VA loans offer eligible active and retired military service members, in addition to surviving spouses incredible home buying benefits. One of those benefits being not having to put a down payment on a house, which gives qualified military affiliates more home buying power.
Lenders are able to offer qualified military service personnel looking to buy a home more favorable terms with more lenient requirements thanks to the fact that VA loans pose less risk to lenders. This is because this entitlement program is backed by a federal guarantee to repay a portion of the loan if a homeowner defaults on their loan.
This also means there are certain regulations regarding loan limits. Using a loan limit calculator can help veterans, active-duty service members, and surviving spouses determine how much house they can afford through the VA loan program.
Loan limits are defined as the maximum VA loan possible without a down payment. They affect whether or not qualified military personnel as home buyers are eligible for full or partial entitlement on a loan. The full entitlement is applicable for all first-time VA home buyers and VA homeowners who have repaid the portion of the entitlement in full on a VA loan, which is calculated at 25 percent. This is true whether the loan amount is $80,000 or $800,000.
Alternatively, veteran home buyers with reduced or diminished entitlement are obliged to remain within the parameters set by VA loan limits. Loans that exceed this amount are considered jumbo loans. These loans pose more risk to lenders, resulting in higher fees and rates. This stipulation is because loans exceeding VA loan limits in your county cannot be guaranteed by the federal government.
Loan limits vary by county. As of 2021, the standard VA loan limit is $548,250. In pricier housing markets, limits can reach upwards of just over $800,000. There is no actual cap or max loan amount issued per VA loan limits. Veterans with full entitlement under the VA program can receive as much as a lender is willing to issue them on a loan. VA limits begin to take effect for veterans with one or more active VA loans who have defaulted on a previous VA loan.
What is a Loan Limit Calculator?
A loan limit calculator shows you how much home you can afford based on the loan amount you can borrow. It factors in your loan type (in this case, a VA loan), the house or property type you want to purchase, as well as your city and state to calculate eligibility towards the total amount you can receive on a loan.
- Loan Type. A VA loan will be used as the input for the loan type in this calculator. It requires a $0 downpayment and is available to military personnel who qualify under a certificate of eligibility (COE), a document that discloses the nature of the terms of your military service discharge. It is also available to surviving spouses.
- House or Property Type. VA loans can be used to purchase single-family unit homes. They can also be used to purchase up to a 4-unit house (so long as it is owner-occupied). A property exceeding 4 units starts to fall into the commercial lending territory. Properties that are 2 and 3 family unit homes may also be purchased using a VA loan. The units in these homes are typically separated, with each one functioning as a separate apartment.
- City and State. You will need to input your city and state to see where your loan limit category falls by county. This will show you the amount you are able to borrow before having to make up the difference for a loan amount that exceeds the loan limit set by the VA.
How is a VA Loan Limit Calculated?
Remember, the VA backs or guarantees a quarter of the total loan amount (25%). Let’s say you purchase a home for $400,000. The VA will guarantee $100,000 of that loan amount. You have managed to restore $60,000 of that $100,000. Because you have partial eligibility, you take the amount available to you (the amount that was restored) and multiply it by 4 (because a quarter of the loan amount is guaranteed by the VA). $60,000 x 4 = $240,000.
That $240,000 value represents how much you are able to borrow before needing to make a down payment. In this case, you would be able to put $0 down on a house until reaching that $240,000 limit. Purchasing a home above that limit would require a down payment equal to 25 percent of the difference between that ceiling and the purchase price.
So let’s say you have the same reduced or partial entitlement as above with $60,000 available to you. The house you are looking to purchase through the VA loan program is $300,000.
First, determine 25% of $300,000 is equal to $75,000. Next, subtract the amount available from that result. $75,000 – $60,000 = $15,000.This means a down payment of $15,000 is required to compensate for the partial guarantee of the VA loan that you’re using.
Finally, military service members who have restored the loan in full are eligible to receive the full amount guaranteed by the VA program, but will need to be mindful of an increase in the VA funding fee required for subsequent borrowers.
How Can The Home Loan Expert Help?
Hero Loan, The Home Loan Expert’s VA Loan Program. Our lending team is dedicated to serving our veteran, active-duty military service members and their families with the same level of passion and commitment they have dedicated in service to our country. We proudly support veteran-owned businesses and events within the community as a way of showing our appreciation and as a way to give back, like through our efforts with the Fisher House Project.
We understand the value of face-to-face contact when it comes to providing a personalized, customer-focused approach to ensuring our clients can get into the home of their dreams. Our services are speedy and efficient, helping home buyers to qualify for a loan in minutes, with closing periods in as little as 14 days. Our underwriting process is streamlined in-house, providing relief from the hassle of stressful paperwork with expedited loan approval timelines.
Our veterans have gained a unique perspective into understanding the importance of home. Our team of lending service providers at Hero Loan would be honored to facilitate the process of getting you into your dream home with ease and grace. Call us today at 800-991-6494 to speak with a VA loan representative who will gladly walk you through your queries around VA loan limits. We can also be reached through our application at any time.