VA Loan Entitlement Explained and Why It’s Important

Veterans who are eligible for a VA loan have VA loan entitlement, which is basically a dollar amount the VA promises to pay back to a lender in the event you default on your mortgage.

This sounds quite simple, but in reality, the concept of VA entitlement can be confusing.

You can think of it as something you're entitled to, given your service to our nation. This is certainly a hard-earned and well-deserved benefit. But that's not entirely what it means, at least in practical terms.

VA Basic Entitlement

There are two VA loan entitlement types: basic and secondary entitlement. The basic, or primary, entitlement amount is $36,000.

Typically, the VA pledges to repay up to 25% of the loan amount. That means that the $36,000 basic entitlement can fully cover a VA loan up to $144,000 without requiring any additional entitlement.

To stay competitive and ensure Veterans across the country have access to homeownership, the VA started to link its guaranty amounts with the conforming loan limit for conventional financing, thereby creating a bonus layer of entitlement.

VA Bonus Entitlement

VA bonus entitlement, also known as secondary or second-tier entitlement, applies to loan amounts over $144,000. Bonus entitlement also allows qualified Veterans to have multiple VA loans at once.

In simple terms, bonus entitlement is the dollar amount that fills the gap between your basic entitlement amount and the 25% guaranty the VA provides on your loan.

For example, if you use a VA loan to buy a $660,000 home and want to avoid a down payment, the VA would need to guarantee 25% of the loan, or $165,000. Your basic entitlement covers $36,000 of that amount. The remaining $129,000 comes from your bonus entitlement.

How is VA Loan Entitlement Calculated?

Remember, the VA typically covers 25% of the loan amount. To calculate how much entitlement a VA loan uses, simply multiply the loan amount by 0.25.

For example, if you purchased a home for $600,000 using a VA loan, the VA guarantees $150,000 of that loan. That means you’ve used $150,000 of your entitlement even if your current loan balance is lower.

If you’ve used part of your VA loan benefit, your remaining entitlement depends on how much you’ve already used and the loan limits in the county where you’re buying.

In counties that follow the standard conforming loan limit, that limit is currently $832,750. A quarter of that amount equals $208,187.50, which is the maximum guaranty the VA typically provides in those areas.

These limits change annually, and you can check limits in your area with our VA loan limit calculator.

In order to meet that mark, the VA essentially created an additional entitlement amount beyond the $36,000 basic entitlement. Known as bonus entitlement, that additional layer of entitlement fills the gap and applies anytime a Veteran purchases a home for more than $144,000.

To estimate your remaining entitlement:

• Multiply your county loan limit by 0.25
• Then, subtract the entitlement you’ve already used.

To find out how much you could get with no down payment, multiply your remaining entitlement by four.

Now, let’s walk through an example: You purchased a home for $600,000 using your VA loan benefit, but you need to relocate and want to keep that home.

• Entitlement used: $600,000 × 0.25 = $150,000

Now you’re buying in a county with the standard conforming loan limit ($832,750):

• Total available entitlement: $832,750 × 0.25 = $208,187.50
• Remaining entitlement: $208,187.50 − $150,000 = $58,187.50

To estimate your no down payment price range:

• $58,187.50 × 4 = $232,750

In this scenario, you could purchase a home up to $232,750 without making a down payment.

Want a quicker result? Use the VA loan entitlement calculator below to estimate your remaining entitlement.

How VA Entitlement Affects Your Down Payment

There are benefits to providing a down payment on a VA loan if you can afford it. But if you do want to use your 0% down benefit, it is vital to understand that, in most cases, it is only available if you have full entitlement.

Generally, Veterans and service members have full entitlement if they meet service eligibility requirements and:

1. Have not used the VA loan before, or
2. Have used the VA loan before and paid it off entirely

Homeowners with active VA mortgages on their property have reduced or partial VA entitlement. The same is true for Veterans who’ve lost a VA loan to foreclosure and those who’ve allowed a VA loan assumption without a Substitution of Entitlement.

In most cases, homeowners simply sell their current VA-backed property and then regain their full entitlement by completing a VA restoration of entitlement.

For example, say you have an active VA loan and have already used $138,000 of your entitlement. In a county that follows the standard conforming loan limit, your maximum entitlement is $208,187.50, so you have about $70,188 remaining.

Now you want to buy a second home for $400,000. The VA requires a guaranty equal to 25% of the loan amount, which means you'd need $100,000 of entitlement to back the full purchase with no down payment.

Since you only have about $70,188 remaining, there's a roughly $29,812 gap between your entitlement and the loan amount. To cover that difference, you would need to make a down payment equal to the gap amount.

Keep in mind that using partial entitlement typically means you've used your VA loan benefit before, which can affect your VA Funding Fee. Subsequent users generally pay a higher rate than first-time users. The exact amount depends on factors like your down payment and disability exemption status, but typically ranges from 1.25% to 3.3% of the loan amount.

VA Loan Entitlement and Max VA Loan Amounts

It's important to understand that there's no maximum amount on a VA loan. You can get as much as the lender is willing to give you without the need for a down payment, provided you qualify and have your full VA loan entitlement.

Some of the country's most expensive areas have loan limits that exceed the conforming loan limit. Think parts of California, New York, Virginia, Hawaii and a handful of other states. The VA has higher loan limits in high-cost counties that can reach up to $1,299,500.

Because VA loan limits can vary by location and change each year, it’s helpful to check the current numbers for your area.

If you still have questions about VA loan entitlement, connect with a Veterans United VA loan expert to help you understand your options and what you may be eligible to borrow.