01 Jun Are VA Loan Limits Unlimited?
Most people would appreciate the benefits of a VA home loan; no down payment required, no VA mortgage insurance, as well as lower interest rates usually associated with government-sponsored home buying programs.
From 2020 onwards, active military members and veterans eligible for the full VA loan amount will no longer have to worry about VA loan limits. If a homeowner has defaulted on a VA loan or has other VA loans that have not yet been paid off, loan limits still apply to them.
Related Article: Best VA Loan Lenders for Active Military & Veterans
What Is a Loan Limit?
A VA loan is the maximum amount for which the Department of Veterans Affairs can guarantee a loan without you having to make any down payment. These match the Federal Housing Finance Agency for conforming loan limits. Many banks do not cap the amount you can borrow; they set a maximum amount you can finance without putting money down.
Veterans who don’t have entitlement to the entire VA loan amount can borrow as much as they can before their down payment is required. The VA government’s loan limits can determine this. If a veteran has a full entitlement VA loan, they may borrow up to the loan amount without putting any money down.
A veteran’s eligibility is limited if they do not have all the entitlements because of an active VA loan or a prior default. Veterans can use these limits to assess their zero-down-payment ability. A limit can change every year. It is usually higher in more expensive markets due to a higher housing price.
Related Article: Can You Reduce Your VA Loan Interest Rate?
Loan Limits if You Have Full VA Entitlement
For veterans, service members, and survivors eligible for full benefits, there is no limit on the amount that can be borrowed over $144,000. The benefits of this offer include not having to make a down payment. We will guarantee your lender that should you default on a loan worth more than $144,000, we will pay them as much as 25% of the total loan amount.
The following requirements must be met for you to have full entitlement.
- If you haven’t taken advantage of your home loan benefit.
- When you have paid off a previous VA loan and sold your property (in this scenario, you would be able to reclaim your full benefits), or
- The lender has used your home loan benefits, but you had a foreclosure or compromise claim (a.k.a. a short sale) and have repaid it to the bank.
Related Article: What Is VA Homeowners Insurance, and Do You Need It?
VA Loan Limits if You Have Remaining Entitlement
The VA loan limit for your remaining entitlement depends on the county-based loan limit where you live. If you default on your loan, you will have to pay your lender up to 25% of the county loan limit minus the amount you have already used from your entitlement.
With your remaining entitlement, you can take out another VA home loan either on its own or with a down payment.
You may have remaining entitlements if any of the following apply:
- Your VA loan is active, and you are still repaying the loan, or
- You are still the homeowner after paying a previous VA loan in full.
- Your VA loan was refinanced into a non-VA loan, and you still own the home, or
- If you defaulted on a previous VA loan and didn’t repay us in full or if you had a compromise claim (or short sale)
A deed held the title to your home instead of foreclosure, or foreclosure was avoided by an act instead of a deed.
- You could not repay a previous VA loan because you had a foreclosure.
How VA County Loan Limits Affect Your Loan
When using the remaining entitlement and your loan amount is over $144,000, you may need to make a down payment. Because of this, most lenders require at least 25% of your total loan amount to come from your entitlement, down payment, or a combination of both.
It is possible to borrow more than the county loan limit with a VA-backed loan, for example, if you are able and willing to make a down payment. But do not forget that your lender will still have to approve your loan application. Depending on the size of the loan you can afford, the lender will decide the amount you can borrow:
- History of credit
- A collection of valuable items, such as savings accounts, retirement funds, and investment accounts.
VA Loan Limit Example
There is a lot of confusion about VA loan limits and entitlements, so let’s look at an example. For example, Justin has already used $50,000 of his VA loan entitlement, but he wants to use the rest to purchase another property. He can borrow a maximum of $647,200 in his county. Considering the VA will guarantee a quarter of that amount ($647,200 / 4), he will be eligible to receive a maximum of $161,800.
Justin’s VA loan limit is $447,200 ($111,800 x 4) after subtracting the amount he has already used ($161,800 – $50,000).
A down payment of at least one-quarter of the difference would be needed if he were to purchase a home priced higher than $447,200. On a house worth $500,000, a down payment of $13,200 would be required.
Related Article: Are Surviving Spouses Eligible for a Va Home Loan?
What if You Have Multiple VA Loans?
In some cases, two or more VA loans can be applied for simultaneously, but it does not happen very often.
In most counties in the United States, a VA-eligible borrower with full entitlement can obtain a loan of $548,250 with enough VA backing. VA home loan benefits are typically worth around $210,000, so most veterans are still eligible for some benefits after using their VA home loan benefits. Before restoring eligibility, the VA usually requires the loan to be repaid in full, and the home sold, but there is an exception.
This exception can be helpful in cases of military reassignment. Using the remaining VA home loan benefits does not require you to sell your previous home or pay off your loan if you have enough entitlement to do so. Your income and credit must still qualify, however.
What to Do if Your House Costs More Than Your Loan Limit
You still have options available to you if you are looking at a house beyond your VA loan limits. The VA loan does not require a down payment. However, if you’re interested in pursuing a VA loan for the purchase, you will need to take the home’s price, subtract your loan limit, and divide it by four to determine how much down payment you will need. (In other words, it should be a quarter of the difference between the purchase price and the VA loan limit.)
An alternative loan program, such as a conventional or FHA loan, may also be an option. However, these require at least 3 to 3.5% down, and the closing costs are typically higher than VA loans.