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Understanding VA Home Loan Eligibility and Loan Limits

Full Entitlement and Loan Limits

If you meet any of the following requirements, you have full entitlement:

• You have never utilized your home loan benefit.
• You have fully repaid a previous VA loan and sold the property, which restores your full entitlement.
• You have used your home loan benefit but experienced a foreclosure or compromise claim (short sale) and repaid the loan in full.

It’s important to note that terms like additional entitlement, bonus entitlement, or tier 2 entitlement are used when discussing VA-backed loans exceeding $144,000 with lenders. However, when applying for a loan, you don’t need to employ these terms.

Loan Approval and Borrowing Capacity

Eligible veterans, service members, and survivors with a VA home loan can obtain a Certificate of Eligibility (COE) confirming their eligibility and entitlement. However, loan approval still relies on the lender’s assessment of your:

• Credit history
• Income
• Assets (such as savings, retirement, and investment accounts)

While there is no mandatory minimum credit score required by the VA, individual lenders may have their own credit score criteria. It is advisable to contact multiple lenders for comparison purposes.

Understanding COE Information

The line on your COE stating “This Veteran’s basic entitlement is $36,000” is intended for your lender. It signifies that you possess full entitlement. However, this amount does not represent the total loan amount you can borrow. Instead, it assures your lender that the VA will cover up to $36,000 if you default on a loan under $144,000. For loans exceeding $144,000, the VA guarantees up to 25% of the loan amount to the lender.

Remaining Entitlement and Home Loan Limit

If you have remaining entitlement, your VA home loan limit is determined by the county loan limit in your area. In the event of loan default, the VA will cover 25% of the county loan limit minus the portion of your entitlement already utilized.

You can use your remaining entitlement, either alone or in conjunction with a down payment, to secure another VA home loan. You may have remaining entitlement if any of the following conditions apply to you:

• You are currently repaying an active VA loan.
• You have fully repaid a previous VA loan and still own the property.
• You refinanced your VA loan into a non-VA loan and still own the property.
• You experienced a compromise claim (short sale) on a previous VA loan without full repayment.
• You participated in a deed in lieu of foreclosure, transferring your home’s title to the mortgage-holding bank to avoid foreclosure.
• You went through a foreclosure on a previous VA loan without full repayment.

Loan Limit vs. Loan Guarantee

The VA-backed home loan limit refers to the amount the VA guarantees to the lender, indicating the maximum sum the VA will pay if you default on the loan. However, there is no imposed limit on the amount you can borrow to finance your home.

Impact of County Loan Limit

If you have remaining entitlement and your loan amount exceeds $144,000, you may need to make a down payment. Most lenders require that either your entitlement, down payment, or a combination of both covers at least 25% of the total loan amount.

By making a down payment, you may qualify for a VA-backed loan exceeding the county loan limit. Nonetheless, loan approval remains subject to your:

• Credit history
• Income
• Assets (such as savings, retirement, and investment accounts)

Similar to before, there is no set minimum credit score mandated by the VA, but different lenders may have varying credit score requirements. It is advisable to contact multiple lenders for comparison.

Have Questions about Your Entitlement?

You can talk to your loan officer at CMG Lending or Call a VA representative at 877-827-3702.

You can also contact your regional loan center directly. Find your regional loan center.