VA Loan Articles
VA Loan Down Payments and Maximum Loan AmountsIf you're looking for a VA guaranteed loan, you are probably curious about the maximum amount you are entitled to borrow using a VA home loan. Some borrowers are surprised to learn there is no fixed maximum amount applied as a nationwide standard. Did you know the Department of Veterans Affairs insures loans based on market conditions by state and county and the appraised value of the home? It's true--the maximum loan amount may be consistent across many areas when it comes to county limits, but there are a variety of factors that may change the actual amount of money the VA is willing to insure on a home loan.
If you examine the VA list of county loan limits, you'll see that for all counties not specifically named in the VA loan limits document, the maximum VA loan guaranty amount for 2011 is $417,000. For high-cost counties, the amounts can be much higher.
County limits are only part of the equation--if the appraised value of the property is lower than the county limit, the VA will only guarantee a loan for the amount of the appraised value plus any VA approved add-ons to the loan apart from the asking price. That changes the final amount a VA loan applicant may be approved to borrow. The VA will guarantee a loan for either the limit or the appraised value of the property (plus approved loan add-ons including energy efficient upgrades), whichever amount is lowest.
Whenever the appraised value is higher than the VA loan limit for that particular county, the buyer must come up with the extra money to cover the sum above the VA loan limit or work with the buyer to re-negotiate. The amount above and beyond the sum the VA is willing to guaranty must be paid up front and would not be considered part of a down payment.
One of the most attractive features of a VA home loan is the ability to get a no-money-down VA home loan. Many believe it's to the buyer's advantage to provide a down payment when the buyer can afford to do so...but much depends on the buyer's strategy for repayment, refinancing down the line and other factors.
The VA loan funding fee is lower for those who put money down, and it is possible to lower a monthly mortgage payment by putting money down. That said, the no-money-down VA mortgage does have its benefits for those who can't afford to come up with a down payment. Buyers should take a long look at the numbers, do the math and decide which course is more advantageous over the lifetime of the loan and whether they can adjust their budget accordingly in the meantime.