VA Bonus Entitlement Helps Veteran

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

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:  $424,100 (Arizona)
*based on maximum Conventional loan limits

Step 2:

Calculate veteran’s total entitlement: $424,100 x’s 25% = $106,025 (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):   $106,250 – $36,000 = $70,250 (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).    $70,250 x’s 4 = $281,000 (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 $281,000 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.

Minimum VA 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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