Understanding VA Bonus Entitlement

Veterans receive entitlement to help them buy a home with no down payment. In order to qualify, they must meet the minimum service time requirements along with an honorable discharge. As long as they buy a primary residence to live in full-time, the underwriting guidelines are flexible and the costs low.

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When you shop for a VA loan, though, you may hear terms like basic entitlement and bonus entitlement. What are the differences and how do you qualify?

What is Basic Entitlement?

Veterans are provided basic entitlement once they are eligible for a VA loan. The basic entitlement provides veterans with a loan amount of $144,000. The VA guarantees 25% of that amount, which means $36,000. With this entitlement, veterans can buy a home up to $144,000 with no down payment.

What is Bonus Entitlement?

The VA realizes that in most areas, it’s hard to find a decent home for $144,000. That’s where the bonus entitlement comes into effect. Veterans can use an additional $77,275 bonus entitlement benefit to buy a more expensive home with no down payment. This entitles veterans to a home that costs as much as $453,100.

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You don’t have to do anything special to get the bonus entitlement. As long as you qualify for basic entitlement, the bonus is automatically available to you as well. If you don’t use all of your entitlement, it remains available for use for a future purchase.

How Entitlement Works

So now that you know how much entitlement you may get, how does it work? Below are a few examples:

Joe is a veteran and buys a home for $150,000 with a VA loan. This leaves Joe with a benefit of $303,100 ($75,775 VA guarantee). Joe decides he wants to move after living in the home for one year. He sells the home and pays off the loan. Joe then applies for reinstatement of his entitlement to buy another home a few towns away. Joe is free to use his entire $453,100 benefit again.

Jack is a veteran as well. He buys a home for $200,000 with his VA loan. This leaves Jack with $253,100 in VA entitlement. Jack’s job relocates him one year after living in the home. The new job is located 150 miles away. Jack doesn’t want to sell his current home because it’s close to his family and is where he plans to retire. Jack requests that the VA allow him to use his remaining entitlement to buy a home near his new job while keeping his existing home. The VA grants him the one-time exception, which allows Jack to buy a home for $253,100 without a down payment.

As you can see, you can reuse your VA benefits, whether basic or bonus, if you pay off your loan and sell the home or if you apply for a one-time exception. Your bonus entitlement helps you afford a more expensive home than the basic entitlement would provide. You don’t have to apply for the bonus entitlement if you find a home that costs more than $144,000; you are eligible for it as long as you are eligible for basic entitlement.

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