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Second-tier entitlement for a VA loan or Texas Vet loan, sometimes referred to as bonus entitlement, is an important feature of the VA home loan program. A veteran seeking a VA mortgage or Texas Vet mortgage for either a home purchase or a VA loan for a refinance might need to make use of second-tier entitlement under the following two circumstances.
It is possible to have more than one VA loan at the same time. If a veteran has an existing loan on the home they currently reside in, or a rental property they lived in previously, the first step is to look at how much entitlement is tied up with that loan. Essentially entitlement is the amount of the loan that the VA guaranteed on the mortgage.
In the second case above, the VA would have suffered a loss on the prior VA loan, and part of the Veteran’s entitlement or eligibility is forfeited. The same thing applies as having an existing loan on another property, we need to determine how much entitlement was used on the previous loan. One major consideration is that with a prior foreclosure, bankruptcy or short sale, the veteran will likely have a two year waiting period before being eligible for another VA loan.
So here is an easy to understand example of how to calculate how much remaining entitlement would be available for a veteran who does not have their full entitlement. Let’s say that the original loan amount on the loan in question was $100,000 (whether open loan or a loan that the VA suffered a loss on). The VA would have guaranteed 25% of the original loan amount, which means the amount of entitlement used was $25,000.
The VA loan limit in the state of Texas for 2017 is $453,100. This means that a qualified Veteran with full entitlement can purchase a home using a VA loan or Texas Vet loan with zero down up to the 2017 VA loan limit, and the VA would guaranty 25% of the loan limit.
25% of $453,100 = $106,025 (this is the maximum amount of guaranty available from VA in 2017 with zero down).
$106,025 less $25,000 = $81,025 (maximum entitlement less amount of entitlement used on prior VA loan).
$81,025 (remaining available entitlement) times 4 = $324,100. This would be the maximum VA loan amount available (plus VA funding fee if applicable), with zero down for a VA loan or Texas Vet home loan. It is also important to note that due to VA secon-tier entitlement rules, the minimum loan amount is $144,001. If the desired loan amount is less, 2nd tier entitlement cannot be used. If the maximum loan amount is less than needed, it may be possible for the Veteran to pay 25% of the difference and obtain a VA loan for more than the calculated maximum.
Summing it all up, getting the help from a VA lender that has experience with Second-Tier VA mortgages is your best bet. Our VA loan and Texas Vet loan specialists can quickly determine remaining entitlement by obtaining a copy of your VA Certificate of Eligibility (COE) electronically, sometimes in a matter of minutes. We will also look at the other considerations in qualifying for a Texas Vet or VA home Loan, such as monthly income, credit history, debt ratios, etc.
Now that's service. Hold the pickles, please.
If you would like assistance in calculating your second-tier entitlement for a Texas Vet or VA Mortgage, or you have other questions, please call 866-704-2826, or choose your loan type by clicking the appropriate button below and completing our quick-and-easy pre-qualification form. Our experienced VA lending specialists will be happy to assist you, no obligation.