VA Loan Limits: What is the Most You Can Borrow in 2019?
Veterans and active-duty military personnel have a powerful tool at their disposal: VA-backed home loans. Offering mortgages with no down payment requirements, reasonable terms and competitive interest rates, veterans today are beginning to embrace the flexibility of the home loan programs offered by the VA.
Although the numbers are improving dramatically, there are countless veterans who are unaware that the VA offers home loan programs. Even more troubling is many veterans don’t understand how the programs work and just assume they don’t qualify.
Here, we will unlock some of the mysteries surrounding the elusive VA loan limit — from how much you’re allowed to borrow to whether or not you can buy a house that is more than the VA loan limits. We’ll also tackle bonus entitlements and how you can use this additional “layer” of coverage to boost the amount of money you can borrow.
How are VA loan limits determined?
VA loan benefits are pretty straightforward, but certain language can throw many veterans for a loop. For example, the term “VA loan limits” may lead you to believe there is a cap on how much money you can borrow using your benefits. You also might think the VA itself sets the loan limits.
The fact is, the VA uses loan limits established by the Federal Housing Finance Agency. Each year, the FHFA announces conforming loan limits based on the increase or decrease of an expanded-data home price index that tracks seasonally-adjusted home prices from the previous year.
For 2019, the FHFA set the national conforming loan limit for one-unit properties at $484,350. The 2019 limit is a significant change from the previous year, which was $453,100.
VA loan limits in 2019
Remember that the VA doesn’t have its own set of rules that apply to loan limits. The agency follows the loan limits established by the FHFA. So, the best way to address VA loan limits is to think of them as the maximum loan amount that the VA will insure.
If you need to borrow more money than the loan limit allows, you’re free to do so, but the VA doesn’t insure any additional financing over the conforming loan limits. But, if we were to answer the question, “What are the VA loan limits for 2019?” directly, the answer would be $484,350 in most regions throughout the U.S.
Can you buy a house that exceeds the VA Loan limit?
As we discussed earlier, one of the common myths associated with VA loans is you can’t borrow more than the VA loan limit. The reality is you’re free to borrow as much money as a bank is willing to lend you. Remember that loan limits are the cap on how much the VA will insure in case you default on your mortgage.
For example, if you want to buy a home for $500,000, and your county loan limit is $484,350, the bank will require a down payment of at least $15,650, which is the difference between the sales price and your county loan limit. The bottom line is you can without question buy a house that exceeds conforming loan limits using your VA Home loan benefits, but your lender will require a down payment.
Although the national conforming loan limit is $484,350 for 2019, real estate in many counties across the U.S. is much more expensive. So, the FHFA sets loan limits for these counties that are higher than the national limit of $484,350. Many states have county loan limits as high as $726,525 for one-unit properties. You can look up your county’s loan limit here.
Using your VA bonus entitlement
The VA offers you two types of entitlement: basic and bonus. Your basic entitlement provides you with up to $36,000 in insurance on a mortgage loan for up to $144,000 (lenders typically let you borrow up to four times the maximum guarantee of your basic entitlement, which is $36,000).
In layman’s terms, if you take out a home loan for $144,000 and you default on your payments, the VA will cover $36,000 of the loan. However, the VA also provides you with an additional “layer” of coverage known as your bonus entitlement. This additional coverage gives you the chance to borrow more money than your basic entitlement allows.
Bonus entitlement at a glance
Since the maximum guarantee for your basic entitlement is $36,000, and lenders usually let you borrow four times the maximum guarantee, the VA will only cover loans up to $144,000 ($36,000 x 4). Unfortunately, it’s getting harder to find a decent home at that price. This is where your bonus entitlement springs into action.
The bottom line is your bonus entitlement gives you enough coverage to qualify for loans up to the national conforming loan limit of $484,350 or more if you live in a high-cost county. Here’s how it works:
- Your basic entitlement max coverage is $36,000 x 4 (4 times the max guarantee) = $144,000 total loan amount
- Your bonus entitlement max coverage is $85,087 x 4 (4 times the max guarantee) = $340,348 total loan amount
You then add your basic and bonus total loan amounts ($340,348 + $144,000 = $484,350). As you can see, your combined basic and bonus entitlement loan amount is the same as the national conforming loan limit. So, you unlock more borrowing power when you use both your basic and bonus entitlement.
*The VA calculates the max coverage amount for bonus entitlements by using 25 percent of the national conforming loan limit ($484,350) and subtracting that figure ($121,087) from the max coverage for basic entitlements ($36,000), which equals $85,087. Why 25% of the national loan limit? Because the VA typically guarantees up to 25% of loan amounts up to the national conforming loan limit.
Final thoughts on 2019 VA loan limits
The most important takeaway from this article should be the VA doesn’t limit how much money you can borrow. The VA only limits how much of your loan it will insure. If you want to buy a home for $500,000, and your county loan limit is $484,350, you can absolutely buy the house. You will just need to pay the difference in the form of a down payment. Do keep in mind that other restrictions apply such as your credit score, the loan-to-value ratio and other factors that include your debt-to-income or housing-expense ratio.