VA Home Loan Process and Entitlements
What this domain tests
The sequence from preapproval to closing, and the entitlement math that determines down payment. Candidates must show they can walk a file through each gate and spot where VA-specific rules differ from conventional lending.
Core concepts
- Certificate of Eligibility: Establishes entitlement. It can be obtained through the lender's connection to VA systems or by application, and service history determines eligibility category.
- Entitlement math: With full entitlement, the guaranty covers the loan up to the county loan limit without a down payment. With remaining entitlement, the veteran's entitlement plus the guaranty on the new loan must reach the lender's required level; the shortfall is covered by a down payment. Work in dollars, not percentages alone.
- Order of operations: Preapproval, purchase contract, VA appraisal and Notice of Value, underwriting, title work, clear-to-close, closing. Repairs negotiated after the Notice of Value follow VA repair requirements.
- Appraisal issues: If value is below price, the buyer may renegotiate, pay the difference in cash, or invoke the escape clause.
- Funding fee: Collected at closing or financed; exemptions and refunds on certain refinances matter.
- Servicing and post-closing: Know assumptions, reinstatement of entitlement after payoff, and one-time restoration when a prior property is disposed of.
Traps
Questions mix county loan limits with entitlement amounts, forget the down payment when entitlement is partial, and assume a low appraisal kills the deal.
Worked example
A veteran has remaining entitlement of a stated dollar amount. The lender requires guaranty equal to 25% of the loan. If 25% of the target loan exceeds available entitlement, the veteran's down payment is the difference between the required guaranty and the entitlement available, divided by the guaranty percentage. Compute the required guaranty first, subtract entitlement, then convert the shortfall to a down payment figure.