VA Entitlement for Construction Loans: How It Works and How to Restore It

VA Entitlement for Construction Loans: How It Works and How to Restore It

0:00

Understanding Basic, Bonus, and Restoration Options for Your Home Build

If you’re thinking about building a home with a VA construction loan, understanding your VA entitlement is crucial. Entitlement is the amount of money the VA guarantees to your lender if you default. It’s what makes $0 down payment possible for veterans.

But it’s not just about knowing you have entitlement—you need to understand how much you have, how it can be restored, and what happens if you want to use it more than once.

What Is VA Entitlement?

VA entitlement is the amount of money the VA guarantees on your behalf when you use a VA loan. It’s essentially your buying power. There are two types of entitlement you should know about:

1. Basic Entitlement

• Covers up to $36,000 or 25% of a loan amount up to $144,000

• Mostly relevant for smaller loans, but it’s still the foundation of your VA guarantee

2. Bonus (Tier 2) Entitlement

• Designed to help veterans purchase homes in higher-cost areas

• Kicks in above the $144,000 mark and allows for 0% down on loans up to the conforming loan limit (currently $806,500 in most areas)

• In high-cost areas, the limit is even higher

💡 Example:

If you’re building a $400,000 home, your entitlement would cover 25% of that amount—or $100,000. Because VA loans are guaranteed, you don’t need a down payment to make up the difference.

Using Your VA Entitlement for Construction Loans

A VA One-Time Close Construction Loan allows you to:

1. Buy land

2. Build your home

3. Move into long-term financing—all with one loan and one closing

Your VA entitlement is what allows you to do this with 0% down, provided you’re not currently using it on another property.

Here’s how it works:

• When you secure a VA loan, part of your entitlement is tied to that property.

• If you still have remaining entitlement, you can use it to build a second home—as long as it’s going to be your primary residence.

• If you’re out of entitlement, you’ll need to restore it before using it again.

How Restoration Works (And Why It Matters)

If you’ve already used your entitlement, there are two main ways to restore it:

1. Sell the Property & Pay Off the Loan

• If you sell your home and pay off the VA loan, your entitlement is fully restored.

• You can use it again for your next primary residence.

2. One-Time Restoration

• If you want to keep your existing property but still use your VA benefits, you can apply for a one-time restoration.

• This is allowed as long as the current loan on the home you bought with your VA benefits has been paid off or refinanced into another mortgage product.

• This allows you to use your entitlement again, but only one more time unless you sell the original home.

Can You Use VA Entitlement More Than Once?

Yes, you absolutely can—but it depends on how much entitlement is remaining after your first purchase. This is called Partial Entitlement.

💡 Example:

• You bought a $200,000 home, and the VA guaranteed $50,000 of that loan.

• If you’re in a normal conforming loan limit county of $806,500, you would have $151,625 left in remaining entitlement.

• This means you can get 100% financing up to about $606,500.

• VA allows you to go above this, but it would require 25% down for every dollar over the available entitlement.

💡 Key Takeaway:

The total VA guarantee across properties cannot exceed your entitlement cap unless you restore it.

💡 Pro Tip:

If you’re planning to build a new home but still own your first VA-financed property, make sure to connect with a knowledgeable loan officer to calculate how much entitlement remains before you jump into a new contract.

What About Entitlement Limits?

When your entitlement is completely unused or has been restored, there is no cap on how much entitlement you have. We’ve handled VA Construction loans upwards of $2 million with 100% financing.

When any of your entitlement is used or lost, the conforming loan limit and entitlement cap come into effect. In most counties, this is $806,500 for 2025, but in high-cost areas, it can be significantly higher.

Final Thoughts: Know Your Entitlement Before You Build

Your VA entitlement is incredibly powerful—but it’s not unlimited. Understanding how much you have, how to restore it, and how to maximize it is critical before you begin the process of building your home.

If you’re planning to use your VA benefits for a new construction project, make sure you know exactly what’s available and how you can leverage it to build your dream home with as little out-of-pocket expense as possible.

Want to Learn More?

If you have questions about VA entitlement or want help calculating your remaining balance, feel free to reach out. Planning ahead will save you from surprises down the road.