How to Qualify for VA Loan Bonus Entitlement

Buying a home is already complicated - but it gets a little more complicated when home buyers try to understand the loan process, especially when they're getting a VA loan. VA loans have entitlements amounts, both basic and bonus, that can be difficult for most people to understand.

For home buyers who have VA entitlements and who are going to buy a home, there are a few things to know. Working with a good lender and an experienced real estate professional can make the buying process easier, as both types of professionals can explain the buying process step by step. If you're a home buyer who will be getting a VA loan, below are some things you need to know.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.

What Is a VA Home Limit?

A VA loan is a loan that is available to service members who are active duty and retired. VA loans do not require a down payment or mortgage insurance. They're an excellent option because they're affordable and have reasonable repayment terms. For people who are involved in the military, VA loans can open doors to those who might not otherwise be able to afford a house.

A VA home loan limit is the maximum amount of money that a home buyer can borrow using a VA-backed home loan without making a down payment. Home buyers who want to borrow more than the VA home limit may still be able to get a loan of the right amount, but they may have to make a down payment.

What Is the Basic Entitlement? Bonus Entitlement?

People who qualify for a VA backed home loan receive an entitlement. The entitlement amount is the maximum amount that the VA is guaranteed to pay to the lender if the home buyer defaults on their mortgage.

If the borrower qualifies for a VA loan based on factors like their credit history and income, and if the purchasing price is equal to or below the value of the property, then the lender will probably agree to loan the home buyer up to four times the amount of the entitlement. This amount represents the loan limit for the buyer.

Home buyers who want to borrow more than the loan limit may have to make a down payment. The entitlement and down payment must combine to cover at least 25% of the total loan amount.

Home buyers may qualify for basic and bonus entitlements. For the basic entitlement, the VA guarantees to the lender that they will pay up to at least $36,000 or 25% of the loan amount, whichever is less, in the event the buyer defaults on their loan. $36,000 is 25% of a $144,000 loan, so the loan limit is $144,000.

The bonus entitlement guarantees up to 25% of the Federal Housing Finance Agency's (FHFA's) current national conventional financing confirming limit. The VA also looks at the state's and county's loan limits. The VA guarantees up to 25% of the loan amount based on these limits.

Many buyers find this confusing, and rightfully so! To understand how much they're entitled to borrow without making a down payment, many home buyers must contact a good lender to discuss their particular case.

Contact a Real Estate Professional

If you qualify for a VA loan, work with a real estate professional who understands VA loans and other issues that affect military service home buyers. Service members, particularly active duty service members, have unique issues that can impact the kind of home they'd like to purchase, where, and on what budget. Working with a real estate professional who understands these issues can make the home buying process easier and more successful.

For informational purposes only. Always consult with a licensed mortgage or home loan professional before proceeding with any real estate transaction.