Written by Isaac F. Davis

 

Many VA borrowers wonder whether they can get more than one loan with the VA Loan Guaranty Program.  In fact, you can use VA loans as many times as you want as long as you have entitlement.  Entitlement is how much the VA will guarantee for each loan under the Program. And, entitlement is available to those who are eligible for VA mortgages. How much a VA-eligible borrower is entitled to for each loan varies.  The general rule is that a veteran can obtain a VA home loan of up to 4 times the amount of his or her available entitlement.

 

There are two types of VA loan entitlements: basic and bonus.  Initially, each eligible veteran has basis entitlement of $36,000 for loans of $144,000 or less and bonus entitlement of at least $68,250 for loans over $144,000.  Bonus entitlement is calculated by taking the annual Freddie Mac conforming loan limit for the county in which you live, multiplying it by 25% and then subtracting the basic entitlement of $36,000. In 2009, most counties have a loan limit of $417,000, but some areas have limits that are higher.

 

Multiple VA loans can be a tricky subject.  Although having more than one VA loan at a time is rare, it is possible.  There are certain circumstances under which a veteran may have extinguished his or her basic entitlement, but still has bonus entitlement available to purchase a home using the Program.  For instance, a borrower might have an open VA loan of $144,000, for example, but still have bonus entitlement of $68,250 intact.  In this scenario the borrower could get a loan over $144,000 and up to $273,000 using bonus entitlement alone. 

 

In counties where the maximum loan limits exceed $417,000, bonus entitlements are greater than $68,250 based on 25% of the difference between the loan limit minus $144,000.  Of course, a veteran would have to show ability to pay in order to borrower this much.  County loan limits help VA-approved lenders figure how much a borrower is entitled to. And, purchase price is the other key part of the equation that makes each VA loan unique.

 

If a VA borrower has one loan, the VA guaranty is a simple calculation.  However, calculating the VA guaranty for borrowers who desire to use the entitlement on, and finance, multiple properties can get complicated.

 

Generally speaking, the VA guarantees 25% of each additional loan amount over $144,000 up to the maximum county 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.

 

Also, whether a VA borrower has used the VA Home Loan Guaranty Program before can come into play.  Entitlement can be restored as long as a VA loan is paid in full. Typically, if a VA loan has been foreclosed, the entitlement cannot be restored until the loss is repaid. 

 

The following sample calculations are intended to help VA-eligible borrowers understand how entitlements are figured for multiple VA mortgages: 

 

1) Borrower is using $36,000 of his entitlement on a current VA loan and is getting another VA loan for $470,000.  The loan limit in his county is $625,000.

 

$625,000 x 25% = $156,250 maximum VA guaranty

$156,250 – $36,000 = $120,250 available entitlement

$120,250 x 4 = $481,000 maximum loan amount for this borrower

 

The proposed loan amount is under $481,000, the borrower will need entitlement of $117,500 which is the full 25% VA Guaranty on his loan of $470,000, and a down payment should not be required.

 

2) Veteran has used $105,000 of her entitlement on a prior loan which has been paid off 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 VA guaranty

$395,000 x 25% = $98,750 entitlement on 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 guaranty

$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.

 

In certain cases, a subsequent VA loan is not possible.  Here are two examples where the borrower would be better off using a program other than that of the 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 no entitlement remaining; therefore, he is not eligible for a subsequent VA loan.

When a borrower exceeds his or her entitlement, a down payment is usually necessary.  This is a situation where it would make sense for a borrower to explore financing options other than the VA Program. Contact a VA loan specialist for help calculating multiple VA loans and to determine the best loan options for you.