Updated: November 1, 2024
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If you're a veteran or eligible family member, VA home loan limits indicate the amount you can borrow to purchase a home without needing to place a down payment. Over time, changes like the Blue Water Navy Vietnam Veterans Act of 2019 have influenced these limits, expanding the horizon for many homebuyers.
Eligible veterans and service members with full entitlement do not have limits on loans as of 2020. If you have remaining entitlement, VA home loan limits vary depending on your county.
VA home loan limits are a bit of a misnomer as they don't cap the amount you can borrow; rather, they tell you how much you can borrow without needing to make a down payment and define the maximum amount the VA will guarantee for the lender, ensuring a safety net if you default on the loan. The VA will guarantee up to 25% of the loan amount, depending on your VA entitlement.
The VA used to impose limits on all loans over $144,000, but that changed with the Blue Water Navy Vietnam Veterans Act of 2019. Now, no loan limit restrictions exist if you're a first-time VA loan user with full entitlement. However, if you're using a portion of your entitlement for a VA loan already, the county loan limits come into play for loans above $144,000.
The Blue Water Navy Vietnam Veterans Act of 2019 eliminated loan limits for veterans with full entitlement, which includes those using their home loan benefit for the first time. It extended a more flexible and accommodating framework within the VA home loan program, marking a progressive stride in making homeownership more accessible for veterans.
VA, FHA and conventional loans are distinct pathways to homeownership, each with its own guidelines, including how loan limits are set. Here's a simplified breakdown of the differences among them regarding loan limits:
VA Home Loan Limits: VA home loans used to limit the amount a veteran could borrow without a down payment, not the total amount they could borrow. Currently, there's technically no maximum loan limit for first-time VA loan users, provided they have full entitlement, allowing a great deal of flexibility. However, the loan limit may still apply to veterans with reduced entitlement due to multiple VA loans or defaults on previous loans.
FHA Loan Limits: FHA loan limits are established by the Federal Housing Administration and are influenced by the county's median home price. They are set annually and are designed to accommodate moderate-income homebuyers. The limits are categorized into low-cost and high-cost areas, with the latter having higher loan limits to account for higher median home prices. FHA loan limits dictate the maximum loan amount for FHA-insured mortgages.
Conventional Loan Limits: Conventional loans typically adhere to the limits set by the Federal Housing Finance Agency (FHFA) for Freddie Mac and Fannie Mae conforming loans. These limits are also set annually and vary by county based on housing costs. There are also high-cost area adjustments, similar to FHA loans. Conventional loans that exceed these limits are known as non-conforming or jumbo loans and come with different lending criteria.
Understanding these distinctions will help you select a loan type that aligns with your financial situation and the property market in your desired area, creating a smoother pathway toward securing a home loan.
Entitlement plays a significant role with regard to VA home loan limits. It represents the amount the VA guarantees to the lender on your behalf should you default on the loan, defining how much you can borrow without a down payment.
VA home loan limits work differently based on whether you have full or remaining — also called reduced — entitlement. The former indicates that you haven't previously utilized any VA loan benefits or have entirely restored your entitlement from previous usage. Remaining entitlement, on the other hand, reflects a situation where you have used some of your VA loan benefits but haven't fully restored them.
As of 2020, those with full entitlement no longer have a VA loan limit, regardless of the loan amount. The VA home loan limits only come into play when you have reduced entitlement. In such instances, the VA will guarantee your lender up to 25% of the county loan limit minus the entitlement you've used.
Understanding your entitlement will help you navigate VA home loan limits, aligning your borrowing plans with the financial framework provided by the VA.
VA home loan limits only come into play when you have reduced entitlement. Here are the scenarios where you may have reduced entitlement:
Existing VA Loans: If you have an ongoing VA loan due to a previous home purchase and you're looking to secure another VA loan, perhaps due to a change in station, you will be subject to VA home loan limits, which determine the amount you can borrow on the new loan without a down payment based on the remaining entitlement.
Previous VA Loan Not Fully Restored: If you've paid off a previous VA loan but haven’t restored your entitlement, it will still be reduced. You can restore entitlement by providing proof to your lender that the VA loan was paid in full.
Refinanced Previous VA Loan: If you’ve refinanced a previous VA loan to a non-VA loan type, keep the refinance closing paperwork as your lender may need it to restore your entitlement, making the VA home loan limits applicable for any future VA loans you may pursue.
Short Sale or Deed in Lieu of Foreclosure: In cases where you've sold your home as part of a short sale and didn't fully repay your VA loan or had deed in lieu of foreclosure on a VA loan, your entitlement will be reduced. Additionally, your lender may set a waiting period before you can apply for a new VA loan.
Foreclosure on a Previous VA Loan: If there was a foreclosure on a previous VA loan that hasn’t been paid in full, a waiting period of at least two years after a foreclosure sale is required before applying for a new VA loan.
Understanding the scenarios when VA home loan limits apply allows you to navigate the homebuying journey with clarity and helps in making informed decisions.
Restoring your entitlement renews your eligibility to utilize the VA home loan benefit. It's a step to reclaim the benefit after you've paid off your previous VA loan or if the property secured by a VA loan has been sold.
Restoring entitlement is relatively straightforward. You'd need to complete Form 26-1880 and submit it to the VA. Entitlement restoration is automatic if your previous VA loan was paid off and the property sold. However, a one-time restoration can be requested if you've retained the property. The process ensures you're set to leverage the VA home loan benefits for your next home purchase.
The variation in VA home loan limits across different counties is closely tied to the conforming loan limits set by the Federal Housing Finance Agency (FHFA). Conforming loan limits represent the maximum loan amount that Freddie Mac and Fannie Mae are willing to back and are established based on the county's median home prices.
VA county home loan limits traditionally align with the FHFA's conforming loan limits. In high-cost counties, where the median home prices are higher, both the conforming and VA county home loan limits are adjusted upward to accommodate the higher price tags on homes. This alignment ensures that veterans can purchase homes using their VA loan benefits, even in areas with higher real estate prices.
The differences in VA home loan limits per county provide a better view of your homebuying potential. If you need additional resources, checking out the VA's website or speaking with your loan officer may provide insight, guiding your homebuying plans.
Since 2020, eligible borrowers who have full entitlement don’t have VA loan limits. If you have remaining entitlement, understanding VA home loan limits is key to planning and budgeting for your home purchase. There are several benefits to staying within these limits, but you also have options if you're eyeing properties priced above them.
VA home loan limits don't cap how much you can borrow. Instead, they indicate the loan amount that can be secured with no down payment if you have remaining entitlement, which is beneficial in planning your finances. If you aim for a home priced above the limit, a down payment may be needed to cover the difference.
Staying within VA home loan limits means choosing a home priced at or below the set limit for your county, ensuring the VA's guarantee covers your loan without requiring a down payment. Remember, this only applies if you have reduced entitlement. Here are some notable benefits:
No Down Payment
The primary benefit of adhering to VA home loan limits is the ability to purchase a home with no down payment. This can be a significant financial relief, especially for first-time homebuyers or those without a large savings.
Lower Interest Rates
Typically, VA loans offer competitive interest rates, and staying within the VA home loan limits can often secure these favorable rates, reducing your monthly payments and saving money over the life of the loan.
Faster Loan Approval
Loans within the set limits tend to process faster as they pose less risk to lenders.
Opportunities for Increased Home Equity
By not having to put down a large sum upfront, you can use that money in ways that could potentially increase the home's value, thus building equity.
When the property you want costs more than the VA home loan limits in your county, you still have options. Here are some strategies to deal with this situation:
Making a Down Payment: When a property exceeds the VA home loan limits, making a down payment to cover the difference is a straightforward option. It keeps the loan amount within the limit, ensuring you still benefit from the VA loan's favorable terms.
Securing a Jumbo Loan: Jumbo loans cater to homebuyers eyeing properties with prices soaring above the conventional loan limits (and thus VA home loan limits). However, they come with stricter credit requirements and higher interest rates.
Piggyback Loans: By taking out a second mortgage alongside your VA loan, you manage to cover the extra amount needed without altering the terms of your VA loan. However, each loan in the piggyback arrangement has its own terms and conditions, so it’s best to understand the details and ensure it aligns with your financial situation.
Exploring Other Loan Types: Beyond VA loans, exploring other loan types like conventional or FHA loans can be a sensible route. Each loan type comes with its own set of criteria and benefits which might align with your financial scenario.
Waiting and Saving: If the property prices are too steep, it might be worth waiting, saving and revisiting the market later. This patience allows for a larger down payment, reducing the loan amount needed.
Closing the gap between your desired property price and the VA county home loan limits in 2023 requires a blend of information and strategic action. Every option has its own set of pros and cons. Don’t hesitate to seek personalized advice, considering your financial circumstances and the VA county home loan limits.
MoneyGeek addressed the most common questions about VA home loan limits to help you get a better understanding of how these limits interact with your homebuying journey.
A VA loan is a mortgage loan partially backed by the U.S. Department of Veterans Affairs (VA). It helps U.S. veterans, active duty service members and select military spouses to purchase homes. VA loans offer competitive interest rates, require no down payment and don't necessitate private mortgage insurance (PMI). However, they are issued by private lenders.
VA home loan limits do not cap the amount you can borrow, but they do define the maximum amount the VA will guarantee without a down payment if you have remaining entitlement. Borrowing above the limit may require you to put down a payment upfront.
These limits are typically aligned with the conforming loan limits set by the Federal Housing Finance Agency (FHFA) based on county median home prices.
With full entitlement, there's no cap on the VA-backed loan amount for 100% financing. However, with remaining entitlement, the maximum loan amount for 100% financing aligns with the VA home loan limits in your county, requiring a down payment for any amount that exceeds these limits.
Over the years, VA home loan limits have evolved, often in parallel with changes in the housing market. Notably, the Blue Water Navy Vietnam Veterans Act of 2019 removed loan limits for those with full entitlement.
Full entitlement allows you to bypass VA home loan limits for 100% financing. If you have remaining entitlement, your maximum loan amount for 100% financing depends on the VA home loan limits in your county. The level of entitlement you have directly impacts the loan limits applied to your VA-backed loan.
VA home loan limits apply when you have reduced entitlement, either from a current VA loan or one in the past. These limits guide how much you can borrow without a down payment under such circumstances.
The 2023 VA home loan limits vary by county. You can check the latest limits on the VA’s website or consult with a local VA loan officer for precise figures.
With full entitlement, you will not have VA home loan limits. However, with remaining entitlement, options include making a down payment to cover the excess amount, securing a piggyback loan or exploring other mortgage types like conventional or FHA loans to accommodate the higher home price.
About Christopher Boston
Christopher (Croix) Boston was the Head of Loans content at MoneyGeek, with over five years of experience researching higher education, mortgage and personal loans.
Boston has a bachelor's degree from the Seattle Pacific University. They pride themselves in using their skills and experience to create quality content that helps people save and spend efficiently.
