What is VA law and how does it work?

Types of VA Loan Entitlement

As a homebuyer looking to use the VA loan, there are three types of rights you should be aware of.

VA basic right

Prior to 2020, the base fee meant up to $36,000 security on a loan of up to $144,000 with no down payment. But starting in 2022, if your loan amount exceeds $144,000, the VA will guarantee 25% of the loan amount even if you don’t make a down payment. In addition to your full entitlement, you may be entitled to a bonus (more on this below).

When you receive your Certificate of Eligibility (COE), the base fee listed on the loan is $36,000. It is considered a full right. Above all, $36,000 is not the limit of the amount you can borrow. Instead, it reflects the amount the VA will guarantee on the loan.

With this base fee, the VA will guarantee a loan of up to $144,0000. However, that does not mean that $144,000 is your loan limit. After this point, the VA bonus entitlement comes into effect.

Right to VA bonus

The VA bonus entitlement indicates the additional amount the VA will guarantee if your loan amount exceeds $144,000. Sometimes this additional right is referred to as an additional right or level 2 right.

With this premium entitlement, you will not meet the loan limits set by the Department of Veterans Affairs. However, you will likely encounter a lender-imposed limit that takes into account your income, credit, and other financial details.

Reduced rights VA

If you have a reduced entitlement, it usually means that you have an existing VA loan that you are repaying or that you have defaulted on a previous VA loan. Although there is no limit to the amount you can borrow with a reduced fee, you will be required to pay a deposit if you exceed the fee.

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