What Is a VA Loan Entitlement?
VA loans are one of the best ways for service men and women to purchase a home. Because of the $0 down payment requirements and low interest rates, knowing how to qualify for a VA loan is key. Enclosed is information about VA loan entitlements and how to request a certificate of eligibility.
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Definition
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VA loan entitlement is the basic amount for which the VA will insure or guarantee a loan. Entitlements are based on service member's income, and most lenders will lend up to four times the amount of the total entitlement. The standard entitlement is $36,000. However, entitlements can be as high as $60,000.
Certificate of Eligibility
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In order to obtain an entitlement letter, a veteran needs to contact a lender or the VA directly to obtain a certificate of eligibility. If active duty, current LES (pay) records must be provided. If prior service, a copy of the DD214 (Honorable discharge) form must be provided.
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Loan Limits
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The VA sets a limit on the amount of a loan that they will insure for a veteran or active duty service member. Currently the limit is slightly over $400,000. The limit can change at any time.
Misconceptions
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There is a common misconception that the VA lends money directly to veterans and active duty personnel. The VA does not lend the money directly, the VA insures or guarantees the loan in the event that the veteran defaults.
Considerations
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Prior to applying for a certificate of eligibility with a lender, it is wise to check your personal credit history and clear up any blemishes in order to expedite the approval process. Collections and bankruptcies must be closed and paid for a period of 1 to 2 years before applying for a home loan.
Expert Insight
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VA loans can be worked to the benefit of the veteran if the veteran hires a true expert. Using a Realtor as a buyer's agent is free to the veteran, and many Realtors know how to help and utilize VA loan benefits and eligibility to best assist the veteran.
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