Limits for a VA Home Loan

The VA loan limit went up. How much money can you borrow?

Very nice homeThanks to the Blue Water Navy Vietnam Veterans Act of 2019 loan limits were eliminated effective January 1, 2020. Want a million dollar home loan? It's possible due to the Blue Water Navy Vietnam Veterans Act. There is a catch, of course, you still need to meet the purchase guidelines, including, income, credit, employment . . . and the maximum lender's loan limit.

Eligible Veterans with full entitlement no longer have limits on loans over $144,000.

The change in the guidelines means Veterans are not required to make a down payment, and the VA will guarantee 25% of the loan amount to your lender if you default on a loan that is over $144,000.

If you meet either of the requirements listed below, you have full entitlement:

At least one of these statements must be accurate:

  • You have used your home loan benefit previously, but had a compromise claim (also called a short sale) or foreclosure and repaid the VA in full, or
  • Your full entitlement was restored after paying off a previous VA home loan in full, or
  • You never used your home loan benefit

What is bonus entitlement, additional entitlement, or tier 2 entitlement?

You may have come across the terms' bonus entitlement, additional entitlement, or tier 2 entitlement. These terms refer to the Veteran's eligibility amount to achieve a 25% loan guaranty.

Tier 2 entitlement occurs when the home buyer has his or her entitlement locked up with another home loan. A reduction in the eligibility amount can affect the amount that the Veteran can borrow on another house.

Why does my Certificate of Eligibility state that “this Veteran'entitlement is 36,000?”

The $36,000 is not the maximum loan amount you can obtain. Rather, it means that if you default on a VA home loan for less than $144,000, the VA promises to pay your lender up to $36,000. For loan amounts over $144,000, the VA promises to pay your lender up to 25% of the loan amount.

This line on your COE contains information for your lender. It states that you have full entitlement.

Can You Rent a House That Has a VA Loan?

This where the tier 2 calculation kicks in. You may have a percentage of your eligibility tied up on another home, but you could still have eligibility remaining that can be used on another home. This situation requires a calculation to arrive at that magical 25% guarantee.

Conclusion

In conclusion, the increase in VA home loan limits is good news for veterans. The new limit of $1,000,000 will allow more veterans to purchase or refinance a home with no money down. With the increase in the limit, more veterans will be able to take advantage of the VA home loan program. This program has many benefits, including a low interest rate and no money down. If you are a veteran, be sure to take advantage of the VA home loan program in 2022.

SOURCE: VA Home Loan Limits

Recommended Reading

  1. VA Streamline Refinancing: Everything You Need to Know
  2. VA Home Loan Inspections: What You Should Know
  3. VA Closing Costs: Everything you need to know