VA limits

Explaining VA Loan Limits

October 2, 2012

Explaining VA Loan Limits

How do you know how much money you can borrow with a VA mortgage loan?

The issue of VA loan limits can be a confusing one for some–if the Department of Veterans Affairs doesn’t place a set, standardized dollar limit on VA home loans that a borrower can look up for future reference, why all the discussion about VA loan limits in the first place? While it’s true that the VA does not place a dollar limit on the mortgages it guarantees, there are limitations placed on the amount of money that can be loaned in a single transaction.

According to the Department of Veterans Affairs, “While VA does not have a maximum loan amount, there are effective ‘loan limits’ for high-cost counties.”

How can you understand what these limits are?

“The limits are derived by considering both the median home price for a county and the Freddie Mac conforming loan limit.” That statement is found in the introduction to Chapter Three of the VA Lender’s Handbook. The Fannie/Freddie conforming limit is not the actual dollar amount the borrower is capable of borrowing–some VA loan fees and other expenses may also be included in the home loan, which plays a part in the final dollar amount.

Not all VA loans are issued in housing markets with the same conditions–some areas are much more expensive.

Consider the VA borrower trying to get a home loan in New York compared to a less expensive housing market in the midwest; the loan limits in the more expensive market must vary in order to insure qualified borrowers get a fair shot at a VA mortgage.

You can discover more about VA loan limits by studying the following table, found on the VA official site at Qualified borrowers who have their full VA loan entitlement are eligible for the following, based on loan amount:

The VA loan rulebook adds, “The percentage and amount of guaranty is based on the loan amount including the funding fee portion when the fee is paid from loan proceeds.”

VA loan amounts are limited to the less of either the sales price of the home or the fair market value, whichever is lower, plus allowable fees and expenses. Borrowers who pay a VA loan funding fee will pay a lower fee for first-time use of their VA home loan benefits; subsequent-use VA loan funding fees are higher. Those who are exempt must show proof of exempt status or apply for a VA loan funding fee refund once exempt status notification is received.

Do you have questions about VA home loans? Ask us in the comments section.

One Comment
  1. Clay A. Bucy

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