can refinance the old VA loan into a new VA loan to reduce the rate and payment or convert an ARM into a Fixed.

? In this case, the entitlement from the prior loan transfers to the new loan. 5. Another qualified Veteran can assume the prior VA loan (subject to lender approval) and substitute his/her own entitlement.

Restoration

Restoration Situation Property that secured the prior VA loan was sold and paid in full.

Prior VA loan was assumed by another veteran who substituted entitlement.

Previous VA loan was paid in full and the new VA loan is secured by same property.

Documentation Required

HUD-1

VA should already reflect restoration in this case. If not, obtain documentation evidencing assumption.

Obtain closing docs from prior VA loan to have the address and prior VA loan number. COE should match.



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