Can You Borrow More Than The Value Of Your Home?

Thomas Short
Military VA Loan contributor

When most people buy homes, they have to use financing — or a mortgage — to afford it. Traditionally, a 20 percent downpayment has been required in able to qualify to buy a home, meaning 80 percent of the home is financed.

However, these days, plenty of loan programs allow home buyers to purchase a home with as little as three percent down, leaving 97 percent of the home financed through a mortgage. Other programs, like the VA loan, go even further — home buyers can finance 100 percent of the home price with no downpayment required.

If VA home buyers can get a loan worth the entire value of the home, is it possible to get a mortgage worth more than the value of the home? It turns out yes, but only in certain conditions.

Check today's VA loan rates (Jul 15th, 2024)

Finding your home’s value

Before a lender will finance your home and approve your mortgage, they’ll want to know the value of your home. To do this, they use a VA appraiser to assess the home’s value.

VA appraisals are well-known for being more in-depth than other types of home appraisals, but that’s a small price to pay when you can end up financing the entire value of the house. But the outcome of the appraisal is going to have a big impact on how you buy the house.

Let’s say you want to purchase a home. You and the seller agree on $250,000, so you take the number to your lender. They’ll send an appraiser to check the value of the home — and this can affect your loan eligibility.

If the appraiser comes back and says the home is only worth $230,000, your lender isn’t going to be willing to approve your loan of $250,000. In this specific instance, you cannot borrow more than the home value. You’ll be forced to negotiate for a lower price with the homeowner or find money to make up the additional $20,000.

But, if the appraiser comes back and agrees the home is worth $250,000 or more, then you’re in business.

Financing more than your home’s value

Your lender is only going to allow you to finance 100 percent of the home’s value with a VA loan. But there are additional fees involved with closing. For example, you’ll be forced to pay a funding fee upon closing, usually around 2-3 percent of the value of the loan.

Here’s a perk of VA loans: your lender will allow you to finance the funding fee as well.

So, technically speaking, you can borrow up to the value of the home and the funding fee. For first time home buyers, the funding fee is 2.15%. Add this to the value of the home and you can get a VA loan worth 102.15% of the home’s value.

The additional costs of the funding fee will be added to your monthly payments.

Check today's VA loan rates (Jul 15th, 2024)

Borrowing more than your home value with a VA refinance

You don’t need to be buying a new home to borrow more than your home’s value.

If you currently own a home and want to refinance, you can borrow over 100% of the home’s value — but only in specific circumstances.

With a VA streamline refinance, you can borrow your home’s value plus an additional $6,000. However, that additional money needs to go to specific areas.

Some of the areas you can put the money include:

  • Heating/air conditioning
  • New insulation
  • Solar Panels
  • Heat Pumps
  • New energy efficient windows

The goal with this is to improve the home not just cosmetically but through efficiency. Making these changes can help reduce the costs of your energy bills as well. These changes are also available to normal VA loan home buyers.

Also, some streamline refinancers may be able to add their discount points to the refinance as well. Discount points are used to help get you a better rate, so by financing your discount points, you may be sacrificing a better rate. But this would allow you to refinance over 100% of your home’s value.

Check today's VA refinance rates (Jul 15th, 2024)