VA provides veterans the opportunity to buy a home with no down payment or in the case of refinances, up to 100% of the value of the home. The amount the veteran can borrow with no down payment is called the VA Loan Limit. Each county in the United States has a specific limit set by VA. This is called the "VA County Loan Limit". Generally this limit is set at $417,000 with the exception of specific High Cost Counties.
In these high cost counties where VA has set the limits higher, a veteran can borrow more with the same zero down. These loans are referred to as Jumbo VA Loans. Jumbo VA loans are extremely popular as they often have lower rates than Non-conforming Jumbos and even Fannie Mae Conforming Jumbo loans.
Can I get a VA loan over $417,000?
The VA county loan limit is not the limit the veteran can borrow however. VA guarantees 25% of the loan up to the county loan limit. However, if the purchase price exceeds the VA county loan limit the veteran can still use his or her eligibility with a down payment. This down payment in essence is the veteran's skin in the game and must be at least 25% of the difference between the county loan limit and the purchase price.
An example can be seen here:
Purchase price ($500,000) - VA County Loan limit ($417,000) = $83,000 x Guaranty (25%) = Minimum Down Payment required ($20,750)
This opens up many opportunities for veterans to purchase homes that they might not have been able to purchase with other types of mortgage options, such as conventional or FHA loans.
VA loans compared to other mortgage products
Conventional loans (mortgage loans backed by Fannie Mae or Freddie Mac) - Conventional loans have loan limits similar to VA loans. However you can't exceed these limits and often times these limits are lower than VA county loan limits. In addition, conventional loans often have higher down payment requirements than VA loans as well. They also have higher rates than VA loans, not to mention, mortgage insurance requirements when there is less than 20% down payment. Together, these make conventional loan payments significantly higher than VA loans. Because conventional loans have lower debt to income requirements than VA loans, qualifying is much more difficult than qualifying for a VA loan.
FHA loans (Loans backed by the Federal Housing Association) - FHA loans too have loan limits based on area median home values. Like conventional loans, they too have down payment requirements, albeit less than Fannie Mae or Freddie Mac requirements. FHA also has monthly mortgage insurance payments which makes the payment higher than VA loans.
In the end, with higher loan limits, lower rates, no mortgage insurance, and less or no down payment requirements, VA loans are the best way for veterans to purchase or refinance a home below, at or above $417,000.
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