Home buyers planning to use the VA loan program often have questions about the loan limits associated with this program. And it’s easy to understand why. This can be a confusing subject with many overlapping factors.
Today, we will talk about the scenarios when a VA loan might have a government-imposed loan limit, and the times when there are no official limits.
As you’ll soon see, it all comes down to something referred to as “entitlement.”
If you have full entitlement, you probably don’t have an official loan limit. So it’s up to the lender to decide how much you can borrow. If you have “remaining entitlement,” there’s probably a county-specific limit to how much you can borrow without a down payment.
When Do VA Loans Have Loan Limits?
The VA loan program is managed by the U.S. Department of Veterans Affairs. This department of the federal government also establishes the official rules and requirements for the program—and one of those rules has to do with entitlement and loan limits.
In a nutshell, borrowers who use VA home loans to buy a house either have full entitlement or remaining entitlement. Here’s the difference:
With full entitlement, there are no government-imposed loan limits, and you don’t need a down payment. If you’ve never used the program before, or you’ve used it but paid off the loan when selling your house, you probably have full entitlement.
With remaining entitlement, your loan limit is tied to your county’s conforming loan limit (described below). You can borrow up to that amount without making a down payment. If you need to borrow more than your county’s loan limit, you’ll have to make a down payment. If you used a VA loan in the past and still own that home, you probably fall into this category.
You can see why this is such a confusing topic for borrowers. There are several variables and factors that come into play here, including previous usage, the size of the loan, the down payment and more.
So let’s see if we can simplify it even more!
The rest of this article is divided into two section: full entitlement and remaining entitlement. This will help you understand (A) which group you fall into and (B) how it affects you when applying for a VA-guaranteed home loan.
Full Entitlement Scenarios
If you have full entitlement, it means you have certain privileges when applying for a VA home loan. There is no official limit to the amount of money you can borrow to buy a home, and you don’t have to make a down payment unless you want to.
Of course, you’ll still need to have sufficient income for the amount you’re trying to borrow, in order to meet your mortgage lender’s requirements.
You have full entitlement if any of the following apply to you:
- You’ve never used your VA home loan benefit.
- You’ve paid off a previous VA loan and sold the property (in this case, your full entitlement is restored).
- You’ve used your home loan benefit before, but there was a foreclosure or compromise claim (like a short sale), and you repaid the VA in full.
You only have to meet one of these conditions, not all of them.
If you are a first-time home buyer, or a first-time VA loan user, you should have full entitlement and therefore no official loan limit. You could finance 100% of the purchase price with no down payment required, up to an amount determined by your lender.
Remaining Entitlement Scenarios
Remaining entitlement is where things get a bit trickier. If you have remaining entitlement, it means there’s an official limit to how much you can borrow without making a down payment. These limits are based on the so-called conforming loan limits established by the Federal Housing Finance Agency.
Conforming loan limits vary by county because they are based on median home prices. The federal government updates these limits every year to keep up with home price changes. In 2023, conforming loan limits range from $726,200 to $1,089,300, depending on the county.
(Note: you can find the current limit for your county on the FHFA.gov website.)
If you have remaining VA entitlement and wish to borrow more than your county’s conforming loan limit, you’ll have to make a down payment. The amount you have to put down can depend on several factors, including the home’s purchase price. Your lender can advise you on this.
As it states on the Department of Veterans Affairs website:
“So if you’re able and willing to make a down payment, you may be able to borrow more than the county loan limit with a VA-backed loan. Remember, your lender will still need to approve you for a loan.”
You may have remaining entitlement if any of these scenarios apply to you:
- You currently have an active VA loan that you’re still paying back.
- You paid off a previous VA loan and still own the home.
- You refinanced your VA loan into a non-VA loan and still own the home.
- You had a compromise claim (short sale) on a previous VA loan and didn’t repay the VA in full.
- You had a deed in lieu of foreclosure on a previous VA loan (transferred your home’s title to the bank to avoid foreclosure) and didn’t repay the VA in full.
- You had a foreclosure on a previous VA loan and didn’t repay the VA in full.
Again, all of this information can be found on the VA.gov website. We’re simply trying to make the rules clearer and more accessible.
The Lender Decides How Much You Can Borrow
Ultimately, it’s up to your mortgage lender to decide how much you are able to borrow. This is true for both full and remaining entitlement scenarios.
The difference is that, with remaining entitlement, there is an official county-specific loan limit above which you would have to make a down payment. But even then, the mortgage lender will decide how much you are able to borrow based on your financial situation.
The VA does not lend money directly to borrowers. They simply guarantee the loan to give mortgage lenders and added layer of protection. To use a VA loan, you will need to apply through a lender in the private sector.
Your lender will review your current income, recurring debts, and any other assets you have. They will use this information to calculate your debt-to-income ratio and determine the maximum amount you are able to borrow.