Have you heard about VA home loans? As your trusted loan officer, I can tell you they’re a fantastic opportunity for service members and veterans. They offer a chance to buy a home without worrying about borrowing limits. But let me tell you, there’s a bit more to it.
Back in 2020, the Department of Veterans Affairs (VA) made a big change. They removed VA home loan limits for people with full entitlement. This meant they could borrow more for a home without needing a down payment.
But it’s not as straightforward as it sounds. You still need to meet the basic eligibility guidelines for a loan. And even though the VA doesn’t put a cap on the loan amount, the Federal Housing Finance Agency (FHFA) does.
So, depending on your situation and your lender, you might still have a limit. Ready to dig into the details of VA home loan limits for 2023? Let’s get started!
What are the 2023 VA Home Loan Limits?
First, let’s talk about VA home loan limits. Being in the real estate industry, I can tell you these limits are a big deal.
They come into play when figuring out how much you can borrow when you apply for a VA loan. They’re not a cap on the total amount you can borrow. But they do affect how much you can borrow without a down payment.
Understanding VA Home Loan Limits
VA home loan limits are tied to something called “entitlement”. This is the amount the VA guarantees to the lender. It kicks in if you can’t pay back the loan.
If you have full entitlement, you can borrow as much as your lender is willing to lend. And you know what? You won’t need a down payment.
But, if you’ve used some of your entitlement on a previous VA loan and haven’t restored it, that’s where the loan limits come in. The VA will only guarantee up to a certain amount.
This amount is known as the conforming loan limit. This limit varies by county and is set by the FHFA.
What’s New with VA Home Loan Limits in 2023?
The big news is that the FHFA has increased the conforming loan limits. This means that the amount the VA will guarantee for borrowers with remaining entitlement has gone up.
For most areas, the VA home loan limit has increased to $726,200. This is up from $548,250 in 2021 and $625,500 in 2022.
This increase reflects changes in average home prices across the country. So, if you’re considering using a VA loan to buy a home in 2023, you might be able to borrow more without a down payment than you did in previous years.
But hold on. These limits only apply if you have remaining entitlement. If you have full entitlement, there’s no limit to how much you can borrow without a down payment. The only condition is that you qualify for the loan amount.
What Does Full Entitlement Mean in VA Home Loans?
I often get asked about full entitlement in VA home loans, and I believe you need to understand this.
Full entitlement refers to the maximum amount the VA guarantees for a VA loan without needing a down payment. It’s like a safety net from the VA to the lender. If you can’t pay back the loan, the VA steps in and covers a portion of it.
Now, if you’re a veteran or active service member, you have full entitlement. And here’s the good news: since 2020, there’s no cap on VA loans.
So what does that mean for you as a borrower? That means you can borrow as much as your lender agrees to lend without a down payment if you have full entitlement. But of course, the lender will still check things like your income and VA loan credit score requirements to ensure you can afford the loan.
Benefits of Full Entitlement for VA Home Loans
Full entitlement comes with some great benefits:
- No down payment: With full entitlement, you can finance the home’s entire value. No need to worry about saving for a down payment.
- No mortgage insurance: Unlike other loans, VA loans don’t require monthly mortgage insurance. This can save you a significant amount of money over the life of the loan.
- Lower interest rates: VA loans usually offer lower rates than other loan types. This means lower monthly payments and less interest paid over time.
- Reusable: Once you’ve paid off a VA loan in full, you can use your full entitlement again. It’s like getting a second chance to use this amazing benefit.
What About Remaining Entitlement in VA Home Loans?
Remaining entitlement is another critical term in the world of VA loans. It refers to the portion of your VA loan entitlement that you haven’t used. This comes into play if you’ve used a VA loan before and haven’t fully restored your entitlement.
You can use your remaining entitlement for another VA loan. However, the process can be a bit more complex, and the loan limits may be lower.
Effects of Remaining Entitlement in VA Home Loan Limits
Having remaining entitlement can affect your VA home loan limits in a few ways:
- Lower loan limit: If you have remaining entitlement, your VA loan limit might be lower than if you had full entitlement. This is because the VA will only guarantee up to a certain amount based on the county loan limits.
- Possible down payment: If the loan amount is more than your remaining entitlement, you might need to make a down payment. This is to cover the difference between the loan amount and the amount the VA will guarantee.
- Limited by county loan limits: The amount you can borrow with the remaining entitlement is also limited by the county loan limits where the property is located. These limits vary from county to county.
How Are VA Home Loan Limits Calculated?
Now that we’ve covered the basics of VA home loan limits and entitlements, you might wonder, “How are these numbers calculated?”
It’s a great question that can seem tricky at first glance, and I’m here to simplify it for you. Let’s use our friend Jeff as an example to make things clearer.
Calculation of VA Home Loan Limits for Full Entitlement
For full entitlement, the VA guarantees 25% of the loan amount. So, suppose Jeff is eligible for full entitlement. In that case, he can borrow as much as a lender is willing to lend without needing a down payment.
This is because the VA backs a portion of every loan, known as a guaranty, which is reflected in a dollar amount called “entitlement”.
Calculation of VA Home Loan Limits for Remaining Entitlement
Alright, let’s say Jeff already has a VA loan for a home he bought a few years ago for $300,000. He used $75,000 of his entitlement for this loan ($300,000 x 25%).
Now, Jeff is moving for a new job and wants to keep his current home and buy a new one for $500,000 in an area with the standard county loan limit.
The loan limit for most U.S. counties in 2023 is $726,200, which means the full entitlement would be $181,550 ($726,200 x 25%). So, Jeff’s remaining entitlement would be calculated as follows:
$181,550 (full entitlement) – $75,000 (used entitlement) = $106,550 remaining entitlement
This remaining entitlement of $106,550 can be multiplied by 4 to get the maximum loan amount Jeff could borrow before needing a down payment, which is $426,200.
If Jeff wants to buy a home that costs more than this amount, he would need to make a down payment.
The down payment would be 25% of the difference between the maximum loan amount and the purchase price. So, for a $500,000 home, Jeff would need to come up with a down payment of $18,450.
Ways How You Can Restore Your Entitlement
Restoring entitlement is like hitting the reset button on your VA loan benefits. It’s a way for Jeff to get back his full VA loan entitlement, so he can use his VA loan benefits all over again. Let’s talk about how Jeff can do this.
- Selling the Property: If Jeff sells his house, the one tied to his current VA loan, he can get his entitlement back. Once the loan is all paid off, he can ask the VA to restore his entitlement.
- Refinancing: Jeff can also refinance his VA loan with a non-VA loan. He could use a conventional loan or an FHA loan, for example. Once he does that, he can restore his entitlement.
- Paying Off the VA Loan in Full: If Jeff manages to pay off his VA loan in full, he can get his entitlement restored. He could use his savings, an inheritance, or any other means to do this.
- One-Time Restoration Without Selling: Jeff has the option to restore his entitlement once without selling his house. This means he can keep his current home (maybe as a rental property) and buy a new one with a VA loan. But remember, this is a one-time deal. After using this option, he’ll have to sell all properties tied to a VA loan to restore his entitlement in the future.
Keep in mind that restoring entitlement isn’t automatic. You have to apply for it. You’ll need to fill out a form (VA Form 26-1880) and send it to the VA. Once they approve it, you can use your VA loan benefits again to buy another property.
The Bottom Line
VA home loans might seem tricky at first, but you got this. They’re a fantastic tool for those who currently serve or have served in the US military, and these changes in 2023 are here to make things even better for you.
If you have full entitlement, there’s no down payment to worry about. If not, you still have chances to restore your entitlement and get more benefits. Trust me, you can make the most of VA home loan limits 2023.
But remember, this step doesn’t have to be a solo task. A professional loan officer is just a call away to guide you through your VA home loan journey. So, don’t hesitate. Schedule a call today, and let’s unlock the full potential of your VA home loan benefits.
2023 VA Home Loan Limits FAQs
Do VA home loan limits apply to refinancing as well?
Yes, they do. If you’re considering different home loan refinancing options such as, for example, a VA cash-out refinance, the loan limit is the same as if you were buying a home in the same county. But for an Interest Rate Reduction Refinance Loan (IRRRL), also known as a VA Streamline Refinance, there’s no loan limit.
If I have two VA loans, how are the loan limits calculated?
The loan limits are calculated based on your remaining entitlement. If you’ve used some of your entitlement and haven’t restored it, you can use what’s left for another loan. The VA will guarantee 25% of the county loan limit for this second loan. But if this doesn’t cover 25% of your new loan amount, you might need to make a down payment.
How often do VA home loan limits change?
VA home loan limits can change annually. They usually follow the Federal Housing Finance Agency’s changes to conforming loan limits, which typically happen at the end of the year for the following year.
What happens if I move to a county with a lower VA home loan limit?
Your existing VA loan won’t be affected if you move to a county with a lower VA home loan limit. But if you’re planning to buy another home in that county using your remaining entitlement, the lower limit could affect the amount the VA will guarantee, and you might need to make a down payment.
Are VA home loan limits the same in all states?
No, they’re not. VA home loan limits can vary from county to county within each state. Most counties have the same limit, but some high-cost areas have higher limits. The VA provides a list of loan limits by county each year.