Editor’s note: Effective January 1, 2020, there is no limit on the amount VA borrowers can finance with no money down. The VA loan limits referred to here no longer apply. This post will remain active for archival purposes.
VA Mortgage Loan Limits
The VA Home Loan Guaranty program was first established in 1944 as a way to help servicemen returning from war to build roots in a community.
It was the second government-backed mortgage program to help U.S. homeowners. The FHA loan, established in 1934, was the first.
And, since World War II’s end, three additional government groups now support home loans and mortgage lending, too. They are Fannie Mae, Freddie Mac, and the U.S. Department of Agriculture via its zero-money down USDA loan.
However, the VA loan sports one major difference as compared to the other government-backed mortgage types — VA loans are without “limit”.
There is no explicit maximum loan size for a VA mortgage.Verify your new rate (Jul 12th, 2020)
How VA Loan Guarantees Work
The Department of Veterans Affairs does not lend money for mortgages. The VA is not a lender.
What the agency does do for mortgages, though, is guarantee them. This means that the VA promises the lender that it will repay up to certain amount of loss in the event of foreclosure or other default type.
The VA, literally, guarantees the loan.
The VA Home Loan Guaranty is a terrific benefit for those who currently serve in, or have been honorably discharged, from the Armed Forces, National Guard, or Reserves.
The program allows for 100% financing, never charges mortgage insurance, and, because of the guaranty, mortgage rates are often far below comparable FHA and conventional rates.
However, there are limits to the amount the VA is willing to guarantee. This can affect the maximum loan size a lender will offer for a VA loan.
Typically, mortgage lenders will lend 400% of the VA’s maximum guaranty, which amounts to a maximum VA loan size of $765,600 in many parts of the country.
This figure is not a mandate, however. VA mortgage lenders are free to set their individual VA loan limits at whatever level they like.
In high-cost parts of the country, military borrowers often borrow more than the $510,400 national limit — up to $765,600 with no down payment.Verify your new rate (Jul 12th, 2020)
Getting A Larger Loan Limit For Your VA Home Loan
The Department of Veterans Affairs offers mortgage lenders a guaranty against loss on loans meeting VA mortgage guidelines. Lenders, in turn, offer VA mortgages with loan sizes capped at four times the VA guaranty.
This 4x-limit exists because, in the event of foreclosure, the lender expects to lose about one-fourth of the home’s value via the sale of the distressed home.
The VA loan guaranty protects against that loss.
However, in many parts of the country, the national VA guaranty is too small to support VA loans for more than $510,400. Therefore, to help support its veterans, the VA offers larger loan guarantees in areas considered “high-cost”.
Examples of high-cost areas are Marin County, California; Arlington, Virginia; and, most of Hawaii. In high-cost areas, military buyers can finance up to $765,600 using a VA loan, with no down payment and no mortgage insurance.,
Loans exceeding the national limit are sometimes called “jumbo VA mortgages.”Verify your new rate (Jul 12th, 2020)
Using A Down Payment To Expand Your VA Loan Limits
Sometimes, the Department of Veterans Affairs’ extended loan limits will be too low to help you purchase your home with no money down.
That’s okay. If you’re willing to make a small down payment, your monies brought to closing can function in the same manner as a government’s VA guaranty.
Your down payment can extend your lender’s maximum loan size by 400% of what you put down.
Here’s how it works.
Let’s say you wanted to buy a home in Bellevue, Washington. Bellevue is in King County, and the 2017 VA loan limit in King County is $592,250.
The home you want to purchase, though, costs $600,000.
In order to use your VA benefits, you would only need to “guarantee” one-fourth of the difference between what the home costs and what the VA agrees to guarantee (which is $592,250).
This means that, with a down payment of $1,938 — just 25 percent of the $7,750 excess purchase price –you can buy your Bellevue home with a VA loan and get a great, low mortgage rates with no accompanying mortgage insurance whatsoever.
There is no limit to how much of a down payment you use with a VA loan.
What Are Today’s Mortgage Rates?
VA mortgage loans are an important part of the U.S. housing market and, for eligible borrowers, there is no explicit loan limit. You can borrow as much as you need.
Get today’s live mortgage rates now. Your social security number is not required to get started, and all quotes come with access to your live mortgage credit scores.Verify your new rate (Jul 12th, 2020)