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Generally speaking, the VA promises to guarantee up to a quarter of the loan amount to the lender. The $36,000 basic entitlement x 4 equals $144,000 which is the maximum loan amount for most borrowers. However, since home prices vary across the country, VA actually uses the conforming loan limit, which is $417,000 in most areas at this time, so that veterans everywhere have the opportunity to become homeowners in a competitive market. This can be considered a bonus entitlement in addition to the basic entitlement.

When a borrower purchases a home that is above the conforming loan limit, the VA loan is considered a VA jumbo loan. For instance, the county loan limit is $417,000 and the home purchase is $500,000. The difference between the purchase price or appraised value (whichever is less) is $500,000 minus the county loan limit of $417,000 equals $83,000. The borrower is required to make a down payment contribution of 25% of the difference ($83,000) which is $20,750; still quite a bargain for the borrower.  Depending on the VA county loan limit, VA borrowers would be required to put down much less of a down payment than any other type of loan program, and still get a fantastic interest rate.  Some VA lenders can write VA loans up to $1.5 million.

VA Entitlement with a Second Home

Some VA borrowers have already used some of their entitlement, but may want to purchase another home as a new primary residence without selling the original home. Let’s say that the veteran used $50,000 of their entitlement and the county limit is $843,750. Since a quarter of the entitlement is $210,937 and $50,000 was already used, the balance entitlement of $160,937 is remaining. Remember that the $160,937 represents the one quarter guarantee. When multiplied by 4, the result is $643,748 which is the amount that a borrower can finance at 100% (no down payment) in this particular county where the loan limit is $843,750.

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