A new law will eliminate VA loan limits next year, but the current limits still affect how much you can borrow in 2019 without making a down payment.
Here’s a little basic training on VA loan limits.
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What are VA loan limits?
VA loan limits match the limits set by the Federal Housing Finance Agency on conforming loans. They’re not a cap on the amount you can borrow to buy a home, but a limit on the highest-value loan the Department of Veterans Affairs is allowed to guarantee without you making a down payment.
VA loan limits do not put a cap on how much eligible borrowers can finance.”
For a single-family residence in a typical U.S. county, the limit in 2019 is $484,350. That’s the maximum a VA loan borrower can finance for no money down in those counties.
Higher limits are established in high-cost counties, such as Honolulu, New York and San Francisco, where the one-unit residential limit in 2019 is $726,525.
No VA loan limits starting in 2020
A new law will eliminate VA loan limits next year. That change — along with higher VA loan fees — is coming by way of the Blue Water Navy Vietnam Veterans Act. The removal of the loan limits and the increase in loan fees were included in the legislation to help finance disability benefits for Navy veterans exposed to Agent Orange during the Vietnam War. The law states the VA loan changes will go into effect Jan. 1, 2020.
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VA loan limits don’t restrict how much you can borrow
In the meantime, the 2019 loan limits apply. If you’ve found a property you really love — and can afford — and it’s over the county’s loan limit, you can still get a VA loan. It’s just a matter of coming up with a down payment.
The VA requires an eligible borrower to put down 25% of the difference between the purchase price and the local loan limit. Here’s an example:
Assuming the typical county limit of $484,350 And a home’s purchase price of $550,000 Results in a difference of $65,650 $65,650 x 25% = $16,412.50 down payment required
The VA loan ‘entitlement’
There is one more fuzzy little detail about VA loan limits: the entitlement. It’s a confusing formula that the Department of Veterans Affairs uses to determine the portion of the loan that it will guarantee.
If you stumble upon a reference to an entitlement on your Certificate of Eligibility that is a much lower dollar amount than your loan, don’t sweat it. It’s just the government making things a bit more complicated than they need to be.