The Maximum VA Loan Amount Has Been Eliminated
You have some significant benefits if you’re fortunate enough to be eligible for a VA loan.
A VA loan is one of the greatest mortgage products available since there are no down payment requirements, no mortgage insurance, and some of the lowest interest rates.
In addition, VA loan reforms approved at the beginning of this year added perk: the elimination of the maximum VA loan amount.
This does not imply that you may obtain a VA loan in any amount you wish.
There are still restrictions on how much you may borrow, but they are based on your financial condition rather than a national cap.
What Does No VA Loan Limitations Mean for You
Abolishing a maximum VA loan cap does not signal an imminent spending frenzy. However, it makes purchasing a larger home or a property in a more costly market somewhat simpler.
Most significantly, you can acquire a more expensive home without a substantial down payment (if you prefer).
However, it is vital to keep in mind that omitting the down payment, while permitted, will result in a more significant loan debt and, thus, a higher monthly payment. For instance:
VA Loan “Limits” Are Now Based on Your Income
Because there is no maximum VA loan amount, your borrowing limit will rely on your specific financial situation and budget, as opposed to a government-mandated cap.
Instead of asking, “how much can I borrow with a VA loan? “you should question, “how much house can I afford with a VA loan?”
To establish what you can afford, you must consider your income, credit score, and debts, among other things.
Your VA lender will determine your maximum loan amount depending on the following:
- Your monthly income: How much do you earn each month? Lenders generally only want you to spend up to 30 percent of your income on housing expenditures.
- Your credit score: What is your creditworthiness? Higher credit scores will result in a reduced interest rate and a cheaper monthly payment. As a result, they may also offer you a larger maximum loan amount.
- Your debts: How much must you pay monthly toward your debts? What portion of your income does this consume? Your debt-to-income ratio will also impact the size of your loan.
- Your potential down payment: Do you intend to make a down payment? Moreover, how much? A down payment will reduce your monthly mortgage and may make you eligible for a larger loan.
VA loan ceilings will generally be greater for applicants with lower debt-to-income ratios, substantial down payments, and higher credit ratings.
If you have a low credit score, do not make a down payment, or have a substantial debt, you will be able to afford less and consequently qualify for a lesser loan amount.
How to Calculate the VA Loan Limit
Check the current VA mortgage interest rates to determine how much you might afford a VA loan.
Then, calculate an affordable mortgage payment using these rates, your monthly income, local home prices, your debts, and your down payment.
Using our VA loan calculator, you can also ensure that VA financing fees and other charges are accounted for.