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Navigating the VA Home Loan Process: Understanding Eligibility, Entitlement, and Qualification

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If you are a Veteran, Active Duty service member, National Guardsman/Reservist, or surviving spouse of an eligible Veteran, you may be able to utilize the VA loan benefit. In this comprehensive guide, we will explore the key factors that determine who can utilize this important benefit, including:

  • Eligibility
  • Entitlement
  • Qualification

By understanding these points, you'll be better equipped to navigate the VA loan process and make the most of the VA loan benefit you’ve earned and deserve.

Eligibility: Meeting the Minimum Requirements

Eligibility refers to whether an individual meets the minimum requirements to receive a Certificate of Eligibility (COE) from the VA. There are two main paths to eligibility – either via military service or through the benefits of a deceased Veteran that transfer to the surviving spouse.

Members of the following groups may be eligible for the VA loan benefit:

  • Active Duty service members
  • Veterans with an honorable discharge
  • Spouses of an MIA/POW service member
  • Surviving spouses of an eligible deceased Veteran
  • Reservists/National Guard members with sufficient time served

However, membership in one of these groups does not guarantee eligibility. It is possible to be part of one of these groups and not be eligible for a VA loan.

To confirm your eligibility, it is best to obtain a copy of your Certificate of Eligibility. You can do this by contacting the VA directly or having a lender request it on your behalf.

There are some specific documents you will need to collect and submit to be able to receive your COE. Which documents exactly will depend on your service type. If you would like one of our dedicated VA loan specialists at NewDay USA to guide you in applying for your COE and even submit the application on your behalf during your loan process, reach out to us at 877-586-0470.

Entitlement: What portion of the loan amount will the VA guarantee?

Entitlement represents the amount a veteran has available to guarantee a VA Home Loan. Unlike other loan products that rely on mortgage insurance, the VA Home Loan Program provides a unique guarantee to lenders. The VA guarantees the lender against losses up to a certain portion of the loan amount, and this guarantee is supported by the veteran's entitlement. The entitlement ensures that lenders have added security when providing VA loans.

There are three terms you should be aware of when it comes to entitlement, those are:

  • Full entitlement
  • Remaining entitlement
  • Bonus entitlement

Full entitlement is when a veteran either has never used their VA loan entitlement before or if they have had full entitlement restored after previously using it for a VA loan. When a borrower has full entitlement, there will be no VA limits on the amount they can borrow up to 100% of their home’s value (although individual lenders may set their own limits). To have full entitlement, veterans will need to meet at least one of the following criteria:

  • They have never used their VA loan benefit
  • They paid back a previous VA loan after selling their home
  • They have restored their full entitlement through a one-time restoration
  • They have used their VA loan benefit but had a foreclosure or short sale, but still paid back the loan in full

Important note:  If you currently have a VA mortgage, the VA home loan program makes it easy to refinance your current loan into a new VA loan by restoring your entitlement with a cash out restoration. There’s nothing you need to do to take advantage of the cash out restoration, your mortgage company will take care of restoring your entitlement for you!

Then there is remaining entitlement, which is when some portion of your entitlement is charged to a previous VA loan, this may impact the amount you can borrow. For example, there may be a loan-to-value restriction or a down payment required. In addition, in the event a veteran’s basic entitlement is $0 there will be a minimum loan amount of $144,000.

For those with remaining entitlement, their VA home loan limit is determined by the county loan limit where they live. The VA guarantees that they will pay a lender up to 25% of the county loan limit, less the amount of entitlement already used.

Bonus entitlement, also known as the "tier 2" or "additional" entitlement, is relevant for veterans who have remaining entitlement. It is a term that the VA uses when communicating with a lender about VA-backed loans which exceed $144,000. The bonus entitlement amount varies, based on the conforming loan limits set by the Federal Housing Finance Agency (FHFA) for conventional mortgages.

The amount of the bonus entitlement available to a veteran can be affected when:

  • They have used their VA loan benefit before
  • Any of their entitlement was lost as a result of foreclosure or default on a previous VA loan

Keep in mind that just because the VA guarantees an amount, there is no guarantee that a lender will be willing to loan that amount. The veteran borrower will still need to meet the lender's credit and income requirements.

Qualification: Meeting the Requirements for a Loan

Qualification is the process of meeting the requirements to obtain a loan. It is important to note that having a Certificate of Eligibility and entitlement does not automatically qualify an individual for a VA Home Loan.

Qualification involves meeting both VA requirements (such as property type) and lender requirements (such as credit history, financial stability, and other qualification criteria).

Private lenders are responsible for providing the funds for VA Home Loans, and they have specific guidelines that borrowers must meet.

Navigating the VA Home Loan Process with NewDay USA

The process of determining what you may and may not be qualified for can be complicated. If you're a Veteran and unsure where to begin in utilizing your VA loan benefit, we're here to help. Visit our website at https://www.newdayusa.com/get-started to provide your preliminary information so that we can get in touch with you. Alternatively, you can call us at 844-451-1589. One of our dedicated Account Executives will be able to help you determine your eligibility and apply for a VA loan.

Explore utilizing your VA loan benefit through the NewDay USA 100 VA Cash Out Refinance Loan for covering important expenses such as education, home improvements, and more. We also offer the NewDay USA Zero Down VA Home Purchase Loan for purchasing a home.

At NewDay USA, we are dedicated to helping veterans make the most of their well-deserved benefits. Contact us today to start your VA home loan journey and explore the options available to you.

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