VA entitlement refers to the dollar amount the Department of Veterans Affairs (VA) guarantees on a VA loan. It represents the portion of the loan that the VA will repay to the lender if the borrower defaults. Eligible borrowers receive entitlement codes printed on their Certificate of Eligibility (COE), a VA document that lenders use to confirm a borrower’s VA loan eligibility and remaining entitlement.
Key Points:
- VA entitlement is the amount the VA guarantees on a loan, ensuring lenders are repaid if a borrower defaults, confirmed through codes on the Certificate of Eligibility (COE).
- Basic entitlement is $36,000, covering up to 25% of loans under $144,000. Bonus entitlement applies to loans above this amount, guaranteeing up to 25% of the county’s conforming loan limit.
- There are no strict caps on borrowing amounts; veterans with full entitlement can borrow without a down payment if they qualify, while those with reduced entitlement might need a down payment for loans exceeding county limits.
- Veterans can either replace their entitlement for another veteran assuming their loan or combine entitlements with another eligible veteran to enhance borrowing capacity.
- Veterans can restore their entitlement by paying off previous loans, selling the home, having someone assume the loan or refinancing, enabling them to use VA loans for future purchases.
Table of Contents
- VA Loan Basic Entitlement
- VA Loan Bonus Entitlement
- Max VA Loan Amounts
- VA Entitlement Codes
- How to Calculate VA Entitlement
- VA Restoration of Entitlement
- Can you substitute entitlement for a VA loan?
- Can you combine VA loan entitlements?
- Second-Tier Entitlement for Multiple VA Loans
- Understanding Entitlement for Your Next Home Purchase
- More Reading
VA Loan Basic Entitlement
Basic entitlement on a VA home loan is $36,000. This line on your COE is primarily for your lender, showing that you have your full VA entitlement.
This doesn’t mean that $36,000 is the total amount you can borrow. It means that the VA guarantees lenders that they will generally pay up to $36,000 if a borrower defaults on a loan under $144,000, or 25% of the loan amount.
Because borrowers need more than $144,000 to purchase a decent-sized home in most parts of the country, the VA provides bonus entitlement.
VA Loan Bonus Entitlement
The VA offers bonus entitlement to borrowers seeking to buy a home above $144,000. For borrowers with full entitlement, the VA will guarantee up to 25% of the loan amount.
The 2024 loan limit in most counties is $766,550. In this case, the VA will guarantee $191,637.50 of the loan, a combination of bonus and basic entitlement.
Veterans who’ve experienced a VA foreclosure or who want to hold onto their VA-backed mortgage and purchase again may have reduced entitlement. When you have reduced entitlement, the VA will only guarantee up to 25% of your county’s conforming loan limit minus the amount of entitlement you have already used. Borrowers looking to buy above their county’s conforming loan limit can still qualify for VA loans, but they will typically need to make a down payment to cover at least a portion of the difference.
Max VA Loan Amounts
In 2020, the VA eliminated loan limits for servicemembers, veterans and surviving spouses who still have their full loan entitlement available. Loan limits now only apply to those with partial entitlement.
Having full entitlement typically means one of the following:
- You’ve never taken out a VA loan
- You repaid your VA loan in full
Although VA loan limits exist for those without full entitlement, it’s important to understand that this does not necessarily impose a strict cap on the maximum amount you can borrow through a VA loan. The VA loan limits determine the maximum amount the VA will guarantee without requiring a down payment. However, this doesn’t mean you can’t borrow more than the set limit.
If you qualify, you can borrow more than the VA loan limit by making a down payment. The down payment requirement typically covers 25% of the difference between where your entitlement caps out and the purchase price. Therefore, while the VA loan limit influences the amount of the loan fully backed by the VA without a down payment, it does not restrict the overall loan amount you can secure.
If that’s you, you can borrow as much as a lender is willing to qualify you for without a down payment.
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VA Entitlement Codes
The Department of Veterans Affairs uses VA loan entitlement codes to identify the nature of a veteran’s eligibility for a VA loan. These codes are found on the Certificate of Eligibility (COE) and indicate how the veteran earned their entitlement, such as the Vietnam War (code 04), an unmarried surviving spouse (code 06) and so on.
Each code corresponds to a specific period or type of service, which helps the VA determine the benefits for which the veteran is eligible. You can refer to our VA loan entitlement codes guide for a full walkthrough of each entitlement code.
How to Calculate VA Entitlement
To calculate the entitlement you have or will be using, multiply the loan amount by 25%.
Formula: Loan Amount x 0.25 = Entitlement Used
Example: $200,000 x 0.25 = $50,000
Determining your maximum entitlement depends on your county’s conforming loan limit. To do this, multiply the conforming loan limit by 25%.
Formula: Conforming Loan Limit x 0.25 = Maximum Entitlement Amount
Example: $766,550 x 0.25 = $191,637.50
If you have a reduced entitlement, subtract the used entitlement from the maximum amount to establish your remaining entitlement. Your remaining entitlement is the highest amount the VA will guarantee for your loan.
Formula: Maximum Entitlement Amount – Entitlement Used = Remaining Entitlement
Example: $191,637.50 – $50,000 = $141,637.50
Finally, to establish the maximum loan amount that can be borrowed without a down payment, multiply the remaining entitlement by 4, as the VA guarantees 25% of the loan.
Formula: Remaining Entitlement x 4 = Maximum Loan
Example: $141,637.50 x 4 = $566,550
VA Restoration of Entitlement
VA entitlement restoration allows veterans to regain their full VA loan benefits after using them. This process is essential for veterans who want to use their VA loan benefits again after they’ve been previously reduced by obtaining a mortgage. Here are common ways to restore your entitlement:
- Refinance: Refinance the loan into a non-VA loan type, then invoke the one-time restoration of entitlement.
- Selling the home: Sell the property purchased with the VA loan and repay the VA mortgage in full.
- Loan assumption: Transfer the VA loan to another qualified veteran who substitutes their entitlement for your own.
You can contact your lender or the VA for more assistance with restoring your entitlement.
Can you substitute entitlement for a VA loan?
If a veteran with enough VA loan entitlement assumes your loan, you can ask them to substitute their entitlement for yours on the mortgage. If not, your entitlement will remain associated with the home until the loan is completely repaid.
Can you combine VA loan entitlements?
Yes, two eligible veteran borrowers (a military couple, for example) can combine the remaining entitlement from a previous VA home loan purchase with the remaining entitlement of another borrower, or they can split their entitlement evenly.
Second-Tier Entitlement for Multiple VA Loans
Second-tier entitlement allows veterans to use their VA loan benefits again without restoring their original entitlement. This is particularly useful for veterans who need a second VA loan while still owning a home financed with a previous VA loan.
Second-tier entitlement can benefit servicemembers who receive Permanent Change of Station (PCS) orders and need to purchase a new home at their new duty station. Here’s how it works:
- Eligibility: Veterans must meet standard VA loan eligibility requirements and have sufficient remaining entitlement.
- Loan Limit Calculation: The VA calculates the remaining entitlement to determine the maximum loan amount available without a down payment.
- Concurrent VA Loans: Veterans can have two VA loans simultaneously, provided they have enough entitlement and meet the lender’s credit and income requirements.
Servicemembers with PCS orders should consult with a VA-approved lender to understand their options and make the most of their second-tier entitlement.
Understanding Entitlement for Your Next Home Purchase
Understanding VA Loan Entitlement can be challenging, but VA lenders are experts in this field and can guide you through every step, from obtaining your Certificate of Eligibility (COE) to clarifying your unique situation. That’s why choosing a lender specializing in VA loans rather than a general lender is crucial. Their specialized knowledge ensures you maximize your benefits and enjoy a smoother home-buying experience.
More Reading
VA Loan Eligible and Ineligible Properties: Homes You Can Purchase With a VA Loan
VA Loan Co-Signers and Co-Borrowers Guide
Guide to VA Appraisal Fees and Process
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