Can a veteran get more than one loan with the VA Loan Guaranty Program? Yes, in fact the VA loan program can be used over and over again as long as you have entitlement. Entitlement is the amount of VA guarantee toward each loan under the Program. Only VA-eligible borrowers have entitlement. And, entitlement can vary from borrower to borrower depending on where he or she lives and past usage. Generally, a qualified veteran can obtain a VA home loan of up to 4 times the amount of his or her available entitlement with no down payment.
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Before we discuss multiple VA loans further, let's talk about how entitlement works. VA loan entitlements can be broken down into two types: basic and bonus. Each eligible veteran has basis entitlement of $36,000 for loans of $144,000 or less and bonus entitlement of at least $68,250 to use for loans over $144,000. The amount of bonus entitlement is arrived at by taking the annual Freddie Mac conforming loan limit for your county, multiplying it by 25% and then subtracting basic entitlement of $36,000. In 2009, most U.S. counties have a conforming loan limit of $417,000, and some counties are higher.
Calculating multiple VA loans is not difficult if you know how. Having more than one VA loan at a time is rare, but possible. Most multiple loans involve the use of bonus entitlement. For instance, a veteran may be using his or her basic entitlement, but still have bonus entitlement available to purchase a home using the Program. A borrower might have an open VA loan of $144,000, for example, but still have bonus entitlement of $68,250 unused. In this situation, the borrower would be able to get a loan over $144,000 and up to $273,000 using bonus entitlement alone. Remember, bonus entitlement can only be used for loans over $144,000.
In higher cost counties where conforming loan limits are more than $417,000, bonus entitlements are more than $68,250. Of course, a veteran must demonstrate ability to pay in order to borrow any amount including loans exceeding $417,000. Conforming loan limits are what VA-approved lenders use to calculate how much a borrower is entitled to. Also, purchase price dictates what portion, if not all, of a veteran's entitlement must be used.
In general, the VA guarantees 25% of each additional loan amount over $144,000 up to the conforming loan limit for each VA-eligible borrower. There are many factors to be considered. There is the purchase price, of course. County loan limits must be taken into account. A veteran's income and credit qualification are also factored in. Whether a VA borrower has used the VA Home Loan Guaranty Program before is also part of the equation. Entitlement can be restored after a VA loan is paid in full.
Here are some sample calculations that might assist you in understanding how entitlements are figured for multiple VA mortgages:
1) $36,000 of entitlement is currently being used on borrower's VA loan, and he is getting another VA loan in the amount of $470,000. The conforming loan limit in his county is $625,000.
$625,000 x 25% = $156,250 Maximum entitlement
$156,250 - $36,000 = $120,250 Available entitlement
$120,250 x 4 = $481,000 Maximum loan amount this borrower can get
Since this borrower is seeking a loan of $470,000, which is under the allowed $481,000, he will only need entitlement of $117,500. No down payment will be required.
2) A borrower has used $105,000 of her entitlement on a prior loan which has been repaid in full and entitlement restored. She is borrowing $395,000 with a new VA loan where the county limit is $815,000.
$815,000 x 25% = $203,750 Maximum entitlement
$395,000 x 25% = $98,750 entitlement needed for this loan
This borrower's full entitlement has been restored, and the proposed loan amount of $395,000 should get full 25% VA Guaranty with entitlement to spare, and no down payment is required.
3) A veteran is using $27,500 of his entitlement on a current loan, and is purchasing a home for $320,000 where the county limit is $417,000.
$417,000 x 25% = $104,250 Maximum entitlement
$104,250 - $27,500 = $76,750 entitlement available
$76,750 / $320,000 = 23.98% VA Guaranty on this loan
Since VA's Guaranty will be less than 25% of the loan amount, a down payment will be needed to meet lender requirements.
Sometimes a subsequent VA loan is not possible. Here are two examples where the borrower would most likely benefit from another type of mortgage other than VA:
1) A veteran is using $36,000 of her entitlement on a current loan, and needs to borrow $120,000 for another home purchase where the county limit is $417,000.
Since the loan amount is not over $144,000, this veteran's bonus entitlement cannot be used.
2) A veteran already has a VA loan of $800,000 where the county limit is $729,750. He wants another VA mortgage for $350,000.
$729,750 x 25% = $182,437.50 Maximum Guaranty
$800,000 x 25% = $200,000 exceeds entitlement and down payment was required
This borrower has maxed out his entitlement; therefore, he is not eligible for a subsequent VA loan.
With VA loans, a down payment is usually required by the lender if a borrower exceeds his or her entitlement. Once a down payment is required, it would make sense for a borrower to explore other mortgage options in addition to the VA Program to weight costs and benefits. For more questions about VA loans and to find out if a VA loan is your best option, contact a loan specialist.
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