The VA does not set a limit on how much you can borrow for a house purchased through a VA Loan. However, the VA does have limits for the amount of liability they can assume for any given loan. This can affect the amount of money lenders will allow veterans to borrow when buying a home. (This is why some lenders state there is a VA Loan limit – the reality is the lender limits the amount they will lend to match the amount the VA will guaranty).
The maximum amount the VA will guaranty for 2014 is $417,000, for most locations. However, there are some high-cost counties where the VA will guaranty a home loan for larger amounts. Read through this article to get a full understanding of VA Loan limits, the maximum amount you can borrow without a down payment, and other information you may need to know to secure a VA Loan.
VA Loan Limits & What Lenders Will Actually Lend
Veterans are eligible for a basic VA Loan entitlement, which amounts to $36,000. Lenders will normally allow veterans to borrow up to 4 times the basic entitlement ($144,000) without a down payment, provided they have the income and credit to qualify for the loan, and provided the property appraises for at least the purchase price.
This means that provided you qualify for the loan, and the house appraises for at least the purchase price, lenders will often lend you up to $144,000 without a down payment. You still may need to come up with the VA loan funding fee, which the VA charges for guaranteeing your loan. However, some disabled veterans are eligible to have the funding fee waived. Alternatively, you can often roll the funding fee into your loan.
A note about homes costing more than $144,000: According to the VA: “The maximum guaranty amount for loans over $144,000 is 25 percent of the 2014 VA county loan limit shown below. Veterans with full entitlement available may borrow up to this limit and VA will guarantee 25 percent of the loan amount.” This means that if your home costs more than $144,000, the VA will only guaranty 25% of the loan, up to the $417,000 limit, or the limit for high-cost counties. This affects the lender more than the borrower, but it is important to note.
How to Buy a House that Costs More than the Max VA Loan Guaranty
If you want to use the VA Loan to buy a house that costs more than $144,000, you will need to put make a down payment on the loan. The amount of the down payment will depend on your lender and the cost of your home. But generally, you will be required to put down anywhere from 10-20% of the purchase price on the home (your down payment will depend on your lender’s policies, your income, credit profile, debt to income ratio, and other factors).
You can always make a larger down payment if you have the available funds, and there are some benefits to doing so. For example, a larger down payment reduces your outstanding balance on your home, reduces your monthly payments, and reduces the amount of interest you pay over the life of the loan.
Why Use a VA Loan if Your Home Costs More than The VA Will Guaranty?
This is a great question. The answer comes down to interest rates. Because VA loans are guaranteed by the VA, they often have slightly lower interest rates than conventional loans (all things being equal, including credit score, income, assets, debt to income ratio, etc.). That said, it pays to shop around. A mortgage is often the largest purchase you will ever make, and even a few decimal points on your interest rate can save you, or cost you thousands over the life of your loan.
If you are interested in finding the best interest rates, you can view our list of VA Loan providers to shop and compare interest rates.
VA Loan Limits for High-Cost Counties
Below is the table for VA Loan limits for 2014. The VA bases these amounts on the county median home values reported by the Federal Housing Administration.
NOTE: For all counties not listed below, the limit is $417,000.
|STATE||COUNTY||2014 VA LIMIT|
|AK||LAKE AND PENINSULA||$625,500|
|AK||PRINCE OF WALES-HYDER||$625,500|
|CA||SAN LUIS OBISPO||$518,750|
|DC||DISTRICT OF COLUMBIA||$692,500|
Shop around to save thousands: As mentioned above, shaving a couple percentage points off your VA loan can save you thousands of dollars over the course of your loan. You can interest rates, you can view our list of VA Loan providers to shop and compare interest rates.