f. Guaranty and Entitlement

If the supplemental loan will not be consolidated with a related outstanding guaranteed loan:

·   the veteran must have sufficient entitlement for the new loan, and

·   VA will issue a new Loan Guaranty Certificate solely for supplemental loans.

If the supplemental loan will be consolidated with a related outstanding guaranteed loan:

VA will issue a new modified guaranty certificate.

g. Procedure

If the veteran has no available entitlement, VA can still guarantee the supplemental loan provided the lender is the holder of the veteran’s existing loan and the loans are to be consolidated.

The amount of the modified guaranty will be the maximum guaranty effective on the existing loan at the time the supplemental loan is closed.

To calculate the percentage of guaranty applicable to the combined indebtedness

·   take the result of Step 1, and

divide by the result of Step 3.  

Follow the steps in the table below to calculate the percentage of guaranty applicable to the combined indebtedness.

Step

Action

1

·   Take the balance of the existing loan at the time of closing of the supplemental loan, and

·   multiply by the percentage of guaranty for the existing loan, as shown on the guaranty certificate.

2

Calculate the amount of guaranty that would be issued on the supplemental loan as an independent loan (do not exceed the amount of entitlement available to the veteran).

3

·   Take the balance of the existing loan, and

·   add the amount of the supplemental loan.

4

·   Take the result of Step 1 above, and

·   add the result of Step 2 above.

5

Divide by the result of Step 3 above.