VA Entitlement: What It Is and How It Affects Homebuying

Discover What Your VA Entitlement Is and Why It Matters

If you're using or thinking of using a VA loan to purchase a home, you'll likely become familiar with the term "VA entitlement." While VA entitlement is one of the most important parts of the VA home loan benefit, it can also be easy to misunderstand.

Let's explore what VA entitlement really means, the different types of VA entitlement, and how to determine your entitlement amount so you can enjoy a more streamlined homebuying process.

What Is VA Entitlement?

VA entitlement refers to a financial guarantee from the Department of Veterans Affairs (VA) to mortgage lenders. This guarantee allows eligible VA borrowers to enjoy the benefits of a VA home loan.

Basically, instead of lending you money directly, the VA promises your lender it'll cover a portion of the loan if you default. This amount is typically up to 25% of the loan amount. So, if your home loan was for $250,000, the VA would cover $62,500 if you stopped paying on your mortgage.

Why VA Entitlement Matters

If you're eligible for a VA loan, understanding VA entitlement matters because it affects whether you'll need a down payment, how much you can borrow, and whether you can carry more than one VA loan at a time. VA entitlement makes VA loans with zero down payments possible, which can make homeownership more affordable for qualifying veterans, members of the military community, and surviving spouses.

How VA Entitlement Works

VA entitlement works by combining the VA's guarantee with your personal benefit status to determine how much of a loan you can get without a down payment.

At a basic level, VA entitlement has two layers to understand. First, there's your personal entitlement status, which can be considered "full" or "partial"—depending on whether you've used your benefit before, or how much of it you've used. Then, there's the way the VA structures entitlement, which is called "basic entitlement" and "bonus entitlement."

Put together, these determine how much of your loan the VA will guarantee, whether you'll need a down payment, and how much home you can afford.

Full vs. Partial Entitlement

Your entitlement status affects how much the VA will guarantee for your mortgage loan. The guaranteed amount is the amount of your loan the VA agrees to pay your lender if you don't repay your loan in full.

• Full entitlement: You have full entitlement if you've never used your VA loan benefit before. You may also have full entitlement if you've sold a home purchased with a VA loan and paid it off in full. The same may be true if you've used your entitlement before but paid it back after a foreclosure or short sale. With full entitlement, there are no VA loan limits, which refer to the amount you can borrow without having to make a down payment.
• Partial entitlement: If you've used some of your entitlement for another VA loan or property, you'll have partial (remaining) entitlement. In this case, the VA may not guarantee the full 25% of your new loan amount. That doesn't mean you can't use the benefit again; it just means that, depending on your remaining entitlement, you might have to make a down payment to cover the difference.

Knowing how entitlement status works is important, but it also helps to understand how entitlement itself is structured.

Checking Your VA Entitlement

The most reliable way to see your entitlement status is by getting a Certificate of Eligibility (COE). A COE is an official document that shows qualifying veterans, active-duty service members, surviving spouses, and Reserve and National Guard service members their current basic entitlement. It will also detail any loans already charged against your entitlement, along with showing specific entitlement codes and eligibility conditions.

A COE is typically the first thing lenders check when you try to buy a home with a VA loan, so getting or reviewing it early in the process can clarify what's available to you. You can get your COE online through the VA website, or your lender can help you obtain it. Freedom Mortgage is always ready to help any veteran get their COE. We are just a call away.

Types of VA Entitlement

Again, the VA splits entitlement into two categories: basic entitlement and bonus entitlement. These types of VA entitlement work together to determine the total amount the VA can guarantee on your loan.

VA Basic Entitlement

VA basic entitlement refers to the maximum amount—which is $36,000—that the VA is willing to pay your lender if you fail to repay a VA home loan. That amount applies to loans of $144,000 or less. For loans exceeding $144,000, the maximum is 25% of the loan amount.

In either case, your basic entitlement amount—which often appears on a COE—shouldn't be confused with how much you can borrow. It's just a starting point for what your VA benefit could provide.

VA Bonus Entitlement

For home loans above $144,000, bonus entitlement—sometimes called additional, secondary, or Tier 2 entitlement—will come into play. VA bonus entitlement typically covers 25% of your loan amount.

Bonus entitlement allows the VA to back much larger loan amounts and can make it possible to buy a home with no down payment, even in high-cost areas.

How To Calculate VA Loan Entitlement

Even though this is something Freedom Mortgage will do for you, it's still valuable for you to understand what we are doing when we verify your VA loan entitlement. If you have entitlement, there's a simple calculation to figure out how much you have:

• Amount of the loan ✕ .25 = How much of your entitlement you've used

Suppose your existing VA loan is $125,000. Using the equation to calculate 25% of $125,000 shows you've used $31,250 of your entitlement. Subtract that from the base $36,000, and you have $4,750 of basic entitlement left to use. But keep in mind: You may likely also have additional entitlement available through bonus entitlement.

Remaining Entitlement Calculation

If you have remaining entitlement, follow these steps to calculate your maximum loan amount:

1. Check your entitlement: Review your COE to see how much of your VA entitlement you've used.
2. Find your county loan limit: Use the Federal Housing Finance Agency (FHFA) website to look up the conforming loan limit for your county or county equivalent.
3. Calculate total entitlement: Multiply your county's loan limit by 25% to see the maximum VA guarantee available.
4. Subtract used entitlement: Use this formula: Remaining entitlement = (County loan limit ✕ .25) − Entitlement already used.
5. Estimate your no-down-payment loan: Multiply your remaining entitlement by 4. That's the maximum loan amount you could get with no down payment.

For example, if you've already used $50,000 of entitlement and your county or county equivalent's loan limit is $900,000, it would look like this:

• Maximum entitlement: $900,000 ✕ .25 = $225,000
• Remaining entitlement: $225,000 − $50,000 = $175,000
• Maximum home price with no down payment: $175,000 ✕ 4 = $700,000

This means you can borrow up to $700,000 with a VA loan without putting any money down.

VA Loan Entitlement FAQs

There's a lot of information to consider about VA entitlement. Here are answers to a few of the most common questions.

How Much VA Loan Do You Qualify For?

The amount you qualify for depends largely on two factors: your available entitlement and your lender's approval of your credit and income. With full entitlement, you can borrow up to as much as your lender approves, without worrying about VA loan limits. With remaining entitlement, your maximum no-down-payment loan depends on your remaining entitlement and FHFA county loan limits.

What Does 'Remaining Entitlement' Mean?

"Remaining entitlement" refers to the amount of your VA benefit that's still available after you've used some on a previous loan. If you sold your home and paid off the VA loan, your entitlement is considered restored in full. If you still own a home financed with a VA loan or lost one to foreclosure or a short sale, you may have remaining entitlement left over to use toward your next purchase.

How Do You Restore VA Entitlement?

VA entitlement can be restored by selling the home and paying off the VA loan in full, or by applying for a one-time restoration if you've already repaid the loan but still own the property.

Final Thoughts: VA Entitlement

VA entitlement is more than just a number. It opens the door to the American dream of homeownership using your hard-earned benefit from serving your country. And while VA entitlement may seem complex at first, once you've got the basics down, it can make for a smoother homebuying experience.

If you're ready to save money and buy a home with a VA loan, Freedom Mortgage is here for you every step of the way—from answering your questions about your entitlement to guiding you through the VA loan process. You can get started today and see where your VA entitlement can take you.