Guide to VA Loan Limits

If you’re a veteran, you’re all too familiar with the phrase “hurry up and wait”.

You’ve probably lived it, for years.

Most people experience something similar when going through the home buying process. But luckily for you, you finally get to skip the “hurry up and wait” this time. 🙌

The VA home loan offers veterans unique advantages that home buyers literally can’t find anywhere else. In many instances, there’s no down payment required and eligibility criteria is very lenient when it comes to credit scores.

This shouldn’t come as a surprise—you’ve earned it. Yet unfortunately, too many veterans miss out on VA home loans because they simply don’t understand the process—and how they can make it work for them.

With the near-zero interest rates as a result of the COVID-19 pandemic, now is the time to buy! So, here’s everything you need to know about the functionality of VA loans and the borrowing limits included in them.

Ready? Let’s dive in!

What you’ll learn

• How VA Home Loans Work
• VA Loan Eligibility Requirements
• VA Home Loan Limits
• VA Loan Entitlement
• Can You Have Multiple VA Loans?
• Borrowing Cap Explained
• VA vs. Conventional Loans
• FAQs

How VA Home Loans Work ⚙️

A VA loan is a type of mortgage that is partly insured by the U.S. Department of Veteran Affairs (VA). To take advantage of the loan program you must be either a current or former member of the United States Armed forces, or the surviving spouse of one. 

The VA does not originate or directly lend funds, but instead partially backs a portion of the loan. This process protects the private lenders, who make the loans, from non-payment default. 

Additionally, the guarantee from a government agency also makes lenders feel far more comfortable to lend. This is due to the fact that lenders take on far less risk with VA loans than with other types of conventional mortgage loans.

Millions of service members have been taking advantage of the perks tied with VA loans since 1944. Among these perks includes $0 down financing, favorable rates, and the freedom from Private Mortgage Insurance (PMI). VA loans aren’t hard to come by either as various mortgage lenders from all corners of the market offer these loans.

VA Loan Eligibility Requirements 🇺🇸 

To be eligible for a VA loan, you must meet certain requirements. These requirements mainly have to do with service lengths and times, but may also allow for spouses to qualify for VA loans. The most basic of eligibility requirements include:

• You are on active military duty.
• You’re a veteran who has met the minimum service requirements and was honorably discharged.
• During wartime, you served a total of at least 90 consecutive active days. 
• During peacetime, you served a total of at least 181 consecutive days of active service.
• You served in the National Guard or Selective reserve for more than six years.
• If you are a surviving spouse of someone who died in the line of duty, you also may be eligible. 
• New legislation now allows National Guard troops who supported the COVID-19 response in 2020 to now be eligible for VA loans.

If you fall into one of the above categories, congratulations! You are eligible to take advantage of the benefits under the VA program. To apply, make sure you get a VA Certificate of Eligibility (COE) from the VA. Then contact a few mortgage lenders and they’ll tell you the next steps. 👍 

VA Home Loan Limits 🏠

Like other federally-backed loan programs, there are circumstantial limits to how much you can borrow for your home. However, these limits on VA loans don’t actually cap your purchasing power.

With VA loans the borrowing limits are simply the most the Department of Veteran Affairs will guarantee without the requirements of a down payment. This isn’t the case for other government housing programs, like loans guaranteed under FHA for example. 

The limits for FHA loans include both a maximum (ceiling) and minimum (floor) you can borrow under the program. And not to mention these limits tend to be much lower than limits on VA loans, which makes VA loans better for eligible borrowers.

But who do the VA loan limits affect? Firstly, effective in 2020 there are no borrowing limits on VA loans for active-duty military and veterans who still have their full borrowing ability. This means if you meet the service eligibility and don’t have an existing VA loan, you have no limit to the amount you can borrow.

But, limits do still apply to other applicants in different situations. Those who have limits to borrowing amounts include applicants who defaulted on a VA loan and those who have another active VA loan. 

VA Loan Limits for 2021 🛑

Many government-backed loans saw an increase in borrowing limits in 2021, including VA loans. Currently, for a single-family residence in an average U.S. county, the borrowing limit is $548,250. In plainer terms, this number is the maximum a borrower can finance with no down payment.

It’s also important to know that higher cost states (or specific counties within those states) do have higher borrowing limits. For example, states like Hawaii, New York, and California have a higher borrowing limit currently set to $822,375 in 2021. To figure up how much you can borrow the best way to do so is to check your specific county’s limit.

VA Jumbo Loan Limits 💰

While there are borrowing limits on VA loans, remember that the Department of Veteran Affairs does not cap your overall purchasing power. This means that the government has not set a maximum amount you can borrow under the VA loan program.

So what happens whenever you find a home that’s over the current limit for your county? You have another option: a VA jumbo loan, a loan that exceeds the county-specific limit.

With jumbo loans, the eligibility requirements stay the same as regular VA loans. And there’s an added bonus in that VA jumbo loans also keep some of the same benefits as conforming VA loans, including the $0 down benefit and no PMI. This differs from traditional jumbo loans which typically require a much larger down payment.

But it’s also important to know that jumbo loans tend to have stricter income requirements compared to their conforming VA loan counterpart. You’ll also likely need a better credit score than required by traditional VA standards. It’s also possible you’ll need a larger cash reserve to cover a specified number of mortgage payments if requested by the lender. 

In general, the specific requirements for jumbo VA loans depend on the lender who originates the loan. The same goes for borrowing limits—they are lender-specific. 

VA Loan Entitlement 🎖️

Any veteran who is eligible for a VA loan has what is known as “VA loan entitlement.” While the word entitlement might suggest that you, as a veteran, have the right to the benefit of a VA loan, it has a different meaning in this sense.

Yes, as a veteran you are entitled to the benefit of a VA loan. But, in this context, entitlement refers to the set dollar amount the lender is “entitled” to in the event of borrower default. In case of default, the Department of Veteran Affairs is the one who guarantees, or promises, to repay the lender.

Sure, it may sound simple but in actuality, there is a bit more complexity to the whole concept of VA entitlement. For starters, there are two different types of VA loan entitlement: basic and secondary entitlement. The combination of both allows veterans to borrow as much as a lender will lend with zero down.

The Two Types of VA Loan Entitlement  💪

Basic, or primary, entitlements are traditionally $36,000. The VA usually pledges to repay up to 25% of the loan amount. But some quick mental math will tell you that $36,000 multiplied by 4 is $144,000. And to be perfectly candid, a good home in most parts of America in 2021 far exceeds $144,000 in price.

So, if you plan to purchase a home costing more than $144,000, secondary entitlement now comes into play. Secondary entitlement ensures that the VA loan program helps veterans become homeowners while keeping a competitive edge.

Secondary entitlements are 25% of the loan amount up to the conforming loan limit. And since the conforming loan limit for 2021 is $548,250 (in most counties), this makes the total entitlement $137,062.50. However, you’ll need to subtract the basic entitlement to get the true number of $101,062.50 in secondary entitlement.

To check your current loan entitlement, you may contact the Department of Veteran Affairs or discuss with your lender.

What is a Full VA Entitlement? 💭

Using the previous example, adding together $36,000 and $101,062 equates to $137,062, for your available VA entitlement. To have your full VA entitlement means you have access to utilize both amounts from the primary and secondary entitlement limits. 

When you buy a home through the VA loan program, some or potentially all of your entitlement is occupied in the mortgage loan. Since the VA guarantees 25% of the loan amount, your utilized entitlement is equal to that. 

We’re throwing a lot of numbers around so stay with us! For example, on a loan of $250,000, you would be using 25%, or $62,500 of entitlement. You would then subtract $62,500 from the total entitlement (both primary and secondary) of $137,062. This leaves your remaining entitlement as $74,562.

The remaining entitlement makes it possible for veterans to have more than one loan under the VA loan program. With this boon veterans will find it easier to buy a home after bankruptcy or other financial hardships like foreclosure or short sale.

No Loan Limit with Full Entitlement  ✅

If you have your full VA entitlement you can borrow as much as a lender is willing to give you. Well, you can borrow as much as you’re permitted to without the need for a down payment, that is. 

The no-max, no-down-payment borrowing rules are super helpful in getting your foot in the homeownership door. This is especially true with how explosive the market has been in the coronavirus era. Plus, the combination of the historically low-interest rates as a result of the pandemic makes it an even sweeter time to take advantage of the VA loan program.

Can You Have Multiple VA Loans? ❓

You did your time. You served the country. So naturally, you should be able to take advantage of the perks of a VA loan multiple times—right? Well, at least that’s sort of the case.

VA loans aren’t a one and done benefit. It’s a benefit you can use over and over again, provided you have the entitlement. The existence of secondary entitlement is what allows any veteran who meets the criteria to have two VA loans at the same time. 

While it may seem uncommon, the need for two VA loans still may arise. A common example is whenever a veteran homeowner has to relocate to a new station but has the desire to rent out their primary residence. 

Let’s say your current home cost you $250,000. You do your thing and live your life in that home until you get ordered to relocate a few years later. You decide you’d rather rent out your current primary residence than sell it. But, you now have the need for a new home at your new duty station.

Let’s talk numbers, again. These numbers assume your new home is located in a county with the standard VA loan limit.

Remember that your available entitlement is 25% of the total loan amount (up to the nonconforming limit.) Therefore, in this scenario, you could borrow $298,248 for a home before needing a down payment. Anything exceeding that amount requires a down payment totaling 25% of the excess amount.

So if you wanted a home for $310,000, the difference between that and $298,248 is $11,572. Meaning would have to front $2,938 (25% of $11,572) for a down payment. 

VA Loans and Your Borrowing Cap 💲

Like we explored earlier, there isn’t a cap to how much you can borrow under the VA loan program. So don’t fret if that perfect home is over your county’s borrowing limit. You can borrow as much as the lender you are working with decides to lend. However, the excess may be in the form of a Jumbo loan.

In the case that your desired home is above that limit, you just need to be prepared to cough up enough cash to equal the required down payment. The required down payment follows a formula based on your current entitlement and the home price. Your lender will be able to help you determine that exact formula.

Additionally the amount borrowed in excess will not be guaranteed by the VA and will be your responsibility. Just remember to be mindful of those differences when home shopping.

VA vs. Conventional Loans  🏦

We’ve explored the perks of VA loans. But where do they measure up next to conventional loans? Without getting into the nitty-gritty, conventional loans have much tougher requirements. Among these requirements are a higher credit score, a larger down payment, and the requirement of that dreaded PMI.

It can be very stressful and challenging to get a conventional mortgage loan with bad credit. In most cases, you will need a minimum credit score of 620 – 660 to qualify for a conventional loan. Considering you can get a VA loan with a credit score as low as 580, a conventional loan might not be ideal for the credit-challenged consumer.

Most conventional loans also require a down payment ranging anywhere from 3% – 5% of the total price of the home. VA loans on the other hand (if you have the entitlement) don’t require any cash down.

Lastly, conventional mortgage loans also require Private Mortgage Insurance. PMI is a special type of insurance that essentially insures the loan, protecting the lender against non-payment default. Considering the Department of Veteran Affairs guarantees a portion of VA loans to protect lenders against default, PMI is not a requirement.

About the author

Summer Nevins

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Summer is a banking professional and business school graduate turned expert finance writer. Raised in a small low-income town in the southern United States, Summer, like a lot of millennials, learned the ropes of personal finance the hard way. Both her work and life experiences led to discover her true passion for educating others about the complicated field of finance. Summer currently resides in the Greater Nashville Tennessee area with her husband. When she’s not writing, Summer enjoys exploring the beautiful world and hiking all of the challenging trails along the way.