The concept of the VA’s loan limits can be confusing not just for military homebuyers but even for people in and around the mortgage industry. You’re likely to find a lot of misconceptions and bad information out there online.
If you’re confused about the VA loan process, Veterans United can help steer you through the process!
One of the most common is that the VA loan limits represent the absolute maximum amount of money you can borrow using this long-cherished home loan benefit. The fact is there’s actually no maximum loan amount on a VA loan. What those loan limits represent is how much a qualified military borrower can obtain without making a down payment.
Let’s take a closer look.
VA Loan Limits
The VA program was created to help level the playing field and get veterans and military members into homes, considering it can be difficult for those who serve to meet the requirements for other mortgage products. The biggest single benefit of this program is that qualified borrowers can purchase without having to put money down. That’s a tremendous financial advantage.
But the VA does have in place a loan limit for every U.S. county. This limit dictates how much you can borrow while still putting $0 down, and it’s a pretty generous amount — $453,100 in most parts of the country. But the limits are actually higher in more expensive areas.
There’s no rule or regulation that says you can only get a loan for up to your county’s loan limit. You can get as much as your lender will finance. The issue is that you’ll have to come to the closing table with a down payment to make it work.
Buying Above Loan Limits
The question is: How much will you have to come up with? It depends on two things, the county loan limit and the lower of the sales price and the appraised value. Qualified borrowers will be on the hook for a quarter of the difference.
Here’s an example. Let’s say you have full VA loan entitlement and the county in which you’re purchasing has the standard $453,100. The home you want to purchase is $553,100. There’s a $100,000 difference between the two, and one quarter of that is $25,000, which is how much the borrower would need as a down payment.
The required down payment can increase significantly if you’ve already used some of your loan entitlement and it isn’t or can’t be restored. Let’s say the situation above is the same except you only have $63,275 in entitlement remaining after a foreclosure on your last VA-backed loan. Since the VA insures a quarter of the loan, the most you can get without a down payment is $253,100 ($63,275 x 4).
If you still want that $553,100 home, you’ll need to come up with 25 percent of the difference between that purchase price and your personal loan limit, which is a whopping $75,000 ($517,000 – 216,000).
It’s important to know that your VA loan benefits can help you purchase an expensive home. Obviously you need to be able to afford the mortgage and associated costs. The program is definitely worth a long, hard look if you’re also considering other financing types on a “jumbo” loan, as they’re called. You can talk with a Veterans United loan specialist about what might be possible at 855-524-7279.
Photo courtesy of pnwra