Let’s say you’ve just found out that you’re eligible for the VA loan program. Firstly, congratulation! VA loans are generally one of the best options. Plus, if you qualify for it, it means that you’ve served and sacrificed for our country. Not everyone is that awesome.
Secondly, you might have a few questions. For example, now that you know you can buy a house with a VA loan, exactly how much house
can you buy? Take just a few minutes to find out where your range is and get the home of your dreams!
Entitlement is what makes the VA loan program possible. Here’s how it works: The VA offers each eligible veteran a certain amount of entitlement (separated into basic and additional, but that’s not important). This entitlement amount is the maximum amount the VA will pay to the lender on behalf of the borrower if the borrower defaults on the loan. For the most part, the VA will pay around 25% of the loan amount to the lender on behalf of the borrower. This guarantee lowers the amount of risk that the lender is taking on when they give the VA borrower a loan, which means that they are willing to offer lower interest rates and better loan terms than for conventional loans. The exact amount of entitlement is more complicated to explain than can be justified here. Just know Bottom line is the VA guarantee will cover 25% of it.
VA Entitlement and How Much House
Here’s the thing about the VA guarantee and the VA loan program: it doesn’t really affect how much house you can afford. It does in a nominal way by allowing you to get a lower interest rate than you could get on a conventional loan, but it doesn’t substantially change your debt-to-income ratio or how expensive the home is. While it would be pretty cool for the VA to use your entitlement to subsidize your home purchase, that’s not how the program works, and the way it works is a much smaller burden on taxpayers but still provides a lot of benefit for veterans and can be used more than once. So all of this is nice information, but what about the crux of the question: how expensive of a house can you buy with a VA loan?
How Much House Can You Buy with a VA Loan?
The Fed has loan limits for home loans that it insures, and that limit is, for the most part, $417,000. Many counties that are more expensive have higher limits, but you’ll need to find out from a lender if yours is one of them. The VA loan limits are exactly the same. Here’s the thing, though – that county limit is in place for all loans, not just VA. So how does anyone buy a home more expensive than that? Through jumbo loans, which allow for higher amounts to be borrowed. The VA loan program also allows for jumbo loans, which means that any home you can qualify to buy through a conventional loan you’ll also be able to buy through a VA loan, at least as far as the cost of the home is concerned.
There may be other things that prevent you from being able to purchase that home (such as the sale price being higher than the reasonable
value of the home), but as long as you can financially qualify for the cost of the home you’re buying, you won’t be restricted by the VA loan program. This is a common misconception of borrowers learning about the VA loan program; they expect that there are some limits to the size of the house or the price of the house you can buy using your VA loan benefits. The VA allows you to purchase essentially any home you qualify for financially as long as it meets all of the other criteria the VA has set for homes purchased through its program. Contact us or comment below with questions about your VA loan!