VA loans give eligible homebuyers an advantage over conventional loan programs because, as of 2020, VA loans have no limits for those with full entitlement. That’s extremely valuable if you don’t have a lot of cash for a down payment and want to live in a more expensive part of the country.
If you don’t have full entitlement — which is not the case for most VA loan applicants — you are subject to strict limits on loan amounts, depending on the county you’re looking to buy.
VA loan limits depend on how much entitlement you have and your lender.
Since 2020, veterans, active-duty service members, and surviving spouses with full entitlement have not been subject to any government-enforced loan limit. Theoretically, then, there’s no maximum to how much you can borrow with a VA loan.
In practice, however, that’s not always the case. You’re still limited to the maximum amount a bank will actually loan you, which depends on myriad factors, including your income, credit score, debt-to-income ratio (DTI), and more.
Entitlement is the dollar amount the VA will repay a lender if you default. Most VA applicants have full entitlement, which you have if meet one of the following criteria:
If you don’t meet full entitlement, then you are subject to conforming loan limits set by the Federal Housing Finance Agency (FHFA), which are typically adjusted every year. The limits will increase by 12.21% in 2023.
For the majority of the U.S. the 2023 maximum conforming loan limit for one-unit properties is $726,200, up from the 2022 limit of $647,200. In more expensive parts of the country, the limit is $1,089,300 for one-unit homes in 2023. If you get a bigger loan amount, then you’re looking at a jumbo mortgage.
While these new loan limits are effective immediately, loans using the new limit must close on or after January 1, 2023.
We’ve touched on what full entitlement means, but with what’s called impacted entitlement, you’re subject to VA loan limits. These limits, listed above, depend on the county you’re looking to buy in and whether you’re making a down payment or not. VA-approved lenders may also restrict how much you can borrow if:
If you’re a first-time user of the VA loan program, you shouldn’t have anything to worry about when it comes to limits. You can focus on finding the right house for you and figuring out how much you can afford for a down payment, if you’d like.
But if you are subject to conforming loan limits, it’s important to try to keep your mortgage amount below that number. Otherwise, the loans will qualify as jumbo loans, which may have higher interest rates and require private mortgage insurance (PMI). That translates to more expensive monthly payments and may become a financial burden.
You can use a mortgage calculator to estimate your future monthly payments.
If you have impacted entitlement or you can’t get approved for a high enough loan amount, it’s time to explore other options. Fortunately, there’s a lot you can do.
For most people eligible for the VA loan program, loan limits are not an issue. Full entitlement gives you a lot of flexibility when searching for a home. However, impacted entitlement subjects you to conforming loan limits which, although higher in 2023, may make it more difficult to purchase the home of your dreams.
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