New Kentucky VA Loan Guidelines for Entitlement
• As opposed to lending the money directly, the VA provides a financial guaranty on these loans
which are made by private companies. The guaranty is a type of insurance for lenders (pledging to repay a percentage of the loan if the borrower defaults) which is typically
25% of the loan.
• The guaranty is reflected in a dollar amount which is called “entitlement.” The borrower’s
amount of entitlement determines how much may be borrowed without a down payment. This calculation is determined during the origination process using a document called the Certificate of Eligibility
(COE).
• There are two layers of entitlement:
$36,000 (basic entitlement) + $91,600 (secondary entitlement) = $127,600
(maximum entitlement in most of the country)
• Since the VA guarantees 25% of the loan amount, borrowers can borrow up to 4 times their
entitlement which is now $510,400 in most of the country (1 unit).
• In high cost areas of the country, qualified Veterans can take advantage of
even more entitlement (up to $765,600 for 1 unit).
Kentucky Entitlement, VA Guaranty & VA Loan Amounts
As discussed, published county loan limits are no longer a factor for Veterans
seeking a jumbo loan with full entitlement. So, for Veterans with full entitlement, the
maximum amount of guaranty for a loan above $144,000 is 25% of the loan amount,
regardless of the county loan limit.
•
However, the county loan limits and possible down payment requirements continue to
apply for those who have more than one active VA loan, only partial entitlement
available or those who have defaulted on a previous loan.
•
If the Certificate of Eligibility (COE) shows any unrestored entitlement or the loan
amount is less than $144,000, the regular calculation will still be used to determine if
a down payment is needed, the loan amount needs to be lowered, or if the
entitlement should be restored to receive the 25% guaranty.
•
For Veterans who have previously used entitlement and such entitlement has not
been restored, the maximum amount of guaranty is the lesser of 25% of the loan
amount OR the maximum amount of guaranty entitlement available.
