How Much Can I Borrow With a VA Loan?
This is a funny question. More accurately, the answer to this question is an odd thing. Chances are, if you’ve looked around for this answer, you’ve probably read as many different answers as websites you’ve perused. Even benefits.va.gov lacks a comprehensive and understandable explanation of how much a borrower is able to borrow with a VA loan. I’m going to do my best to give you the long and short of it here.
The first thing to realize is that the VA does not put a limit on how much a borrower can borrow with a VA loan. The VA puts a limit on how much money they are willing to guarantee. A veteran’s basic entitlement is $36,000. Obviously, that’s not very much, but fear not, for the VA is willing to add onto that basic entitlement anytime the loan amount exceeds $144,000 ($36k*4). How, you may ask? It does not matter. All you need to know is that you will have enough entitlement to purchase a home that costs more than $144,000. What does entitlement have to do with anything? Well, most lenders require that at least 25% of your loan amount be covered between the your entitlement and your down payment. The dollar amount that the VA is willing to guarantee varies by county, since home prices and cost of living vary by county as well. The VA publishes a list each year that shows the maximum loan amount that a veteran can get and still have 25% of their loan guaranteed by the VA.
For most counties, you’ll find the loan limit to be $417,000, which is 4*$104,250. For those counties, the VA is only willing to guarantee up to $104,250, and therefore, the loan limit you will most likely experience is $417,000. There are many counties that have a higher loan limit. You can find the full list for 2015 here. So to recap, the VA itself places no limit on how much a veteran can borrower with a VA loan, but does put a limit on the amount of entitlement a borrower has, which makes lenders, who want at least 25% of the loan covered, put limits on how much they’re willing to lend. A veteran’s basic entitlement is limited to $36,000, and then can be eligible for more depending on what county the veteran lives in. For 3,000 counties, that entitlement equals $104,250, which allows veterans to borrow up to $417,000 without having to make a down payment.
But wait, there’s more. You can borrow more than the county loan limit if you can find a lender to give you a “jumbo” loan. A jumbo loan is a VA loan where less than 25% of the loan is guaranteed. Not all lenders offer jumbo loans, and those who do will offer them with varying terms. Suffice it to say though, that the “limit” is not really a limit, and the reason why is because the VA puts no restraint on how much a veteran can borrower, only on how much they’ll guarantee. A lender with a strong stomach for risk can offer jumbo VA loans for higher amounts than the county loan limits the VA publishes.
All complications aside, the most important take-away from all of this is that there is no real limit other than your own finances on how much you can take out on a VA loan. This is especially true if you get your loan with us here at Low VA Rates, because we offer jumbo loans. If you’re wondering how much entitlement you have, check your Certificate of Eligibility (if you already have one) or work with us to get you one. Your COE will have the amount of guaranty you are entitled to listed on it. As it is unlikely that you will use exactly as much entitlement you have available, you will also have what is called “remaining entitlement” after the loan goes through. If sufficient, this remaining entitlement can be used to purchase another property with a VA loan under some circumstances. For more information on this, contact us over the phone or through our website and we’ll explain the circumstances that this can be used.