VA Loan Basic Entitlement vs. Secondary Entitlement Program

va loan entitlementWhen it comes to VA loans, “entitlement” refers to the maximum guarantee the VA provides to a lender for the eligible VA borrower. It is not the maximum loan amount the veteran can receive. VA loan entitlement can be a bit confusing as it has two parts: the basic entitlement and the bonus or secondary entitlement. Here’s how loan entitlement works:

VA Loan Entitlement: Basic and Secondary Entitlement Explained

If you have never used the VA loan program, you have the basic and bonus (secondary) entitlement. The $36,000 figure you see on your Certificate of Eligibility (COE) refers to the basic entitlement. This is the VA’s maximum guarantee for a mortgage up to $144,000.

Bonus entitlement is also available for up to an additional $68,250 (in certain high-cost counties). This amount, called the secondary entitlement, is used for VA mortgages between $144,000 and the conforming loan limit, which is usually $417,000.

As a first-time VA borrower, you will begin with enough entitlement for a loan of up to $417,000.

How Entitlement is Used

When a veteran uses his VA loan entitlement, he can use all or some of it. The VA guarantees one-quarter of the full loan amount. This means borrowers usually use one-quarter of their entitlement to purchase a home. For example, with a standard $200,000 VA mortgage that isn’t in a high-cost county, the veteran will use $50,000 of entitlement. He or she will still have $54,250 entitlement remaining ($104,250 basic and secondary entitlement – $50,000 entitlement used).

Loan entitlement is not a single-use benefit. An eligible service member can reuse their entitlement for the rest of their life. Even if a veteran has used all his entitlement to buy a home, VA loan entitlement can be fully restored when the loan is paid in full. This may be done by selling the home and paying off the mortgage. They also may pay off the mortgage and, using a one-time restoration benefit, keep the property as a second home or rental property.

It’s even possible to have two VA mortgages at the same time. This usually happens when a service member buys a home and has a PCS (Permanent Change of Station). The service member can choose to keep the primary home to rent it out. In this case, the borrower may have enough entitlement remaining to buy a new home without a down payment.

What Happens if a Veteran Doesn’t Have Enough Entitlement?

It’s somewhat common for a veteran to find he does not have enough entitlement remaining after buying a first home with the VA entitlement. This is especially the case if the first VA loan was lost to foreclosure. The good news is the secondary entitlement can be used to allow veterans who have gone through foreclosure on a VA property to buy again. The veteran’s COE will explain how much entitlement is remaining.

In some cases, the borrower does not have enough entitlement remaining for a new VA loan. It’s still possible to get a VA mortgage with a down payment, often with less down than is necessary with other loan programs.

Borrowers who are unsure of their remaining entitlement can speak with a VA mortgage specialist. They will be able to explain more about using the VA entitlement for the first, second, or even third time.

VA Loan Rates: Why Do They Change?

va loan ratesDeciding to buy a home is a huge decision and is confusing with all the terminology that gets thrown around. One option for veterans is to use a lender that offers VA loans. Once you decide that a VA loan is right for you, the next thing to examine is VA loan rates from one lender to another.

A lower interest rate on a loan means that you’ll have a lower monthly payment and end up paying much less over the life of the loan.

VA Loan Rates

What are the Benefits of a VA loan?

A VA loan does not require a down payment, unlike other loan programs. Most require at least 20% down to avoid paying private mortgage insurance, while a VA loan you can finance the entire cost of the mortgage.

Since VA loans are guaranteed by the government, individuals who get a VA loan and don’t put down at least 20% are exempt from paying for PMI. This also means you’ll have a lower monthly payment than you would with other loan types.

Lenders offer VA loans because they are government guaranteed and create less of a risk than other mortgage programs to the lenders.

Why and how Often do rates change?

VA loan rates are highly regulated, but they’re not fixed and vary depending on how the market performs that day. In the past, the VA set their own lending rates, but that’s not the case any longer. Lenders are allowed to charge their own rates to keep the market competitive with other VA lenders and other loan programs.

The Government National Mortgage Association (GNMA), commonly referred to as Ginnie Mae, provides liquidity in the market. They do this by purchasing VA loans from the lenders that issue them.

Lenders sell the loans to get money to provide more loans to consumers. The GNMA 30 year bond gets traded on the market daily like other securities and bonds that are bought and sold based on investor strategies.

Every day lenders look at the Ginnie Mae bond price and change their interest rates to match. The index each lender uses is the same, meaning that rates vary little from one lender to another. Rates from one lender to another aren’t static but don’t expect to see drastic differences when looking at the different loan rates from one bank or credit union to another.

Rates can change daily and frequently vary from the morning until the afternoon, especially if something affects the market. Investors put money into the market if they feel confident about how the economy is doing.

They’re more likely to invest money in stocks and transfer money from bonds. This causes interest rates to increase, while rates tend to decrease if investors feel that economy is headed downward. Understanding

Assists in broadening your knowledge of the mortgage process and different types of loans available. This information will assist you with pursuing the loan type that fits your financial situation and home-buying goals.

Obtaining Military Documentation for VA Loans

va loan documentsAs a veteran, you will at some point want to purchase a home with a VA loan. The best way to do that is to get a home loan through the Veterans Administration. Like all other types of loans, VA loan documents will be required to get your application approved.

VA Loan Documents

The main document that you must get to secure a VA loan is the Certificate of Eligibility (COE). Once you have this document, you will be able to provide a lot of information proving that you are eligible for this type of loan.

Steps in Obtaining Certificate of Eligibility

The first step in obtaining your certificate of eligibility is to ask your lender if they offer VA loans. You will also want to ask the lender if they offer you the opportunity to obtain your COE online. Most lenders will have access to the VA loan system which can allow you to get your certificate of eligibility within a few minutes. In some cases, your lender may not be able to get this document via the internet. Then you will need to ask your lender about other ways to get this documentation.

Ways To Get Certificate of Eligibility

When looking to get your certificate of eligibility, you will need to keep in mind the three ways you can get it. First, you can use the internet and access the VA e-Benefits Portal. This will allow you to find your COE and print it out immediately. You can also send a request to the Atlanta Regional Loan Center via mail and get the COE by regular mail. Those who are looking to get their COE can also use their lender to access the VA online portal and get the document that way as well.

Other VA Loan Documents Needed

Another thing required to obtain documentation to secure a VA loan is to provide proof of service. Oftentimes, it will be necessary to provide your DD Form 214 which will provide the lender with documentation proving that you are a veteran. If you are still serving, it will be necessary to get and provide a statement of service by your personnel officer or commander. The statement must show the date of entry into the military and when you were ordered for active duty and for how much time.

As well as providing the certificate of eligibility and proof of service forms, it will be necessary to get other forms to secure a VA loan. You will need to get form 26-1880 if you have served in the National Guard, reserves and/or active duty. For those who are surviving spouses of veterans, then you will need form 26-1817 to get a VA loan. It will be very beneficial for you to work with a VA loan specialist to properly interpret the information on the forms so that you can confirm your eligibility status.

Are VA Loan Gift Funds Allowed?

va loan gift fundsVA loans have cemented their position as one of the most valuable loan products in the market. The loan product offers a lot of amazing benefits to eligible veterans. These include, in addition to others: zero down payments and no cap on seller’s contribution to the closing costs. Now, when it comes to closing costs it is not really that easy to find a seller. A seller should be ready to pay the costs and all such costs have to be taken care of before the loan is sanctioned. Apart from under certain special circumstances. But, there is an easy solution out of this. And that solution is VA Loan Gift Funds.

What Are Gift Funds?

Gift funds are very simple to understand. They work exactly like a gift does. Your friends or family give you a certain amount of money without any conditions. VA loan Gift funds allow the money to be used for covering the closing costs towards a VA loan. However, there is a set of restrictions that the applicants need to adhere to. These conditions are generally easy for the loan applicants to fulfill. And are, of course, much less stringent than a regular home loan any given day.

Applicants cannot just show up with a pile of cash and call them gift funds for a VA loan. If they get such a gift fund, then they must be able to prove that it came from a legitimate source. Such a source can include family members or even family-like relations, where even friends may qualify. Even if the gift funds are coming from a known person, they should also have a legitimate paper trail. This means these funds should have records with an established financial institution or a bank.

Who is the Source of the Gift Fund?

Another important thing to keep in mind is that no person who is involved in this entire transaction process, in any way, can act as a source of the gift fund. So, someone like a lender cannot become a sponsor of VA loan gift funds. To make sure that this condition is met, the applicant needs to produce a letter with the gift fund. This letter will include all the important details of the donor. It will also include the amount of gift funds, and the date of transfer of these funds to the recipient. This letter also carries an important disclaimer that clearly states that the donor of the gift fund. This donor, in no way, is expecting a repayment of the funds they have gifted.

VA Loan Gift Funds

In the case of VA loans, there are a lot of provisions that make it easier for the applicants to get the loan. The same goes for gift funds as well. Unlike other loan products, a loan applicant is not required to provide a copy of the “gifter’s” bank statement to the lender or to the VA authorities. All they need to do is to present a cancelled cheque, which is considered ample proof of documentation for a VA loan.

Gift Funds can most definitely be used to fund a VA loan and as it turns out it is easier to get a gift fund with a VA loan than with a regular loan.



Can I Apply for a VA Loan Online?

va loan online

VA loan online application is one of the best ways to acquire a home. These loans (VA Loans) are written with extremely favorable terms and make it very easy for veterans to get into the homes that they deserve. Even better, the loan application process can usually be completed entirely online – yes, you can apply for a VA Loan online.

There are many lenders available that offer VA loans. To be able to apply for a VA loan online, you may want to focus on banks that you are familiar. These banks should have federal credit unions that you’ve done business with before. Also national online lenders who will compete to give you the best rates on your mortgage loan.

When you apply for loans, your credit report will only be hit once. It is in your best interest to apply for as many loans as possible within a short amount of time; this will give you the most favorable terms. In practice, applying for a VA loan online is generally as easy as filling out an online form with each lender. There are also third-party aggregate services that will take your information and send them to dozens of lenders at a time.

How Should You Prepare for Your VA Loan?

Before you start applying for your VA Loan online, you should pull your credit report from one of the three major reporting bureaus: Equifax, Experian, or TransUnion. Look over your credit report for any errors and correct them before you apply; your credit score has quite a lot to do with how lenders see you.

As far as technology goes, you should have digital copies of all your documentation (discussed below). You also should be able to digitally fax documents if needed, as many lenders operate only with fax machines.

What Do You Need to Apply for a VA Loan Online?

  • Proof of your service. To apply for a VA home loan, you will need to have either: 

    (1) served for 80 consecutive days of active service during wartime

    (2) has served 181 days of active service during peace time

    (3) served 6 years or more in the National Guard or Reserves

    (4) or been a spouse of a service member whose death was a result of their service.

  • Documentation of your current income.To determine the amount of your income, you current income is considered. This income should be documented thoroughly over the past year. In case you have pay stubs, the last three to six months of pay stubs should be sufficient. If your income is irregular, you will need to document it more thoroughly and have a history of deposits.
  • The last three years of your tax returns. Often, your last three years of tax returns may be requested. This is to identify the amount of money that you have made on an annual basis over the last three years. Don’t worry if you weren’t making as much money back then; the lenders generally just want to see that you’ve been employed.

Once you have all your documentation and information ready, you can begin the process. Generally, this will begin with a simple form through which the lender will pre-qualify you based on your credit score. After that, the lender will ask for a packet with the above information, to give them a more specific idea of your borrowing capabilities.