Calculating Remaining VA Entitlement
Part of determining whether or not a borrower is eligible for a zero down payment VA loan is by requesting a copy of the certificate of eligibility. This certificate, obtained directly from the VA, determines whether not the borrower is in fact eligible and if so highlights the veteran’s entitlement. For someone using their VA entitlement for the first time, the entitlement amount is $36,000 and the VA guarantee will be applied for loans up to four times that amount, or $144,000. For loans above $144,000, the guarantee applies to loans up to $417,000 and even higher in some areas deemed “high cost.”
But sometimes a veteran uses a VA loan to buy and finance a property without using the entire entitlement amount. Say the veteran bought a house listed for $100,000. Because the guarantee applies to four times the entitlement, the amount of entitlement used in this example is $25,000. If the original entitlement amount is $36,000, the remaining amount is $11,000.
The veteran may decide to keep the old house and rent it out or let a buyer assume the existing VA loan through an assumption. But the veteran can indeed take advantage of his VA benefit using his remaining entitlement amount. In this example, the maximum VA loan would be four times $11,000, or $44,000. If the remaining entitlement were $20,000, the maximum loan amount would then be $80,000.
In each example, the maximum loan amount wouldn’t finance very many properties due to the smaller, allowable loan limits. Remaining entitlement can be used to finance yet another home, but in most cases, there’s not enough left.