Understanding Your Basic VA Home Loan Entitlement
Posted by: Ryan Dudley, Loan Officer, U.S Army Veteran (SGT.)
Upon leaving the military, I was eager to find out what benefits I had accrued along the way. Education benefits and $20,000 bonuses were pitched to me the moment I stepped foot in the recruiter’s office, but it wasn’t until I started my job with United Home Loans that I discovered one of the most valuable benefits of being a veteran. The VA Home Loan Program affords veterans the opportunity to purchase a home with 0% down and no mortgage insurance. 0% down and I’m not required to have mortgage insurance? Sign me up.
Naturally, the initial benefits of the loan program drew my interest. Although, given that I’m a natural skeptic, I decided to take a deeper look into the details. The VA Home Loan program differs from conventional loans in the way that the Department of Veterans Affairs guarantees the loan up to a certain amount. Simply put, the VA is mitigating any loss the lender may face in the event of a foreclosure. When you look at the program as deeply as I did, you will notice that each qualifying veteran is given an entitlement. That entitlement figure is not the amount that you can borrow, rather it is the amount that the VA will back to the lender. In most cases, the lender will loan up to 4 times that amount. The basic entitlement the VA offers is $36,000. That means that the lender will only loan up to $144,000, right? Well, not exactly. In order to address those who live in areas with home that typically have higher home values (that’s most of us in Chicagoland), the VA has created a secondary entitlement. That amount is calculated by taking a quarter of the loan amount and subtracting it by the $36,000 that is already given. For example, if you choose to purchase a home for $400,000 the VA would back a total of $64,000 (a quarter of $400,000 is $100,000 and $100,000 – $36,000 = $64,000). This math is used for any loan up to VA loan limit which is $424,100.
Hopefully understanding your entitlement amount is a bit clearer now. As veterans, we’re used to dealing with relatively convoluted stuff by now. It’s that experience that makes us experts at finding resources to help us figure it out along the way. I’d be happy to answer any VA Loan questions you have, so please contact me at 708-531-8315 any time for more information.