by Ann Huskey
The concept of VA entitlement is often a confusing one. Yes, our Veterans have sacrificed for our country and deserve homeownership. However, that is not what VA entitlement is speaking to specifically.
All veterans who are eligible for a VA loan have an entitlement. An entitlement is an actual dollar amount that the VA will repay the lender in the event that the borrower defaults on the mortgage. The basic entitlement is $36,000. This is basic entitlement was designed to pay for a quarter of the purchase price on a $144,000 home.
Two Types Of Entitlement
Of course, $144,000 may not be enough to purchase a good-sized everywhere within the United States. So, in order to ensure that all veterans have access to homeownership, the VA created a link between conforming loan limits for conventional financing and its guaranty amounts.
Here is where it gets a little complicated. The conforming loan limit for conventional financing is $424,100. In most cases, the VA pledges to repay a quarter of the loan. A quarter of $424,100 is $106,025. However, the basic entitlement is $36,000. In order to cover the full $106,025, the VA created a secondary entitlement of $70,025. This additional layer of entitlement is used any time that a veteran borrower purchases a home for more than the purchase price of $144,000.
As the secondary level of VA entitlement is linked to the conforming loan limit for conventional loans, for many borrowers in most parts of the country $144,000 is the maximum entitlement that they have access to. However, buyers located in high-cost areas may have access to more funds as the limits in those areas are also higher than in other parts of the country.
For more information about VA home loan lenders in Tallahassee contact Ann Huskey, REALTOR®.
