Using your example, here is how a VA 2nd tier entitlement would work.
What if it's a VA loan of, for example $210,000 on a $250,000 unit. I bring $40,000 DP plus my VA remaining entitlement of $10,000, which 'protects' $40,000 of loan value? This effectively could give me the rates (and no PMI) of a 20%DP loan, although the cash turned over is less than 20% of value.
On VA loan of $210,000 you would need 25% of that in equity/down payment and/or available entitlement for this to work so you would need $210,000 X 25% = $52,500. In your example you're actually short by $2,500. If you increased your down payment to $42,500 you can do a new VA loan.
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