Hello dear readers, today we are unraveling the intricacies of VA loan limits and entitlements. If you are a veteran, active-duty service member, or a qualifying spouse thinking about buying a home, this information will be your guiding light. Let’s make this journey easy and informative, step by step.
What Are VA Loan Limits?
VA loan limits represent the maximum amount you can borrow without making a down payment. But here’s the good news: as of January 1, 2020, the VA has eliminated loan limits for borrowers with full entitlement. This means that if you meet the necessary criteria, there’s technically no cap on how much you can borrow.
However, keep in mind that the lender might set a limit based on your credit score and income. It’s always best to borrow what you can comfortably afford to repay.
How Does VA Loan Entitlement Work?
VA loan entitlement is the amount that the VA guarantees to the lender in case you default on the loan. There are two types of entitlements:
- Basic Entitlement: $36,000, generally allowing you to borrow up to $144,000.
- Bonus Entitlement: An additional amount that helps you buy a home that costs more than $144,000.
Your total entitlement is a big factor in determining how much you can borrow.
How Do You Calculate Your Entitlement?
To find out your entitlement amount, you can refer to your Certificate of Eligibility (COE). Your COE shows both the basic and the bonus entitlements. It’s a document that says you are eligible for a VA loan.
If you need help understanding your COE, don’t hesitate to consult a loan officer or a VA loan expert.
Are There Consequences for Exceeding the Loan Limit?
If you decide to borrow more than what your entitlement covers, you might need to make a down payment. But remember, the down payment required for VA loans is still typically less than for conventional loans.
What If I Have a Foreclosure or a Default?
If you have a foreclosure or default on a previous VA loan, it could affect your entitlement. It means part of your entitlement is tied up in that loss, reducing the amount available for your next loan.
Where Can You Find More Information?
To deepen your understanding of these concepts and to get the most current information, it’s advisable to consult reliable sources:
- VA Loan Guaranty: Detailed information can be accessed through the VA Loan Guaranty website. It’s a treasure trove of data on every aspect of VA loans.
- Fannie Mae and Freddie Mac: You can also consult these organizations to get insights on the broader mortgage landscape:
- Fannie Mae: Learn from a range of home buying topics at Fannie Mae’s official site.
- Freddie Mac: Find a wealth of information on home buying at Freddie Mac’s official website.
Conclusion
Understanding VA loan limits and entitlements doesn’t have to be complicated. By breaking it down into smaller, digestible pieces, you’re already on the right track to securing the home of your dreams. Remember to lean on credible sources like the VA Loan Guaranty, Fannie Mae, and Freddie Mac for guidance. Happy home buying!
Sherrie Xiao
