VA Second-Tier Entitlement or VA Bonus Entitlement
VA second-tier entitlement for a VA loan or Texas Vet loan, sometimes referred to as VA bonus entitlement, is an important feature of the VA home loan program. A veteran seeking a VA loan or Texas Vet loan 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.
- The Veteran currently has an existing VA loan on another property that will not be paid in full.
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.
- The Veteran has a VA loan in the past that went into foreclosure or was included in a bankruptcy or short sale.
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.
How to Calculate VA Second-Tier Entitlement for a Texas Vet or VA Bonus Entitlement
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.
There is no VA loan limit in the state of Texas beginning January 1, 2020. This means that a qualified Veteran with full entitlement can purchase a home using a VA Loan that exceeds the Fannie Mae conforming loan limit of $484,350 with zero down, and the VA would guaranty 25% of that loan.
For a Texas Vet Loan (VLB) the maximum loan amount is set to the Fannie Mae conforming loan limit of $484,350. There is no down payment requirement for a Texas Vet Loan up to the maximum loan amount of $484,350. The VA would guaranty 25% of that loan.
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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 our toll-free number at 866-704-2826, or click on the button below and complete our quick-and-easy online form. Our experienced VA lending specialists will be happy to assist you, no obligation.