VA Bonus Entitlement

Is the VA handing out cash bonuses? Well, not exactly, but stick around because the benefits are substantial.

The Basics

First things first, let’s clear up any misconceptions. The VA doesn’t directly fund VA loans; lenders like us do. The VA steps in to guarantee a portion of the loan, specifically 25 percent, in case the borrower defaults. This is where the concept of VA bonus entitlement comes into play.

Unleashing the Power

Originally, the VA entitlement limit was set at $36,000, meaning they’d guarantee up to $36,000 on a loan, or 25 percent of the loan value. But as home prices soared, the VA bonus entitlement became a game-changer. Now, if you have no outstanding VA loans, that original $36,000 guarantee becomes a limitless bonus entitlement.

Translation? You could potentially snag a million-dollar home with a jaw-dropping 0 percent down. Yes, you read that right—no down payment on a million-dollar home. That’s the magic of the VA bonus entitlement.

Reduced Entitlement

Hold on, though. If you’ve got an existing VA loan or plan to keep one while getting a new home, your bonus entitlement becomes reduced entitlement. This is where things get a bit more complex, involving county loan limits and subtracting existing loan balances.

Practical Scenarios

Let’s paint a scenario: You’re moving from Texas to Florida, keeping your Texas home with a $200,000 loan balance. The Florida county loan limit is $750,000. Deducting the old loan balance, you’re left with $550,000 of bonus entitlement. That’s your ticket to a new home with a 0 percent down payment.

Sell that Texas home before closing on your Florida dream home, and suddenly, the sky’s the limit. Well, almost. As long as you qualify for the payment, VA bonus entitlement opens doors to million-dollar homes.

VA bonus entitlement might not be cold, hard cash, but it lets you amplify your home-buying potential, and save on your down payment. Because of that, it’s a pretty incredible benefit.