f. How to Calculate Guaranty and Entitlement Use

Guaranty is calculated on an energy efficient mortgage as described in the following table.

Step

Action

1

Calculate guaranty on the loan without the portion attributable to the energy efficiency improvements.

2

Calculate guaranty on the energy efficiency improvements portion by applying the same percentage used in Step 1.

3

Add the results of Steps 1 and 2 to arrive at guaranty on the entire loan.

However

The veteran’s entitlement will only be charged the amount arrived at in Step 1; that is, based upon the loan amount before adding the cost of the energy efficiency improvements.

Example 1:  If a veteran has full entitlement and applies for a loan of $80,000, plus $6,000 in energy efficiency improvements, VA will guarantee 40% of the full loan amount of $86,000.  Thus, the dollar amount of the guaranty will be $34,400, even though the charge to the veteran’s entitlement is only $32,000.

Example 2:  If a veteran with full entitlement applies for a $144,000 loan to purchase a home, and adds $6,000 in energy efficiency improvements, the 25% guaranty on the loan will only require the use of $36,000 entitlement, but the dollar amount of guaranty will be $37,500.

g. How to Calculate the Funding Fee

Calculate the funding fee based on the full loan amount including the cost of the energy efficiency improvements.