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VA loans are often touted as limitless, borrow-as-much-as-you-want financing tools for active and veteran members of the military. But, like most things that sound too good to be true, it’s not quite accurate.
Since the elimination of VA loan limits in 2020, VA borrowers with full entitlement can take out a larger mortgage without putting money down. That said, you can’t borrow however much you want; you’ll still need to go through the standard loan approval process. And, while the U.S. Department of Veterans Affairs doesn’t impose a dollar limit on a loan’s size, another government bureau — the Federal Housing Finance Agency (FHFA) — does. Depending on your exact status and your lender, you may be subject to these ceilings.
Read on to learn the ins and outs of VA loan limits in 2023.
What are VA loan limits?
VA loan limits refer to the amount of a loan that the VA will guarantee for the lender when a veteran or other eligible applicant under the VA loan program takes out a mortgage. Historically, the Department of Veterans Affairs (VA) imposed these limits on all loans over $144,000. That changed three years ago. As of 2020, mortgage applicants who still have their full entitlement available — meaning they don’t currently have another active VA mortgage — are no longer subject to these historic loan limits.
However, loan limits are still a factor for those who are currently using a portion of their entitlement for a VA loan. In such cases, your VA home loan limit will be based on the county loan limits where you live. While you can still take out another loan, the VA will only guarantee your lender up to 25 percent of the county loan limit should you default on the mortgage.
When do VA loan limits apply?
VA loan limits apply if you have remaining entitlement, meaning that part of the VA-guaranteed dollar amount you’re eligible for has already been tapped. According to the VA, you could fall under this category if:
- You have an active VA loan
- You’ve paid a previous VA loan in full and still own the property
- You refinanced your VA loan into a non-VA loan and still own the property
- You had a foreclosure or short sale and didn’t repay the VA in full
- You had a deed in lieu of foreclosure on a previous VA loan
The loan limit for VA borrowers with remaining entitlement is based on the county where the borrower lives. If the borrower defaults, the VA will only guarantee the lender up to 25 percent of the county limit minus the entitlement already used.
VA loan limits in 2023
In 2020, the U.S. Department of Veterans Affairs (VA) eliminated VA loan limits for eligible veterans, service members and surviving spouses who have full entitlement. You have full entitlement – meaning the entirety of your entitlement is available for use – if you meet at least one of the following criteria, according to the VA:
- You’ve never used the VA home loan benefit
- You’ve paid a previous VA loan in full and sold the property
- You’ve used the VA home loan benefit, but had a foreclosure or short sale and repaid the VA in full
Borrowers with this level of entitlement do not have to make a down payment, and the VA will guarantee the mortgage lender up to 25 percent of the VA loan if the borrower defaults.
While VA borrowers with full entitlement aren’t subject to loan limits, there are limits for borrowers who have remaining entitlement, which could include those who have defaulted on a VA loan or those who already have an active VA loan.
VA loan limits by county
For borrowers with remaining entitlement, the VA loan limits vary by county, and are the same as the Federal Housing Finance Agency’s conforming loan limits. The limits are based on the median home values in each county. Adjusted annually, each state’s loan limits are detailed county by county and apply to one unit (single family) through four-unit homes.
If a mortgage exceeds the FHFA’s “conforming loan limit,” mortgage market-makers Freddie Mac and Fannie Mae won’t back or purchase it, thus making it a riskier proposition for a lender.
What VA loan limits mean for you
VA loan limits don’t limit how much you can borrow to finance a home – that’s up to your mortgage lender, and could be based on your credit and other factors. Rather, the VA loan limit describes how much the VA will guarantee for the lender. If you’re approved for a bigger mortgage (more than $144,000), you’re free to borrow beyond these limits, but without full entitlement, you might need to make a down payment to do so. In other words, with a down payment, you could be able to borrow more than the county loan limit.
Now that VA loans no longer have limits for borrowers with full entitlement, first-time borrowers have no cap on the size of a zero-down payment VA loan. The VA funding fees, which most borrowers have to pay in order to obtain a VA loan, remain in place, however.
Remember, even if you have full entitlement and aren’t subject to loan limits, that doesn’t necessarily mean you can get any size VA loan you want. Your lender will still need to evaluate your credit history, income and assets to approve you for a loan, and for a specific amount.
Frequently asked questions about VA loans
VA loans are mortgages backed by the U.S. Department of Veterans Affairs. These loans aren’t actually made by VA, but by VA-approved lenders (commercial banks, credit unions, etc.); the government simply guarantees them. By doing so, however, it reduces the lender’s risk, encouraging them to extend the financing to a borrower.
You have to go through a process verifying that you’re eligible for the VA loan program. After that, applying for these loans is similar to any other type of mortgage.
There’s a variety of specific requirements to qualify for the VA loan program and obtaining a VA certificate of eligibility (COE) confirms that you have met these requirements. A COE can be obtained by applying through the VA eBenefits online portal online or alternatively, applying through your lender.