Typically, VA loans do not have specific limits in many situations. However, eligibility criteria must be met to access these advantages. Learn how to determine whether there are any VA loan limits and when they become applicable.
What are VA loan limits and why do they exist?
The Department of Veterans Affairs provides VA loans to assist eligible veterans, service members, and their survivors in purchasing homes unlike various other loan types, such as conventional or FHA loans, which impose restrictions on home purchase amounts, VA loans, as of 2020, no longer have limits for borrowers with full entitlement.
Loan limits come into play for individuals who do not possess full entitlement. If you still have remaining entitlement, you will encounter a VA loan limit. Remaining entitlement is applicable if you fall into any of the following categories:
- You are actively repaying an existing VA loan.
- Although you paid off a VA loan, you still own the property that the loan was used to finance.
- You refinanced your VA loan into a non-VA loan and continue to own the property.
- A prior VA loan underwent a short sale, and you did not fully repay the loan.
- Faced with foreclosure on a property with a VA loan, you did not fully settle the outstanding loan.
If any of the scenarios mentioned earlier apply to you, you possess the remaining entitlement and will encounter VA loan limits, which vary by county and align with the limits set by the Federal Housing Finance Agency (FHFA).
VA Loan Limits Changes
In 2020, VA loan limits were eliminated for borrowers with full entitlement seeking to borrow more than $144,000 for home purchases. You possess full entitlement if you meet any of the following criteria:
- You have not utilized your home loan benefit.
- You paid off a previous VA loan in its entirety and subsequently sold the property.
- You utilized your home loan benefit but underwent a foreclosure or short sale and have since repaid the loan in full.
Having full entitlement allows you to apply for a VA-backed loan, and upon approval, you can obtain a Certificate of Eligibility (COE). This certificate informs lenders that you have satisfied the requirements for VA loan eligibility and entitlement.
Conventional loan limits
The conventional or conforming loan limits changed in 2023, now standing at $726,200 for a one-unit property in the continental U.S. However, these limits can differ depending on the location. States such as Hawaii and Alaska, for instance, have distinct standards compared to the rest of the U.S., and high-cost-of-living areas establish limits on a county basis. Additionally, the loan limits increase with the number of units in a property. For example, the conventional loan limit for a four-unit property in the continental U.S. is set at $1,396,800.
FHA loan limits
FHA loan limits undergo annual updates and are contingent on both the number of units and the property’s location. Regions characterized by a high cost of living, such as Hawaii and Alaska, feature higher limits compared to the lower 48 states.
These FHA loan limits are established at the county level, resulting in significant variations between neighbouring counties. Even if they are nearby, the amount you pay in one county can be considerably higher than in another. For the year 2023, the loan limit for a one-unit property stands at $472,030. For a more precise understanding, it is advisable to search for FHA loan limits specific to your current or potential future residence.
The Blue Water Navy Vietnam Veterans Act of 2019
This legislation is designed specifically for Vietnam veterans who served in offshore waters in the Republic of Vietnam between Jan. 9, 1962, and May 7, 1975. Eligible individuals can secure a VA loan without a down payment, irrespective of the loan amount they are seeking.
Furthermore, Purple Heart recipients presently serving on active duty are not required to pay the VA home loan funding fee. Additionally, Native American veterans seeking to build or purchase a home on federal trust land face no loan limits under this act.
Check to see if you’re eligible
If you’re considering a VA loan and are uncertain about potential borrowing restrictions, there’s often no need for concern. In many cases, borrowers won’t encounter any VA loan limits.
However, it’s essential to be aware that certain criteria could lead to the imposition of loan limits, especially if you’ve previously utilized a VA loan and are still residing in that property. Facing challenges in repaying a loan, such as experiencing a foreclosure or short sale without full repayment, may result in encountering a VA loan limit when attempting to secure a new loan.
To determine your eligibility and the amount you qualify for, it’s crucial to obtain your Certificate of Eligibility through the VA. This process will clarify whether you might face VA loan limits when applying for a loan through a VA-backed lender.
Frequently Asked Questions (FAQs)
What are the VA loan benefits for 2023?
VA loans offer the advantage of obtaining a home loan at a competitive rate without the necessity for a down payment or the additional expense of private mortgage insurance. Additional benefits encompass more lenient credit score requirements and the unique provision wherein the VA repays your lender up to 25% of the loan amount in the event of a default.
Can I get a VA loan for $1 million?
Certainly, it is possible to obtain a VA loan for $1 million. In many high-cost-of-living areas where homes are valued well over $1 million, eligible borrowers can still secure VA loans, often without the requirement for a down payment. The flexibility of VA loans allows qualified individuals to access financing even for higher-value properties in such regions.
What is the maximum VA loan for 100% financing?
The maximum amount you can borrow with a VA loan is determined by the extent of your entitlement. With full entitlement, there is no VA loan limit, and you can secure full financing, especially if you plan to borrow more than $144,000.
If your entitlement is not at full capacity, you can still qualify for a VA loan but may encounter loan limits. Your Certificate of Eligibility (COE) will provide details on the amount you are eligible for. Loan limits are county-specific because housing prices vary based on location—either your current residence or the area you intend to move to.