If you're looking for a VA guaranteed loan, you may be curious about the maximum amount you are entitled to borrow. Some borrowers are surprised to learn there is no fixed VA loan maximum. You can borrow as much as a lender will lend. But the VA’s guaranty to lenders on the loan only extends up to a certain figure.
In most parts of the country, the current VA loan limit is $424,100. More expensive counties in the continental U.S. have a $636,150 maximum for the VA loan guarantee, while Honolulu County peaks at $721,050. Let’s take a quick look at how VA entitlement ties into these figures. Remember, there is no cap on VA loans, just thresholds at which down payments become a requirement.
Most qualified VA loan borrowers earn two amounts of entitlement. One is $36,000, and the other is $70,025. The VA’s two-tier entitlement totals $106,025 for borrowers in most of the U.S. The VA guarantees up to one quarter of a loan be returned to lenders in case of default, so that $106,025 represents 25 percent of a loan’s total amount. A little math brings us full circle: $106,025 x 4 = $424,100.
In the more expensive counties with higher limits, VA entitlement can be higher to enable homebuyers to compete in tougher markets and still not have to pay any money down.
All VA loans at or below county limits come with a guaranty that protects up to 25 percent of the loan against default. In the rare instance a borrower defaults on a VA loan, the VA will repay the lender no more than one quarter of the loan amount.
That means anything above a county’s maximum exposes lenders to risk. Given that, purchasing above your county loan limit requires a down payment. Any VA loan that stays within a county’s maximum can likely be a zero-money-down loan (it will depend in part on your previous VA loan utilization and history).
Down payments will vary, but, generally, if you’re a veteran with full VA loan entitlement, buying above your county loan limit requires a down payment. In these cases, the down payment is 25 percent of the difference between the county loan limit and the loan amount.
For example, if a loan is valued at $474,100 in a county that has the $424,100 threshold, the difference is $50,000. One-quarter of that is $12,500. That’s no small sum, but compared to conventional mortgage options, that can be a minimal down payment considering the loan’s size.
Consider that about nine out of ten VA loans get borrowed with no money down. By that measure, about 90 percent of VA loan borrowers finance properties valued at or below county maximums. Going above a county maximum only triggers the down payment requirement, which is still structured to be borrower-friendly.
It’s important to remember there are no caps on how much lenders can issue to borrowers through VA loan. U.S. county VA loan maximums indicate how much a borrower can get before having to make a down payment.