Most VA loan applicants applying for their very first home loan are thinking about enjoying the new home; who is contemplating selling their first home when they close the deal on the VA mortgage? Yet many borrowers do go on to bigger properties, or those located in other cities. There are a variety of reasons why a borrower might come to a VA loan transaction without full VA loan entitlement--what do VA home loan rules say about a borrower using his or her remaining entitlement?
According to the VA loans official site, "Veterans who had a VA loan before may still have 'remaining entitlement' to use for another VA loan. Most lenders require that a combination of the guaranty entitlement and any cash down payment must equal at least 25 percent of the reasonable value or sales price of the property, whichever is less."
The VA cites an example to help make this easier to understand. The official site gives a theoretical, "$23,500 remaining entitlement" that the official site says, "would probably meet a lender's minimum guaranty requirement for a no-down payment loan to buy a property valued at and selling for $94,000.
You could also combine a down payment with the remaining entitlement for a larger loan amount."
What kinds of situations mught have a borrower in this position? Sometimes divorce is a factor, other times a borrower might have had a joint loan with another veteran but is no longer part of that situation. Any situation where the borrower might not have the full VA loan entitlement to use, but still has some could apply.
A borrower with partial entitlement could take out a joint loan with another veteran, which could create a situation where a down payment might not be needed in the same way it might (depending on the transaction and the lender) if the borrower was applying alone.
All VA loan transactions are unique--it's best in these cases to discuss your partial or remaining entitlement with a loan officer to see what options you might have. There are few "blanket" rules that might apply to all applicants with remaining entitlement--talk to the lender to learn how your situation is affected by the VA policies on VA loan entitlement.