When it comes to VA loan limits, the first thing you need to understand is that the VA does not lend money for home purchases. VA mortgages are underwritten and funded by private lenders -- banks, credit unions, mortgage companies and others -- and the VA simply reimburses lenders for losses when borrowers default. How does this affect VA mortgage limits? It's the lenders who are financing the home purchase, and it's the lenders who decide how much they are willing to lend.
Second, there are no VA loan limits. That's correct -- the agency does not restrict the amount you can finance with a VA mortgage. Here's what the VA says on its Web site:
VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment. These loan limits vary by county, since the value of a house depends in part on its location.
If a mortgage lender is willing to lend you $2 million dollars with a VA mortgage, the agency has no problem with it. However, the VA does limit how much it's willing to guarantee, and most lenders set their maximum loan at four times that amount. In most parts of the country, VA buyers can finance a property purchase of up to $417,000 with no money down.
"Jumbo" VA Mortgage Limits
In most of the country, a $417,000 limit buys an average-to-excellent home. However, in more expensive markets (think Silicon Valley), $417,000 will get you a tiny dump. In recognition of this, the VA has increased its guarantee for high-cost parts of the country. Here are a few examples:
- Arlington, VA: $692,500
- Honolulu, Hawaii: $721,050
- Santa Clara County, CA: $827,500
- Nantucket, Massachusetts: $1,094,625
Higher limits allow veterans and servicemembers to purchase property with no money down, even in very expensive markets. Of course, they must have sufficient income and good credit to qualify for the higher loan amount. View all counties that qualify for jumbo VA loan limits.
Go Even Bigger with a Down Payment
While VA loan limits are pretty generous, buyers who wish to purchase more expensive properties can do so with a down payment. For example, if the maximum loan limit in your area is $417,000, and you wish to buy a home for $517,000, your lender will likely require a down payment of 25 percent of the amount over $417,000. In this case, that's a $100,000 difference, so you'd have to put up $25,000. For a $517,000 purchase, that's a 4.8 percent down payment. And that's not bad!
VA loan limits are not cast in concrete. If you are looking for more expensive property (exceeding the VA's published limit in your area), your maximum loan amount depends on the guidelines of individual lenders. That means you'll probably have to come up with a down payment, and you'll have to contact more lenders to find what you want.