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Lesson 4.4

VA Loan Limits

 

No Limits on Borrowing

The VA’s loan limits look different today than they have in recent years.

The loan limits have often inspired confusion among homebuyers and even people in the mortgage industry. The main reason for the confusion is because it sounds like there’s only so much house you can buy with a VA loan, and that’s absolutely not the case. Lenders might have their own in-house cap for how much they’ll lend, but the VA doesn’t impose any kind of cap on how much you can borrow using your benefit.

Today, veterans with their full VA loan entitlement can borrow as much as a lender is willing to lend without the need for a down payment. It wasn’t always like that. In previous years, the VA’s county level loan limits would come into play, and veterans looking to purchase above their limit would be on the hook for a down payment.

For example, in years passed, if you were buying a $500,000 home in a county with a $400,000 loan limit, you would need money for a down payment. Now you don’t, as long as you have your full VA loan entitlement. Needless to say, this is a huge benefit and a big change for veterans nationwide. To buy a $500,000 house with a conventional loan, you might have to put down $50,000 or more.

But it’s also important to understand that the VA’s loan limits haven’t gone away, either. If you have less than you full entitlement available, either because you lost a previous VA loan to foreclosure or you have one or more active VA loans right now, then you will have to contend with the loan limits, which can change annually.

In these cases, lenders will use the county loan limit to help determine how much you can borrow before needing to factor in a down payment. Buyers in these situations are relying on what’s known as their second-tier entitlement. If you’re looking to buy with less than your full entitlement, I also encourage you to check out our video about second-tier entitlement and how to reuse your VA loan benefit.

Current Loan Limits

The 2020 loan limit for most counties in the country is $510,400. For more expensive counties, the limits cap out at $765,600.

Buyers in these high-cost counties have more VA loan entitlement at their disposal. That can be a huge benefit if you already have a VA-backed loan or if you’ve lost one to foreclosure.

Again, though, remember that these limits are not a cap on how much you can borrow. For buyers with less than their full VA loan entitlement, lenders will use these limits to help determine your zero-down buying power.

VA Jumbo Loans

Qualified borrowers who want to buy homes above their county loan limits certainly can. But another consideration is that once you cross this threshold, you're entering “jumbo” financing territory. VA jumbo loans can be a bit tougher to land than a traditional VA loan in terms of credit and asset requirements.

But these loans also offer a lot of big-time benefits for veterans looking for a large mortgage. For example, conventional buyers might need a good-sized down payment to make a jumbo loan work. VA buyers with their full entitlement can borrow as much as a lender is willing to lend without the need for a down payment.