VA Loan Reader Questions: The VA Loan Amount
A reader asks, “Can you get a VA loan for over the agreed price between you and the seller as long as it doesn’t exceed the appraised price? For example, the home appraises for $175,000 and your offer of $159,900 is accepted by the seller, but you want to make improvements to the property, fence, etc. Could you get a loan for the appraised amount of $175,000?”
Let’s examine what the VA loan rules, as described in VA Pamphlet 26-7, have to say on this subject. Chapter Three, The VA Loan And Guaranty, says the following about VA loan amounts:
“VA limits the amount of the loan to the reasonable value of the property shown on the Notice Of Valuation, plus the cost of energy efficiency improvements up to $6,000 plus the VA funding fee” for new purchase home loans.
Additionally, Chapter Three says, “VA has no specified dollar amount(s) for the “maximum loan.” The maximum loan amount depends upon:
• The reasonable value of the property indicated on the Notice of Value (NOV), and
• The lenders needs in terms of secondary market requirements.”
And finally, the Department of Veterans Affairs makes one thing very clear about new purchase home loans–they may not feature any cash back to the borrower except for bona fide refunds. There may be approved disbursements for approved energy efficient upgrades under the VA Energy Efficient Mortgage loan program (at the VA’s discretion) but this program also does not permit “cash back” to the borrower.
The VA Lender’s Handbook states,”Cash to the veteran from loan proceeds is permissible only for certain types of refinancing loans and under very limited circumstances, as follows:
• For IRRRLs, see section 1 of chapter 6 (of VA Pamphlet 26-7)
• For cash-out refinancing loans, see section 3 of chapter 6 (of VA Pamphlet 26-7)
For other types of refinancing loans and all purchase/acquisition loans, the veteran generally cannot receive cash from loan proceeds. The only exception is the refund of items for which the veteran paid cash, which were subsequently included in the loan amount.”
For more information on VA loan policies regarding maximum loan amounts, speak to your loan officer or contact the VA directly at 1-800-827-1000.
Do you have questions about VA home loans? Ask us in the comments section.