The Partial VA Entitlement
What might be surprising to many VA eligible borrowers is that the VA loan isn’t a one-time shot. The veteran can take advantage of the VA mortgage more than once to buy and finance a home. And that can work out in a couple of ways.
The VA issues a certificate of eligibility which will show how much entitlement is available for the VA guarantee. Today, that entitlement is $36,000 and the VA will guarantee up to four times that amount, or $144,000. For loans above that amount, the VA guarantee applies to 25 percent of the loan up to $417,000.
When a veteran takes advantage of the VA loan program, all or part of the entitlement will be used up. For example, if the sales price is $200,000, the VA will guarantee $50,000 of that to the VA lender yet because the $200,000 is above the initial $144,000 guarantee, there is no more entitlement available. In order to restore the entitlement, the veteran must retire the existing VA loan by refinancing out of the current loan into a non-VA mortgage or selling the property to buyers who provide their own financing. Once the loan is retired, the full entitlement is restored for the veteran to use again.
But what if the sales price is much lower than that, say $80,000? Since the guarantee is 25 percent up to $144,000, only one-fourth of the $80,000 is used, or $20,000 which leaves $16,000 available for another purchase. Four times $16,000 is $64,000. If the veteran finds a house for around $64,000 and wants to put little or nothing down, the VA loan is available as long as the veteran uses the remaining entitlement to buy a new primary residence and rents out the prior residence. The partial entitlement isn’t much, but it’s there.