The max VA loan amount no longer exists
If you’re lucky enough to qualify for a VA loan, then you’ve got some serious advantages on your side.
With no down payment requirements, no mortgage insurance, and some of the lowest interest rates around, a VA loan is one of the best mortgage products you can come by.
Plus, VA loan changes enacted at the start of this year introduced another perk: there’s no longer a max VA loan amount.
Now, to be clear, that doesn’t mean you can get a VA loan in whatever amount your heart desires.
There are still some boundaries on what you’ll be able to take out — they just depend more on your unique financial situation, rather than a nationwide limit.
What “no VA loan limits” means for you
The elimination of a max VA loan limit doesn’t mean a spending spree is on your horizon. But it does make buying a larger home, or a home in a more expensive market, a little bit easier.
Most importantly, you’ll be able to purchase that more expensive property without putting a lot of money down (or any at all, if you prefer).
But before doing that, it’s important to remember that skipping the down payment — while allowed — will mean a higher loan balance and, thus, a larger monthly payment. For example:
|Purchase price||Down payment||Interest rate||Monthly principal and interest payment|
For these reasons, you’ll need to be smart about buying within your means. Use a mortgage calculator to determine what you can afford, and let that guide your home search.
VA loan “limits” now depend on your budget
Having no max VA loan amount simply means your borrowing threshold will depend on your unique financial scenario and budget, rather than a government-set limit.
In a nutshell: Instead of asking, “how much can I borrow with a VA loan?,” you should now focus on “how much house can I afford with a VA loan?”
To determine what you can afford, you’ll need to take into account your income, credit score, debts, and other factors.
Ultimately, your VA lender is going to set your max loan amount based on:
- Your income: How much are you bringing in each month? Lenders generally don’t want you spending more than 30% of your income on housing costs.
- Your credit score: How creditworthy are you? Higher credit scores will mean a better interest rate and a lower monthly payment to boot. They might also give you a higher maximum loan amount as a result
- Your debts: How much are obligated to pay toward debts each month? How much of your income does that take up? Your debt-to-income ratio will influence your loan amount as well
- Your down payment (if any): Are you planning to make a down payment? If so, how much? A down payment will make your monthly mortgage costs lower and could qualify you for a larger loan, too
Generally, you can expect borrowers with lower debt-to-income ratios, large down payments, and higher credit scores to see larger VA loan limits.
If you have a lower credit score, skip the down payment, or have lots of debt, you’ll be able to afford less and will, therefore, qualify for a smaller loan amount.
How to determine your VA loan limit
To get a feel for what you could afford using a VA loan, you should check current VA mortgage rates.
Then use those rates, plus your monthly income, local home prices, your debts, and your down payment, to determine a comfortable monthly mortgage payment.