VA Loan Limits 2022 | Loan Cap Eliminated


Peter Warden
Military VA Loan contributor

Unlike FHA, USDA and conventional loans, VA mortgages have no loan limits. That’s because the Department of Veterans Affairs, back in 2020, stopped setting maximum loan sizes for the mortgages the VA insures.

But this doesn’t mean VA homebuyers have unlimited borrowing power. VA-authorized lenders, the institutions that issue VA loans, will still limit your loan size based on your borrowing credentials.

VA borrowers must still prove that:

  • They meet minimum credit score thresholds
  • They can comfortably afford the monthly payments
  • The home’s market value is at least as high as the loan amount

And, VA loan limits will still apply for new borrowers who have already used part of their VA entitlement. 

Check your maximum home purchase price today. Start here (Sep 25th, 2022)

What really changed with VA loan limits?

Veterans and active-duty service members have always been able to buy homes that exceed the conforming loan limit. These old  “jumbo VA loansrequired a down payment, though, despite being VA loans.

Now, with no VA loan limits, borrowers with full entitlement could, theoretically, get a loan of any size with no money down. Even home prices of $1 million or more would be eligible. If a VA lender is willing to underwrite such a loan, the VA will insure it. 

Of course, in reality, lenders aren’t very likely to underwrite such a loan, and very few borrowers would have the credentials to qualify. After all, a $1 million home loan with zero down payment and a 4.16% interest rate has an estimated monthly mortgage payment of $6,000 — that’s a lot more than the average homebuyer can afford.

So the new, post-2020 rules affect only a small proportion of veterans and even fewer of those who are still serving. 

An exception to the new VA loan limit rules

The VA may still limit loan sizes for borrowers who already have active VA loans or who have only partial entitlement for some other reason such as a previous foreclosure.

If you’re in this situation, your new loan’s maximum size will depend on how much entitlement you’re already using and on the conforming loan limit in your county. Loan limits go higher in high-cost areas such as New York, San Francisco, Alaska, and Hawaii.

Even when loan limits apply, exceeding your maximum VA loan size may still be possible — if you can make the down payment that’s required. 

But rest assured, first-time home buyers, or VA homeowners who are refinancing their existing VA loan, usually have access to their full entitlement and can borrow with no down payment up to the level their lender approves.

If you’re worried loan limits will apply to you, speak to a licensed VA mortgage professional — call (866) 314-3616 or fill out this short, simple form.

How to calculate your VA loan limit

If you’re a first-time homebuyer — or a repeat homebuyer who does not currently have an outstanding VA loan — you can borrow up to the limit allowed by your lender. The VA’s loan limits won’t apply.

But if you already have an active VA loan, VA loan limits will help set your maximum loan size for a no-down-payment mortgage loan. 

Exactly how much you can borrow with no money down will depend on:

  • Remaining entitlement: How much entitlement you have left on your Certificate of Eligibility
  • Conforming loan limit: Your county’s conforming loan limit for this year as set by Freddie Mac and Fannie Mae

Calculating your loan limit for your second VA loan is complicated, and you may prefer to get a lender to find your loan limit for you. But if you’d like to calculate your VA loan limit, here’s how:

  1. Divide the original size of your current VA loan by 4
  2. Divide your county’s conforming loan limit by 4
  3. Subtract the answer in Step 1 from the answer in Step 2
  4. Multiply the answer in Step 3 by 4

The answer you get in Step 4 is the no-down-payment loan limit for your second VA home loan.

A VA loan limit example

Let’s work out an example to see this math in action:

  1. For this example, let’s say your current VA loan started out at $200,000. Divide that number by 4 to get $50,000
  2. To keep the math simple, we’ll say your current conforming loan limit, set by the Federal Housing Finance Agency, is $600,000. Divide this number by 4 to get $150,000 which is your full entitlement
  3. Subtract $50,000 (Step 1) from $150,000 (Step 2) to get $100,000, which is your level of remaining entitlement
  4. Multiply your current level of entitlement by 4 to get $400,000

The VA would allow you to borrow up to $400,000 with no down payment, assuming your lender will approve the loan.

What are VA loan limits and why are they so complicated?

The Department of Veterans Affairs does not loan money to veterans and active duty service members. It insures loans to make them safer for the lenders who issue them.

Specifically, the VA insures 25% of your loan amount. So $100,000 worth of VA insurance will allow a lender to underwrite a $400,000 mortgage loan with no down payment and no ongoing mortgage insurance.

Once again, all this math won’t affect your loan size unless you have an active VA loan and are buying another home. Your first use of your VA loan entitlement is now unlimited by the VA.

This math also won’t matter if your lender won’t approve a loan as large as your loan limit. Even if the VA says it would insure a loan up to $400,000, your lender could cap your loan at $300,000 based on your credit report and debt-to-income ratio.

Why VA loan limits don’t restrict how much you can borrow

Even if VA loan limits apply to you because you haven’t repaid a previous VA loan, you could get around the limit by making a down payment.

Essentially, this down payment will make up for your shortage in VA entitlement, allowing the lender to proceed with the loan.

Let’s continue looking at the example from above, in which you could borrow up to $400,000 with no down payment: Let’s say your home price is $500,000, $100,000 more than the VA loan limit allows. 

To make this loan work, you’d need to provide one-fourth of the difference between your loan and your loan limit. In this case, with a difference of $100,000, you’d need to pay $25,000 as a down payment.

That amounts to a 5% down payment — still not a bad deal considering you’re borrowing with no mortgage insurance and getting a competitive mortgage rate.   

No VA home loan limits and the VA funding fee

Loan limits were nixed by the Blue Water Navy Vietnam Veterans Act of 2019 which went into effect on Jan. 1, 2020. 

Along with the changes to loan limits, the law changed the VA funding fee, which most non-disabled borrowers pay on closing a VA home loan. The fee will increase slightly in some cases.

For example, veterans and active-duty service members who currently have an active VA home loan will pay a 3.6% funding fee on their next VA mortgage loan. 

First-time homebuyers and other borrowers with their full entitlement will continue paying 2.3% upfront. This funding fee helps keep the VA home loan program operating. 

If you’re interested in the details, see section 6 (b) of the Act for a full table of the funding fee adjustments.

Why pay VA funding fees at all?

The VA home loan program is self-sustaining meaning it doesn’t use taxpayer dollars or funds from other VA benefit programs.

Paying the VA funding fee ensures that the program is maintained so future veterans and active-duty service members can get these zero down payment home loans backed by a government agency.

This one-time, upfront fee is also relatively small when compared to other zero-down or low-down payment home loans, including USDA and FHA loans. Those other loan types require mortgage insurance premiums every month — for some over the entire life of the loan.

This option often costs borrowers thousands of dollars more than the typical VA funding fee amount.

Benefits of a VA loan

The VA doesn’t lend money directly for your home loan. You get that from a private lender. Subject to conditions, the United States Department of Veterans Affairs promises to pay your lender up to 25% of the loan amount you borrow if you default.

This removes a lot of risk lenders carry with all mortgages, which in turn means benefits for borrowers including lower rates, no down payment requirements and easier credit standards.

Check your maximum home purchase price today. Start here (Sep 25th, 2022)

VA loan limit FAQs

Is the loan limit the amount I can borrow or the amount the VA guarantees?

VA loan limits, and the level of entitlement listed on your Certificate of Eligibility, show the amount of money the VA guarantees the lender on your behalf, not the maximum amount you can borrow. Typically, a lender will let you borrow four times more than the VA guarantee without requiring a down payment. You could borrow even more if you’re able to make a down payment.

How does my county loan limit affect me?

Your county’s conforming loan limit, which is set by the Federal Housing Finance Agency (FHFA), helps set your VA loan limit, but only if you already have an active VA loan. To get a second VA loan with no money down, your total amount borrowed, with no money down, cannot exceed your county loan limit. If you live in a high-cost county — or if you’re buying a multi-unit property instead of a single-family home — your conforming loan limit will be higher.

What is a jumbo VA loan?

A jumbo loan exceeds your county’s loan limit. In the past, getting a jumbo VA loan required a down payment. Now, with no VA loan limits on borrowers with full entitlement, it’s possible to get a loan of any size with no money down.

Are VA loans unlimited?

The size of your first VA loan will not be limited by the VA, but it will be limited by your VA-authorized lender. Your lender will set your loan size based on your ability to repay the loan. Also, the lender won’t lend more than the home value.  

What is the VA loan limit?

There are no VA-imposed loan limits for first-time uses of the VA loan benefit. For subsequent uses of the benefit, your new loan size will depend on the size of your other VA loans and the conforming loan limit in your county. 

What is the VA loan maximum loan amount?

The VA no longer sets maximum loan sizes for VA loans. But lenders will set your loan size based on your borrowing credentials. And, if you already have active VA loans, your next loan’s size will likely be limited because you’d have only partial entitlement. However, you could still exceed the loan limits by making a down payment.

Can I get a VA loan for $1,000,000?

Yes, it is possible to get a VA loan for $1 million or more, but only if you qualify for the loan with your lender. The VA no longer caps loan sizes for VA-eligible borrowers with full entitlement.

What is the new VA loan limit for 2020?

Starting in 2020, the VA no longer sets loan limits for veterans and active duty service members who have full entitlement. Loan limits could still come into play if you already have a VA loan or if you didn’t repay a previous VA loan.

What is the maximum VA loan for 100% financing?

There is no maximum VA loan size for VA borrowers who have their full VA loan entitlement. These borrowers can get a loan, with no money down, of any size, if they can qualify for the loan with a lender.   

What is the maximum allowable VA loan amount based on?

Your maximum allowable VA loan depends on your credit history, debt-to-income ratio, and income. The VA itself does not set a maximum allowable loan for borrowers who have full entitlement. Borrowers who have partial entitlement will have limits on how much they can borrow with no money down. 

Did VA loan limits go away?

Yes. Congress eliminated VA-imposed loan limits in 2019, and the new law took effect on January 1, 2020. While the VA doesn’t limit loan sizes, VA lenders will limit your loan based on your personal finances and credit report.

Are there VA loan caps?

Veterans and active-duty military service members can get mortgage loans up to the amount approved by their lender. The VA no longer caps the size of these no-down-payment loans. But if you already have one or more VA loans, you may need to make a down payment on your next loan.

Can I buy a million-dollar home with a VA loan?

It is possible to finance homes valued at $1 million or more with a VA loan. The VA will insure the loan if your VA lender is willing to lend the money. Lenders check your credit score, bank accounts, and current debt load to make sure you can afford the new loan’s payment. You’ll need to use the new home as your primary residence and not as an investment property.

 

Check your maximum home purchase price today. Start here (Sep 25th, 2022)