VA loan limits are the wrinkle in your dress blues. An annoying detail. VA home loans are pretty easy to understand — no down payment required, better-than-average interest rates and you need to have a military connection to get one. But VA loan limits are a little more complicated and vary by county. They put limits on the VA, but not on how much you can borrow.
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 2018 is $453,100. That’s the maximum a VA loan borrower can finance for no money down in those counties.
High-cost counties have higher limits
Obviously, there are counties where real estate is more expensive. So higher limits are established in those areas, with the one-unit residential limit in 2018 reaching $679,650 for homes in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
In the most expensive counties in the nation — like Honolulu and Kauai, Hawaii — the VA loan limit can top out even higher.
VA loan limits don’t restrict how much you can borrow
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 $453,100
And a home’s purchase price of $550,000
Results in a difference of $96,900
$96,900 x 25% = $24,225 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.