2024 VA Loan Limits: What You Need To Know

2024 VA Loan Limits:

A VA loan stands as one of the premier benefits for Americans who have dedicated themselves to serving our nation, both within its borders and globally. Annually, the limits for VA loans are subject to updates. These limits don’t always play a role, but in this article, we’ll cover scenarios where you might encounter a loan limit and what it entails. However, before delving into those specifics, let’s understand the basics of VA loans.

Understanding VA Loans A VA loan is a mortgage option designed for eligible active-duty service members, veterans, reservists, and the surviving spouses of those who have died in service or from service-related injuries. These mortgages are either directly issued or more commonly guaranteed by the Department of Veterans Affairs.

Various Types of VA Loans and Their Benefits Include:

• Purchase: VA loans facilitate the acquisition or construction of a home, often without requiring a down payment. For those obtaining their VA loan through Elevation Mortgage, the construction must be completed before closing.
• Refinance: This option allows borrowers to switch from another loan type (such as conventional or FHA) to a VA loan. Uniquely, VA loans enable borrowers to convert 100% of their home equity into cash.
• VA Streamline: Also known as an Interest Rate Reduction Refinance Loan (IRRRL), this refinance option aims to reduce your interest rate and adjust your term on an existing VA loan. Its advantages include refinancing at a lower rate and payment even with negative equity, a reduced funding fee, and typically no requirement for an appraisal.
• VA Jumbo: When loan amounts exceed the standard conforming loan limits, VA jumbo loans come into play. With Elevation Mortgage, you can secure a VA jumbo loan up to $4 million, and loans up to $2 million may not necessitate a down payment.
• Native American Direct Loan (NADL): Provided by the VA for eligible Native American service members and veterans for homes on tribal land, these loans offer competitive interest rates for a 30-year fixed mortgage.

Key Requirements for Securing a VA Loan:

• Certificate of Eligibility (COE): The VA issues this certificate to verify that you meet the service requirements and are eligible for a VA loan. The necessary documentation varies depending on your service status, including DD214 or a statement of service, with distinct paperwork for surviving spouses. Elevation Mortgage can assist in obtaining your COE if needed.
• Credit Score: While the VA does not mandate a minimum credit score, lenders may impose their own criteria. Elevation Mortgage, for instance, requires a median FICO® Score of at least 500, though this can vary based on additional loan-associated factors.
• Debt-to-Income Ratio (DTI): This ratio compares your monthly debt payments to your gross monthly income, expressed as a percentage. For fixed-rate loans via VA, Elevation Mortgage allows a higher DTI ratio than allowed by most lenders.
• Occupancy: The property financed must serve as your primary residence. 

Understanding VA Loan Limits

While VA loans don’t have inherent limits, the key factor lies in the extent of the guarantee provided by the VA. This guarantee, capped at 25% of the loan amount by the VA for lenders, comes into play should you default on your mortgage. The specific amount guaranteed by the VA is linked to your level of VA entitlement.

For clarity, when discussing VA loan limits, we’re referring to the maximum amount you can borrow without needing a down payment.

Typically, most individuals securing a VA loan possess what’s known as full entitlement. As of 2020, those with full entitlement face no loan cap, meaning the VA guarantees 25% of any amount a lender approves.

Full entitlement is available under these conditions:

• Your VA loan entitlement remains unused.
• You’ve previously utilized your entitlement for purchasing or refinancing and have since sold the property and fully repaid the VA loan.
• You’ve experienced a foreclosure or short sale on a VA loan but have fully reimbursed the VA.
• You’ve repaid a VA loan in full without selling the associated property, an action that can restore your entitlement once.

To determine if you have full entitlement, your Certificate of Eligibility (COE) will list your basic entitlement as $36,000. This figure is based on an outdated average home price of $144,000, which is no longer accurate in many parts of the country. Recognizing this, the VA introduced the concept of bonus entitlement, which effectively means the $36,000 figure isn’t a limiting factor.

If your COE indicates an entitlement between zero and $36,000, you have some entitlement left but not full entitlement, also known as impacted entitlement. In this scenario, you’re subject to loan limits if you wish to purchase a home without a down payment.

Where these limits are applicable, the VA uses formulas tied to conforming loan limits for conventional mortgages. These limits vary based on your location and the property’s unit count. For example, the standard limit for a single-unit home outside of high-cost areas, Alaska, or Hawaii stands at $766,550 in 2024.

VA County Loan Limits 

In regions classified as high-cost for conventional loans, VA calculations apply higher limits. For instance, in Eagle County, Colorado, a single-unit home can secure a mortgage up to $1,149,825 without transitioning to a jumbo loan.

For those with impacted entitlement, county loan limits often define the threshold for VA Jumbo loans. With full entitlement, you might avoid a down payment, though lenders may require stricter qualifications, such as a minimum 640 FICO® Score.

Mortgages and VA Loan Limits 

VA loans offer leniency for borrowers with less-than-ideal credit histories, allowing eligibility post-Chapter 7 bankruptcy or foreclosure after a minimum of two years. Those with a history of foreclosure or short sale may only need to make a down payment, determined by their maximum entitlement, viewed as 25% of their loan limit.

For individuals with impacted entitlement seeking loans above $144,000, the VA’s maximum guarantee is the lesser of:

• 25% of the loan amount, or
• 25% of the county loan limit minus any un-restored entitlement.

Lenders, including Elevation Mortgage, generally require a combination of entitlement and down payment from the borrower that equals 25% of the loan amount for approval.

Let’s clarify this concept with a real-world scenario. Imagine Kelly is looking to purchase a home valued at $480,000 using a VA loan, but she has an existing $80,000 of entitlement that hasn’t been restored yet. The conforming loan limit for the region where Kelly wishes to buy her home is $726,200.

To determine the applicable entitlement limit for Kelly, we’ll apply two different calculations and compare their outcomes. Initially, calculating 25% of the home’s purchase price gives us $120,000 ($480,000 multiplied by 0.25).

Next, we assess the second calculation: 25% of the county’s loan limit minus the unrecovered entitlement amount. This results in $101,550 ($726,200 multiplied by 0.25 minus $80,000).

In Kelly’s case, the VA would guarantee $101,550, as it is the lesser of the two calculated amounts.

For Kelly to secure a VA loan under these conditions, she would need to contribute a down payment of $18,450 ($120,000 minus $101,550) to meet lenders’ requirements, which stipulate that 25% of the loan value should be covered by a combination of down payment and entitlement.

Alternatively, Kelly could consider an FHA loan, which would require a lower down payment of $16,800 at 3.5%, or a conventional loan demanding a 5% down payment, equating to $24,000. However, if Kelly’s impacted entitlement resulted from a prior foreclosure or bankruptcy, securing these loans might pose additional challenges. For instance, the waiting period post-foreclosure for an FHA loan is three years, and seven years for a conventional loan.

It’s important to note that these entitlement limitations are relevant for both purchasing and refinancing a home with a VA loan. They can influence the amount required for closing costs.

Concluding Thoughts If you have full entitlement according to the VA, you’re not restricted by VA loan limits, as the VA guarantees 25% of your loan amount regardless of its size. Typically, lenders refer to conventional loan limits in your locality to determine when a loan qualifies as a VA Jumbo loan, which may entail stricter requirements.

For those with reduced entitlement, the calculations can become complex, but working with a Home Loan Expert can help navigate these intricacies. It’s crucial to remember that most lenders prefer the loan amount to be supported by at least 25% coming from any combination of remaining VA entitlement and down payment. If meeting this criterion proves challenging, exploring alternative loan options might be advisable.

Gaining a thorough understanding of how home loan limits interact with VA loans is essential. If you’re feeling more confident about this topic, moving forward with preapproval could be your next step.