“Do you know that an eligible military borrower is entitled to reuse their VA home loan benefits as many times as they want depending on their VA loan entitlement? Do you also know that an eligible military member can have two VA loans at one time depending on their remaining VA mortgage entitlement? – If not then continue reading this article to learn more about VA loan entitlement. This article covers various important aspects to answer the most frequently asked question related to VA loan entitlement – ‘How many VA loans can you have?’.“
An overview on “How many VA loans can you have?”
The question “How many VA loans can you have?” is probably one of the most frequently asked questions related to VA loans. And while it isn’t as complex to understand as it is usually perceived, this question continues to be misunderstood by many VA loan borrowers.
So, before venturing into further details about our main topic “how many VA loans can you have”, let us provide you with a brief and quick statement about it.
“VA loan eligibility is a lifelong benefit. This simply means that an eligible VA loan borrower (veteran, service member, and their eligible surviving spouse) can reuse their VA loan benefits as many times as they want. Moreover, a qualifying VA loan borrower can also borrow a second VA loan in addition to an outstanding VA loan.
However, both these scenarios are highly dependent on one significant factor, commonly known as VA loan entitlement. Hence, it is the VA loan entitlement that primarily determines the reusability of VA loan benefits. In simple words, whether an eligible VA loan borrower may or may not reuse their VA loan benefits again for either –
- borrowing another VA mortgage after the restoration of their VA loan entitlement; or
- borrow a second VA loan simultaneously which means having two outstanding VA loans at one time,
is dependent on their remaining VA loan entitlement.”
What is a VA loan?
A VA loan is a mortgage loan guaranteed by the United States Department of Veterans Affairs, previously known as the Veterans Administration. Under this program, only qualifying veterans, service members, and their eligible surviving spouses can obtain the VA loan to finance their homebuying.
The VA loan offers many exclusive benefits to eligible military borrowers as well. Among these, some of the most prominent benefits of a VA loan include –
- Being assumable. This means outstanding VA loans can be easily transferred to other eligible veterans and non-veterans both,
- Require no private mortgage insurance,
- Comes with zero or no down payment at all in most cases, and
- Carry competitive interest rates.
Types of VA loans
Before obtaining a VA loan, it is important to understand its many types. Doing this will help you understand the different purposes which can be achieved with the help of a VA loan.
1. VA no or zero-down payment home purchase loans
The VA no or zero-down payment home purchase loans can facilitate veterans, service members, and their eligible spouses to finance their purchase of a home without requiring making any down payments at all. Apart from this, VA loans also carry competitive interest rates and do not require any private mortgage insurance.
2. VA Cash-out refinance loan
With VA Cash-out refinance loans, eligible military borrowers can borrow cash against home equity. These cash borrowings out of their home equity can be ordinarily applied to various concerns. Such as paying debts, doing home improvements, or funding school.
3. VA Interest Rate Reduction Refinance Loan (IRRRL)
The VA Interest Rate Reduction Refinance Loan or IRRRL is also known as the Streamline Refinance Loan. With this type of loan, existing VA loan borrowers can obtain a lower interest rate by refinancing their existing VA loan. For example, converting a fixed-rate mortgage into an adjustable-rate mortgage and vice versa.
4. VA Adapted housing grants
This is another type of VA loan offered to veterans that have suffered from a permanent and total service-connected disability. The purpose of this VA loan category is to help such veterans with a disability to –
- Purchase or build an adapted home, or
- To make modifications to an existing home to account for their disability.
5. VA Native American Direct Loan (NADL) Program
This type of VA loan aims at helping eligible Native American Veterans to finance their purchase, make improvements, or construct homes on Federal Trust Land. In addition, VA loans obtained under this category are also allowed another benefit. Native American Veterans can use them for an interest rate reduction on a VA loan.
Understanding the concept of VA mortgage loan entitlement
While the basic concept that defines VA loan entitlement is easy to understand, it is the numbers and the math behind it that confuses a lot of people. Here we explain the main concept of VA loan entitlement followed by a numerical illustration to ease your understanding.
What is VA mortgage loan entitlement?
A VA loan entitlement is the dollar amount of money that the VA guarantees on an eligible veteran’s loan. The current VA entitlement is 25 percent of the loan amount.
As mentioned above, VA loans carry a guarantee from the United State Department of Veterans Affairs. But the VA does not provide a 100% guarantee of the amount you borrow in case of a default. There are limits to this which determine the amount you are eligible to borrow without making any down payments.
The following two categories of VA loan entitlement explain how much amount of loan can a veteran borrow –
- Full entitlement
- Remaining entitlement
1. Full entitlement
When eligible veteran, active service members, and their eligible surviving spouses have full entitlement, then they aren’t subject to any VA home loan limits on loan amounts above $144,000.
In this case, eligible military borrowers do not need to make any down payments. Moreover, the VA guarantees to pay 25% of the loan amount to the mortgage lenders if the borrower defaults.
The following requirements help determine whether an eligible military borrower has full entitlement or not. Note that at least one of the following three requirements needs to be present to confirm full entitlement.
- The prospective military borrower has never used his/her VA home loan benefit, or
- The military borrower has fully paid a previously borrowed VA home loan and sold the property as well (meaning that their full VA loan entitlement has been restored), or
- The military borrower used their VA home loan benefit which subsequently resulted in a foreclosure or compromise claim. However, this was eventually paid in full to the VA.
2. Remaining entitlement
When a qualifying veteran, service member, and their eligible surviving spouse has a remaining entitlement, complications can arise when obtaining another loan.
With remaining entitlement, a military borrower can take out another loan with or without the need to make a down payment.
A military borrower has a remaining entitlement when any one of the following conditions exists –
- There is an outstanding VA home loan that the military borrower is still repaying, or
- A previously borrowed VA loan was fully paid, but the veteran still owns the home, or
- The veteran refinanced his/her VA loan into a non-VA loan as well as still owns the home, or
- A previous VA home loan had a compromise claim (short sale) or a foreclosure, and the military borrower didn’t repay the loan to the VA, or
- The title of a home bought by the military borrower using a VA home loan, was later transferred to the mortgage lending bank to avoid foreclosure. This is also known as having a deed in lieu of foreclosure on a previous VA loan.
Understanding what VA home loan basic entitlement and additional entitlement are and how they are calculated
Besides understanding the VA home loan full entitlement and remaining entitlement, another important factor to know about regarding VA loan entitlement is its levels. VA home loan entitlement has two different levels. These are –
- Basic entitlement
- Additional entitlement (also known as bonus entitlement or tier 2 entitlement)
The VA basic entitlement amount is $36,000 which is 25% of $144,000. This $36,000 amount can go as high as 25% of the loan amount which shouldn’t exceed or should remain up to the conforming loan limit. This limit varies in different parts of the country and is actually the county loan limit where the military borrower lives. The most common county loan limit in most parts of the country stands currently at $647,200. In a few other counties, this limit goes up to $970,800 as well.
Next comes VA additional entitlement or bonus entitlement or tier 2 entitlement. This is basically calculated as 25% of the maximum conforming loan limit of the county where the military borrower lives.
Calculating VA basic entitlement and bonus entitlement to understand how they work
When an entitled military borrower buys a home using a VA loan, some portion of his/her VA loan entitlement gets utilized against that loan. This is usually 25% of the loan amount.
Although exceptions do exist, remember that allocating a VA loan entitlement to a loan is temporary. This means that VA loan entitlement can be also restored. For example, by repaying the VA loan borrowed. We have already discussed this in the above sections of this article.
Supposedly, a VA loan borrower buys a property worth $250,000. In this case, the amount of VA entitlement tied up to this mortgage is $62,500. This means that now the remaining VA entitlement is $99,300 ($161,800 – $62500) provided that the county’s conforming loan limit is $647,200. (Note: $62,500 is 25% of $250,000 and $161,800 is 25% of $647,200.)
Moving forward, the same military borrower now wants to obtain another VA loan. This means using his remaining VA loan entitlement. In this case, the maximum borrowing amount of a VA loan now cannot be more than $397,200 ($99,300 x 4). Why this is so is because of the following two reasons.
First, the VA does not guarantee more than a quarter of the loan amount. And second, it is the VA entitlement that determines the amount of loan that can be originally and subsequently borrowed. Hence, the military borrower cannot borrow a loan more than four times the amount of the remaining VA entitlement ($99,300).
While it is easy to find out how many VA loans can you have with the help of the above explanations and illustrations, it is still advisable to seek the professional advice of an expert.
Hence, if you are having any trouble understanding your position with regards to how many VA loans can you have and your VA entitlement status, we are here to help.
AttorneysFunding.com isn’t just a veteran-owned mortgage company but we also have decades of experience in handling different mortgage issues. Based on our vast experience, we believe that it is always better to have an expert opinion on your VA entitlement before deciding on how many VA loans can you have.
Call us now at (916) 471-2678 or click here to book a free consultation session and discuss further. Our expert loan officers will be happy to offer you expert assistance regarding your mortgage needs.