If you’re considering using your VA benefits to qualify for a VA home loan or refinance, prepare yourself with the knowledge of how much you can borrow. While the VA posts traditional VA home loan limits regularly online, under certain circumstances you can borrow more than what’s set as the maximum loan limit to get into the home you desire. Read more to find out how you can get the most out of your VA loan benefits.
Maximum VA Home Loan Limit
There is a vast misconception regarding the maximum-allowed VA home loan size. The VA regularly posts updates—similar to FHA—on the maximum loan amounts allowed. The amounts vary and are codependent on the property state and county of the home being financed. The VA home loan limit is traditionally capped between $417,000–$625,000. However, veterans can use their benefits to purchase a home, or refinance an existing home loan for an even higher loan amount than the traditional capped amount—known as the “VA loan amount.”
In fact, the Department of Veterans Affairs (VA) does not set a cap on how much you can borrow on a VA mortgage loan. The maximum loan amount available to veterans who use their VA benefits is 100% dictated by the lender. Homesite Mortgage has always worked with veterans to find the best home loan solution no matter how large of a loan amount they seek.
The reason the VA has even established loan limits is to simply provide veterans information on the maximum amount of money they can borrow with zero money out of pocket for a down payment. If the county loan limit is set at $417,000, a veteran can typically buy a house and get a mortgage up to $417,000 with zero money out of pocket. If the county loan limit is set at $625,000, again, the veteran can qualify for a mortgage at $625,000 with zero money out of pocket.
If the loan needs to be higher than the county loan limits, then an experienced VA mortgage banker is needed. A good lender will be able to draw out a plan of the maximum VA home loan amount, and know how much of a down payment is needed in order to qualify for a certain loan amount. Homesite Mortgage bankers have the right experience and knowledge to help you get the most out of your VA benefits!
Calculate the VA Home Loan Limit
There is no secret calculation to understanding how much you can borrow through a VA home loan. All the necessary information is posted on the VA benefits website. Be sure you’re looking at an official government site by checking that the URL ends in .gov (instead of .com).
Take a look at the simple calculation below for someone seeking a mortgage with a larger loan amount than what’s set by the VA County Loan Limit. There are three steps to this process:
1. Figure out the maximum amount the VA will guarantee, which must be equal to 25% of the appraised value or purchase price (whichever is less) in order to qualify and use your VA benefits. Take the county loan limit, multiply it by 25% (.25) and you now you know the maximum amount the VA will allow to be used towards the required 25% guaranty.
2. Take the appraised value of the home (or purchase price—whichever is less) and multiply that number by 25% (.25).
Subtract Maximum Loan Amount from Appraised Value (Step 2–Step 1=Step 3) If the max guaranty calculated in Step 1 is higher than Step 2, then no money is required out of pocket for the down payment. It also signals that you have enough equity to refinance into a VA home loan. If there is a positive number between Step 2 and Step 1, the difference needs to be brought down through offering more money for a down payment, or having that much equity in your home to qualify for a refinance.
VA Guaranty Calculation Examples
Scenario #1: VA Purchase Loan
VA County Loan Limit = $625,000
Purchase Price = $900,000
Step 1: $625,000 X .25 = $156,250
Step 2: $900,000 X .25 = $225,000
Step 3: $225,000–$156,250 = $68,750 remaining? This is the required down payment.
In the above scenario we quickly calculated that this veteran can buy a $900,000 home, as long as they offer a down payment of $68,750. Homesite Mortgage can provide them with a loan of $831,250.
Scenario #2: VA Refinance Loan
VA County Loan Limit = $417,000
Appraised Value = $1,500,000
Step 1: $417,000 X .25 = $104,250
Step 2: $1,500,000 X .25 = $375,000
Step 3: $375,000–$104,250 = $270,750 required equity
In the above scenario as long as the mortgage being refinanced is less than or equal to $1,229,250 then you can qualify for a loan from Homesite Mortgage.
Keep in mind that not all veterans will qualify for the same loan amount and every borrower is subject to income and credit qualifications. Some lenders may even require you to have additional money in the bank set aside in savings as part of being qualified for a higher loan amount. If you have additional questions please call us today! Homesite Mortgage has the knowledge and the expertise to make sure you are maximizing your VA benefits to get the right mortgage that makes sense for your situation.
Written by Tom McSwain, U.S. Air Force Veteran.