If you’re a veteran or military member planning to secure a loan backed by the Department of Veterans Affairs (VA), you may have heard reference to “loan limits.” Loan limits are the maximum amount that borrowers can secure with a conventional mortgage loan. If a borrower needs a loan amount that is higher than the conforming loan limits in their area, they would have to take out a jumbo mortgage loan, which would typically have more stringent lending requirements.
What are VA home loan limits?
Similar to loan limits for a conventional loan, VA home loan limits are the maximum amount that eligible applicants can borrow using a VA-backed home loan without making a down payment. The VA loan limit amounts are the same as those set by the Federal Housing Finance Agency for conforming loan limits. In 2021, the limit is set at $548,250 for single-family residences in most counties throughout the United States, and for high-cost areas, such as some counties in Hawaii and parts of Washington, D.C., the limit is $822,375.
However, it is very possible that you don’t have to worry about VA loan limits at all. Since 2020, veterans, service members, and surviving family members who still have their full entitlement no longer have loan limits. That means if you have your full entitlement, you won’t have to make a down payment, and the VA will guarantee your mortgage up to 25 percent of the loan amount for loans over $144,000.
How might this affect you?
If you're an active-duty military member or veteran applying for a VA home loan, loan limits won’t apply to you if one of the following describes your situation:
- You have yet to use your entitlement.
- You have paid off a previous VA loan and sold the property.
- You have used your entitlement and had a foreclosure or compromise claim, but have paid the VA back in full.
In other words, if you still have your home loan benefit, VA loan limits will not affect you. However, you still have to get approved for the loan amount that you need. If you’re hoping to purchase a very expensive property, but you don’t have the credit score, debt-to-income ratio, and assets to secure lender approval, you may not be able to buy the home.
For active-duty military members or veterans with remaining entitlement (meaning not full entitlement), loan limits still apply. For example, if you have defaulted on a VA loan or have other active VA loans, your loan limit would be whatever the conforming loan limit is in your county. If you secure a VA loan with remaining entitlement, the VA will guarantee up to 25 percent of the conforming loan limit in your country, minus the entitlement amount you have already used.
You can use your remaining entitlement either on its own or with a down payment to secure another VA home loan. It might be necessary to make a down payment in this case because lenders typically require 25 percent of the loan amount in the form of an entitlement, down payment, or a combination of the two. For example, if you have a remaining entitlement of $20,000 and you want to purchase a $200,000 home, you might need to put down up to $30,000 in order to reach 25 percent of the loan amount.
If you have remaining entitlement and you want to restore your full entitlement, you can often do so by either selling your current home and repaying the VA loan or repaying any claim in full.
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