If you are planning to use your VA home loan benefit to purchase or refinance a home, you may be wondering how high you can go.
VA does not set a cap on how much you can borrow to finance your home. However, they do set a cap on how much liability VA will assume, which affects the amount of money you can borrow on a VA mortgage.
The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow with $0 down. These limits vary by county, since the value of a house depends in part on its location. VA basically mirrors the conforming loan limits, which you can check here.
There are “high cost” areas with higher limits, but the minimum limit is currently $424,100 (2017). This year, all counties in Arizona conform to the minimum limit. In California, roughly half the counties have higher limits ranging from $488,750 to $636,150.
Borrowing more than the limit
The VA loan limit does not mean you can’t borrow more on a VA loan. To figure out how much you can borrow over the limit, there a couple of factors, and then it is a simple math problem. If you have full entitlement, you can count on putting down 25% of whatever amount you pay over the limit. So for example, if you buy for $10,000 over the limit, you will need to put $2,500 down.
VA’s “basic entitlement” amount is $36,000. Since the VA offers lenders a 25% guarantee, you can get a VA loan up to 4 times that, which comes to $144,000. In 1944 when the program was established, that was probably enough to buy most homes. In today’s world, that doesn’t get you quite as far. So VA also has a “bonus entitlement” rule, which allows you to buy more if you are purchasing a home for more than $144,000.
For example: Say you are buying a house for $434,100 in a county with a limit of $424,100. Take 25% of the amount over the limit ($10,000). The VA will guarantee 75% of that, so your maximum VA loan will be $431,600, and your down payment will need to be $2,500.
With low fixed rates and no monthly mortgage insurance, this is still almost certainly a better deal than any other options available.
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