Getting 100% Home Financing on VA Loans Using Secondary Entitlements – Boston Mortgage How-To

On all VA mortgages, the VA guarantees 25% to the lender. The basic VA entitlement is actually a specific amount of $36,000. That only allows you to buy a house for $144,000. In the Greater Boston area, that’s not much of a house or much of a mortgage. So the VA allows for something called “secondary entitlements”. These allow you to go to the conforming loan limit (the normal limits of what can be loaned on a given property) or to the *county* limit – whichever is *higher*. That’s excellent news. If the conforming limit of the loan is $417K, they have to guarantee 25% of that mortgage. So with the basic entitlement at $36K, they are guaranteeing an additional $50-68K on top of the $36K to lend you the $417K for your house or condo. In Boston, however, the VA county limit is actually $500K! That means the VA would have to give a bonus entitlement of an additional $89,000 of guarantee for the loan. That’s a 25% guarantee. The VA does not lend money – all they do is guarantee 25% of the mortgage. The reason for the 25% is that, on average, when a lender forecloses, the mortgage lender loses about 25%. So by guaranteeing 25% against loss, the Boston mortgage lender can be comfortable lending you 100% financing. And that, my friends, is excellent news for home buyers in the Boston area.

Phil Ganz (354 Posts)

Philip D. Ganz is a Boston Mortgage Broker and Boston Home Loan specialist. For information, expertise, consulting, or advice about home loans, refinancing mortgages, or commercial property loans, contact Phil with no obligation: 617-529-9317

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