Calculating Partial Entitlement on Veteran Home Loans

VA Loan benefits include a 100% no money down loan for the purchase of a home.  There are several ways to decide if you can use those VA Loan benefits to purchase your next home.  There’s a formula for calculating Partial Entitlement on Veteran Home Loans, and just because you’ve used your Eligibility once, does NOT mean that you can not use it again.

Someone recently asked: “VA Loans are for Owner Occupied Property – so how can you buy a second home with your VA Benefits?”

These loans are for Owner Occupied property.  So, we can’t make a VA Loan on a “Vacation” Home or Investment Property.

The good news is that there is a provision that allows you to own two homes, and still be able to use the VA Home Loan program.  For example, if you are stationed at Fort Sam Houston and you buy a house in San Antonio, and then you are deployed… and your spouse wants to live near family in NC.  In that situation, we can probably use your benefits to purchase the home in NC.  We must prove a “net tangible benefit” and your Spouse must live in the home for at least 6 months out of the year.  

To figure out how much you might qualify in calculating Partial Entitlement on Veteran Home Loans we need your Certificate of Eligibility.

How do I get a Certificate of Eligibility?

The Veteran’s Administration provides you with a Certificate of Eligibility.  A “full” certificate will have an amount of $36,000.  It’s a green form, approximately 8 x 11.

If you don’t have one, you will need to  Complete a VA Form 26-1880, which is called a Request for a Certificate of Eligibility.  You then use that form to apply for your Certificate of Eligibility.

You can send the Request For A Certificate of Eligibility For Home Loan Benefits, to the Winston-Salem Eligibility Center, along with proof of military service. In some cases it may be possible for VA to establish eligibility without your proof of service (typically your DD 214).   Our experience with the process says that to avoid any possible delays, it’s best to provide such evidence.

If you previously purchased a home using your VA Benefits then you might still have some of that “Entitlement” available to you for the purchase a new home! If you’ve used your Eligibility, the Certificate should be sent to the Veteran’s Administration, and they will write on the Certificate the amount you have left.

This is ALSO something we can do for you, as the Lender on your new home.

To Calculate Partial Entitlement on Veteran Home Loans, consider the following:

• If your previous home was purchased using a VA Loan, and that loan was paid off by the folks you sold the house to, the full entitlement may have been restored.
• If you sold your home to someone, and allowed them to ASSUME your VA Loan, then you might have the full entitlement restored, if one or more of the purchasers were also Veterans.
• If you still own the home, and you are renting it out – you might be able to purchase a new home using your partial entitlement, but there are several restrictions

Calculating Partial Entitlement on Veteran Home Loans

Here are some example calculations… If a Veteran has used $27,500 of entitlement on a prior loan, which may not be restored, and is purchasing a home for $400,000 where the county loan limit is $484,350.

$484,350 X 25% = $121,087 Maximum VA Loan Guaranty
$121,087 – $27,500 = $93,587 VA Loan Entitlement Available
$93,587 / $400,000 (sales price) = 23.39% Guaranty
$93,587 X 4 = $374,348 Maximum Loan Amount with 25% Guaranty

Since the VA Loan’s Guaranty will be less than 25%, a down payment will be required.

$400,000 X 25% = $100,000
$100,000 – $93,587 = $6,413 Down Payment

This is still a MUCH BETTER scenario than having to put 5% down (the minimum required by Fannie Mae) which is over $20,000!

Qualifying for a Veteran Home Loan

Residual Income Calculations make VA Loans very different to Underwrite, and do pre-qualifications.  Residual income is the amount of net income remaining (after deductions of debts, obligations and monthly shelter expenses) to cover family living expenses such as food, health care, clothing, and gasoline. All members of the household are included in determining if the residual income is sufficient.

Household members must be counted even if the veteran’s spouse is not joining in title or on the mortgage, or if there are any other individuals depending on the veteran for support, such as children from a spouse’s prior marriage who are not the veteran’s legal dependents.

We also count Child Care when calculating Veteran Home Loan qualifications.  I am mentioning this, because if you are talking to a Loan Officer who only talks to a Veteran every other month – they may not being doing the calculations correctly.  This is the number one complaint we hear from borrowers… they provide all of the information to the Loan officer, and 3 weeks later they find out that there’s a problem.  It’s normally because the LO doesn’t do very many of those types of loans.

If you have questions about purchasing a home, and calculating Partial Entitlement on Veteran Home Loans – please call Steve and Eleanor Thorne 919 649 5058.  We appreciate your Service, and we LOVE working with Veteran’s who want to purchase their dream home!