If you are a veteran, you probably want to know how much money you can borrow with a VA loan. Most loan programs have maximum loan limits, so it would make sense that the VA loan does too. Unfortunately, it’s a bit more complex than just knowing the limits.
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Keep reading to learn how much you can borrow with your VA loan.
First, you should know how much entitlement you have. If you’ve never used your VA benefits, you have a basic entitlement and a bonus entitlement.
The basic entitlement is for a loan amount of $144,000. But because most veterans can’t buy a home for $144,000 and comfortably fit their family, the VA offers bonus entitlement. The bonus entitlement is good up to a loan amount of $453,100. This means you can get a VA loan of up to $453,100 with no down payment if you have never used your benefits.
But, it gets more complicated. Lenders don’t have to limit you to a $453,100 loan. If you qualify for the loan, meaning you can afford the payments, you can borrow much higher amounts on a VA loan. The difference is that you’ll need to make a down payment.
The VA guaranty stops at $453,100. Any amount that you borrow above that will require a down payment. Lenders generally require you to put down 25% of the difference between your loan amount and the guaranty. If you have full entitlement right now and need a $475,000 loan, you would have to make a down payment of $5,475 (25% of $453,100).
Using Your Entitlement
Technically, once you use your entitlement, it stays with the house until you pay off the loan and sell the home. Then you can ask the VA to reinstate your entitlement. This sets you back at the $453,100 entitlement limit.
Now, if you don’t sell the home, the entitlement stays with the home. This means you only have the entitlement left that you didn’t use with the original purchase. If you refinanced your home with the VA IRRRL program, you don’t have to certify that you live in the home anymore. You only have to certify that you did live in the home as your primary residence before.
The VA may grant you a one-time exception to use your remaining entitlement to buy another home. If you need another home because your job relocated you or you outgrew your home, the VA will often grant the exception. But this time around, you will only be able to borrow as much as the amount of entitlement that you have left.
Is Your Area High Cost?
There are certain areas of the United States that are considered high-cost. This means that the limit you can borrow and still not need a down payment may be higher. The VA goes along with the national conforming loan limits. Today there are more than 200 counties that have higher loan limits because of the high cost to live in those areas.
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The ceiling or maximum amount the VA will guarantee in a high-cost area is $679,650. The exact limit will vary based on the area, though.
Do You Qualify for the Loan?
Now putting your entitlement aside, you have to prove that you can afford the loan. It’s not enough to say that you are ‘entitled’ to a loan amount of $453,100 because you have full entitlement. You have to prove that you can afford it.
The only way to prove that you can afford the loan or qualify for it is to follow the VA’s rules. The eligibility requirements are as follows:
- Minimum 620 credit score (in most cases)
- Maximum 43% debt ratio
- Have enough disposable income to meet the requirements
- Have stable income and employment
- Don’t have any defaults on federal loans
Does the House Qualify for the Loan?
Now to complicate matters, even if you have enough entitlement and you can prove that you can afford the loan, you still can lose the loan. It all depends on the value of the house. The VA won’t let you buy a house that isn’t worth at least as much as the loan.
Say for example that you want to borrow $300,000 to buy a home. You pass the pre-approval stage with flying colors. Now the lender orders the appraisal. It comes back to the lender showing that the house is worth $250,000. The lender would only be able to give you a loan for $250,000, which leaves you $50,000 short for the home purchase.
As you can see, there are a lot of factors at play when you want to get a VA loan. Talk with your VA lender to see what your maximum loan amount may be given your circumstances. As is the case with any loan, make sure you shop around to get the best deal and to find the lender with the most flexible qualifying requirements.
Meta Description: Knowing how much you can borrow with a VA loan can help you choose the right house to buy. Learn the requirements to see where you stand.
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