VA Bonus Entitlement Helps Veterans Qualify for More Mortgage

Bonus Entitlement and VA Mortgage Qualification

Calculating Maximum VA Loan AmountArizona Veterans that no longer have access to what is known as “Basic Entitlement” to finance a home using a VA loan have the benefit of tapping something called “Bonus Entitlement” in order to help them purchase a home using a VA mortgage.   Bonus Entitlement is used when a Veteran does not have Basic Entitlement due to:

1. Already having a VA loan in their name
2. Completing a short sale on a VA loan previously
3. Foreclosing on a VA loan previously

Calculating a Veterans Max VA Loan Amount Using Bonus Entitlement

What loan amount can a VA borrower qualify for when using their bonus entitlement.  Here is how a mortgage lender calculates the answer (a summarized version of the calculation):

AZ VA Mortgage lenders require that they have 25% coverage or “guaranty”  from the VA on a new bonus entitlement VA loan they originate.  In other words the VA must guaranty a dollar amount equal to 25% of the veteran’s new home loan amount.  VA’s guaranty amount is determined by calculating the veteran’s entitlement dollar amount in a bonus entitlement situation.  Based on an VA mortgage lender needing a 25% guaranty, the veteran’s home loan cannot equal more than 4 x’s what the VA will guaranty in terms of dollars for the veteran.  Here is how a VA mortgage lender backs into the maximum loan amount a  veteran borrower can qualify for using bonus entitlement:

Step 1:

Take the maximum 0% down VA loan:  $417,000 (Arizona)

Step 2:

Calculate veteran’s total entitlement: $417,000 x’s 25% = $104,000 (this is the veterans total entitlement)

Step 3:

Subtract all basic entitlement already used by the veteran from the total entitlement calculated in step 2  to determine the veteran’s remaining entitlement (let’s assume a veteran had used all $36,000 of their basic entitlement):   $104,000 – $36,000 = $68,000  (remaining entitlement).

Step 4:

A VA lender will determine what the veteran’s new maximum loan amount with $0 down based on bonus entitlement would be by multiplying the remaining entitlement in step 4 by 4 (or in other words dividing it by 25% to make sure the maximum loan amount has 25% coverage/guaranty from the VA).    $68,000 x’s 4 = $272,000 (maximum loan amount our sample VA buyer could borrower based on their bonus entitlement).

Clear as mud?   In the above scenario, a veteran that used all of their $36,000 basic entitlement would be able to qualify for an additional/new VA loan equal to $272,000 with 0% down.   Now this example is for a veteran who either is exempt from the VA funding fee OR who paid the VA funding fee in cash rather than financing it in.   Adding in a funding fee skews the maximum loan amount number slightly.   The idea of this blog article is to give you a basic understanding of what is a complex calculation.

Calculating a Veteran’s Minimum Loan Amount Using Bonus Entitlement

Now we get a break from doing math!  There is no complicated formula here.  A veteran must borrower at least $144,000 on a VA loan to be able to use bonus entitlement.  It is that simple! NOTE:  There is no minimum loan amount on a regular VA loan only on a loan that is created based on bonus entitlement.

If you have any questions about how to obtain more than one VA loan or how to get approved for a VA mortgage even after a VA short sale/VA foreclosure please call.  We would be happy to walk you through what your options are.

By Jeremy House


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Jeremy is the Founder of The HOUSE Team and a Sr. Loan Officer/Branch Manager with PrimeLending. Over the past several years he has ranked in the top 1% of all loan officers nationwide and one of the top 200 loan officers in America. In the mortgage industry, the devil is in the details. Jeremy prides himself on being a student and an expert when it comes to everything mortgage related.

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