How Do Basic and Bonus Entitlement Work?

If you are seeking out a VA Loan, it is important to know that each eligible veteran has a basic and bonus entitlement. However it is important to learn what an entitlement is and how it affects your VA loan amount. The simple definition reads as follows, “Each veteran is entitled to a certain amount of money that the VA will guarantee.” So, here is a breakdown of basic and bonus entitlement work in action:

1. A basic entitlement guarantees that the VA will cover up to $36,000 of a loan while the bonus entitlement covers $68,250. What this means is the VA will guarantee that $104,250 of any loan under $417,000 will be paid in case of default.
2. The $417,000 figure represents the amount of loan funding available from Fannie Mae and Freddie Mac. These two institutions guarantee securitization on private loans, VA loans and FHA loans. However, in most states throughout the country, the maximum loan amount remains at $417,000. Fannie and Freddie will not buy any loan that is over that benchmark loan amount.
3. Any loan amount over $417,000 is considered a jumbo loan, and the only way to obtain this amount of financing is through private lenders who use guidelines outside of the VA and FHA.

Important Facts to Keep in Mind

Most private lenders will loan up to four times the amount of basic and bonus entitlement amounts. The only barrier is the $417,000 benchmark loan amount. However, the guaranteed fund coverage provided by the VA ensures you will receive a quality loan that is quite affordable.

How MortgageDepot can Help

We are a leading mortgage finance company based in New York. We have a quality staff that specializes in VA Loans. Since basic and bonus entitlements are tricky, it is wise to seek out the advice of our specialists. We guide you through the entire process and guarantee we will place you in a loan that works in every way.