VA loan glossary

40 terms your lender may use, translated.

Assumption: When a buyer takes over the seller's existing VA loan, including its interest rate and remaining balance.
Basic entitlement: The first tier of entitlement, $36,000, shown on your COE. It covers loans of $144,000 or less.
Bonus (second-tier) entitlement: Extra entitlement for loans over $144,000. With full entitlement it equals 25% of the loan amount; with partial entitlement it is based on the county loan limit.
Cash-out refinance (Type I and Type II): A VA refinance that can replace any loan. Type I does not raise your balance; Type II gives you a larger loan, often to take cash out.
Certificate of Eligibility (COE): A document from VA that shows a lender you qualify for the VA home loan benefit and how much entitlement you have.
Churning: When a lender pushes you to refinance again and again soon after your last loan, mostly to earn fees. VA's seasoning and recoupment rules aim to stop it.
Conforming loan limit: The yearly loan size limit set by FHFA for Fannie Mae and Freddie Mac. VA uses the one-unit county limit when you have partial entitlement.
Debt-to-income ratio (DTI): Your monthly debt payments divided by your monthly gross income. VA's guide is 41%, but loans above that can be approved with strong residual income.
Discount points: Money paid up front to lower your interest rate. One point equals 1% of the loan amount.
Entitlement: The amount VA promises to repay a lender if your loan goes into foreclosure. It is what lets lenders offer no down payment.
Escape clause (amendment to contract): A required VA contract clause that lets you cancel without losing your earnest money if the home appraises below the price.
Full entitlement: You have never used the benefit, or you used it and it was fully restored. With full entitlement there is no VA loan limit.
Funding fee: A one-time fee paid to VA to help keep the program running. It is a percent of the loan amount and can be added to the loan.
Funding fee exemption: A rule that waives the funding fee for Veterans receiving disability compensation, certain surviving spouses, some service members with a pre-discharge rating, and active-duty Purple Heart recipients.
Guaranty: The part of the loan VA backs. For loans over $144,000, VA generally guarantees up to 25% of the loan.
IRRRL: Interest Rate Reduction Refinance Loan, also called a VA streamline refinance. It replaces one VA loan with a new VA loan at a lower rate or more stable terms, usually with little paperwork.
Loan Estimate: A standard three-page form lenders must give you that shows your rate, payment and closing costs, so you can compare offers side by side.
Loan servicer: The company that collects your monthly payments. It may be different from the lender that made your loan.
Loss mitigation: Options a servicer uses to help a borrower who is behind avoid foreclosure, such as repayment plans, modifications or a partial claim.
Minimum Property Requirements (MPRs): VA's basic rules that a home must be safe, structurally sound and sanitary, with working utilities and safe access.
Native American Direct Loan (NADL): A loan made directly by VA to eligible Native American Veterans, or Veterans married to Native Americans, to buy, build or improve a home on federal trust land.
Net tangible benefit: Proof that a refinance actually helps you, such as a lower rate, a lower payment or a move from an adjustable rate to a fixed rate.
Notice of Value (NOV): The letter that states the VA's reasonable value for the home after the appraisal is reviewed. Your loan amount is based on the lower of this value or the price.
Occupancy: Your promise to live in the home as your main residence, usually within about 60 days of closing.
One-time restoration: A one-time chance to restore entitlement after you pay off a VA loan but still keep the home. After using it, you must sell the home to restore it again.
Origination fee (1% flat charge): The lender may charge up to 1% of the loan to cover its costs that are not on VA's list of fees a Veteran may pay.
Partial (remaining) entitlement: What is left when some entitlement is still tied up in another VA loan or an unpaid VA loss. County loan limits apply here.
Reasonable value: The value VA sets for a property based on the appraisal. Seller concessions are capped at 4% of this number.
Recoupment: How long it takes for monthly savings to pay back the refinance costs. For an IRRRL, it must be 36 months or less.
Regional Loan Center (RLC): A VA office that handles home loan matters such as COEs, appraisals and entitlement questions for a set area.
Release of liability: VA's approval that frees the original borrower from responsibility for a loan someone else has assumed.
Residual income: The money left each month after your mortgage, taxes, debts and estimated living costs. VA sets a minimum based on family size, region and loan size.
Restoration of entitlement: Getting your used entitlement back, usually after you sell the home and pay off the VA loan, or when a qualified Veteran assumes your loan and substitutes their entitlement.
Seasoning: A waiting period before you can refinance a VA loan. You need six monthly payments made and 210 days since the first payment due date.
Seller concessions: Extras a seller pays for the buyer, like the funding fee or paying off debts. VA caps them at 4% of reasonable value; normal closing costs do not count toward the cap.
Substitution of entitlement: When a Veteran who assumes your loan puts their own entitlement in place of yours, so your entitlement can be restored.
Tidewater process: A step that gives the lender or agent two business days to send the appraiser more sales data before the appraiser reports a value lower than the contract price.
VA appraisal: An independent estimate of the home's value done by a VA-assigned appraiser, who also checks the home against VA's property rules. It is not a full home inspection.
VA loan technician: A VA staff member who can help Veterans talk with their servicer and find options to avoid foreclosure, at no cost.
VA Partial Claim: A program that started in June 2026 where VA pays a servicer to bring your loan current. You repay VA later, without interest, when you sell, refinance or pay off the home.