This is a tricky question and one that we, as VA Loan Specialists, have a hard time answering simply. The best answer is, in fact, “it’s complicated”. So, with that in mind, let’s take some time to see how the rules are applied. Thankfully, the VA has recently posted clarifications and examples to make it easier on all of us.
The first thing that we need to understand is that the VA now adjusts the maximum loan amounts by county thanks to recent changes intending to support the ‘Jumbo’ loan market that lenders have shied away from in the past year. Some counties may be at the national limit of $417,000 but if housing prices are higher than average, they may have a higher limit. Here in Honolulu, the limit is currently at $750,000 ($625,500 on the neighbor islands). Remember, that is the max for 100% financing, and that the VA program will actually allow for loan amounts greater than that as with a minimal down payment.
Knowing that, let’s take a look a VA Joe who has just PCS’d to Hawaii from Ft. Riley in Manhattan, Kansas. He still has his a VA loan on his home over there with a balance of $221,050. The VA guarantees 25% of that loan amount, so he is currently using $55,262.50 of his total entitlement. “What is his total entitlement?” you ask. Good question, it is one fourth of our local county loan limit. So because he is buying in Hawaii, the full VA entitlement will be $750,000 divided by four or $187,500. We determined that he is already using $55,262.50 of that total because he still has a VA loan on his house in Kansas. What remains is the difference of $132,237.50 ($187,500 – $55,262.50).
Now we know that he has $132,237.50 of entitlement available if he were to obtain a VA loan here in Hawaii, but what does that mean as far a loan amount? The entitlement guaranty must cover 25% of the loan amount, so we can give him a loan for $528,950 – four times the amount of the remaining entitlement. It’s important to remember that $528,950 is the maximum loan amount and if he wants to finance the VA funding fee, the purchase price will need to be slightly lower than that. He could even obtain a larger loan, but a small down payment would be required.
That’s a lot of numbers to digest. The important thing to take away is that you may be able to use your VA loan privileges for 100% financing even if you have another VA loan outstanding. Feel free to contact us if you need assistance determining the amount of entitlement you have remaining.