If you’re a veteran or an active service member planning to buy a home, you might wonder: What happens if I need a loan larger than the VA loan limit? VA loans offer fantastic benefits, including no down payment and competitive interest rates, but what if your dream home’s price exceeds the limit?
The good news is that you can borrow beyond the VA loan limits, but you may need to make some adjustments. This guide will break down how VA loan limits work, what happens when you exceed them, and the best strategies for securing a larger loan.
Understanding VA Loan Limits
What Are VA Loan Limits?
VA loan limits determine how much you can borrow without needing a down payment. The Department of Veterans Affairs (VA) no longer sets loan limits for eligible borrowers with full entitlement, but limits still apply if you have partial entitlement (e.g., if you have an existing VA loan or defaulted in the past).
- In 2024, VA loan limits for partial entitlement align with conventional loan limits set by the Federal Housing Finance Agency (FHFA).
- For most areas, this means a limit of $766,550.
- In high-cost areas, limits can reach $1,149,825.
Who Has Full vs. Partial Entitlement?
Your VA loan entitlement status determines whether loan limits apply:
✅ Full Entitlement: No loan limit applies—borrow as much as your lender approves.
✅ Partial Entitlement: Loan limits apply, and exceeding them requires a down payment.
You have full entitlement if:
- You have never used a VA loan before.
- You’ve fully repaid a previous VA loan and restored your entitlement.
You have partial entitlement if:
- You have an active VA loan.
- You defaulted on a past VA loan.
- You haven’t restored your entitlement after selling a home with a VA loan.
To check your entitlement, request a Certificate of Eligibility (COE) from the VA or consult your lender.
What Happens If You Exceed VA Loan Limits?
If you need a home loan above the VA loan limit and have partial entitlement, you may need to pay a down payment on the portion exceeding the limit.
How Much Will You Need to Pay?
The VA typically guarantees 25% of the loan amount. If you exceed the loan limit, lenders will require 25% coverage of the difference.
Example Calculation:
- Home price: $900,000
- VA loan limit in your area: $766,550
- Excess amount: $900,000 – $766,550 = $133,450
- Required down payment: 25% of $133,450 = $33,362
Instead of a 20% down payment ($180,000) on a conventional loan, you’d only need $33,362 under a VA loan.
Options If You Need a Larger VA Loan
If your desired loan amount exceeds the VA limit, here are some options to consider:
1. Use a Down Payment
If you have partial entitlement, you can still secure a larger loan by making a down payment on the excess amount, as shown in the example above.
2. Look for Lenders Offering High VA Loan Approvals
Some VA-approved lenders specialize in jumbo VA loans, allowing you to borrow more than the loan limit without significant restrictions. These lenders may have:
- Slightly higher credit score requirements.
- Stricter debt-to-income (DTI) ratios.
- Additional financial documentation requirements.
3. Consider a VA Jumbo Loan
A VA Jumbo Loan is any VA-backed loan exceeding conforming loan limits. The benefits include:
✔ No private mortgage insurance (PMI)
✔ Competitive interest rates
✔ Lower down payment than conventional jumbo loans
4. Explore Alternative Financing
If VA loan limits are a concern, you might consider other mortgage types:
- Conventional jumbo loans (20% down but broader acceptance).
- FHA loans (lower credit score requirements but with PMI).
- Portfolio loans from private lenders (customized, but higher rates).
5. Consider Using a Second Mortgage
If you exceed the VA loan limit but want to avoid a large down payment, a piggyback loan (a second mortgage) could be an option.
- Example: A 80-10-10 loan, where you take an 80% VA loan, a 10% second mortgage, and put 10% down.
- This can reduce out-of-pocket costs while still keeping the benefits of a VA loan.
Maximizing Your VA Loan Potential
Here are a few strategies to increase your VA loan approval:
✅ Improve Your Credit Score
- VA loans don’t have strict credit requirements, but a score above 620 improves your chances of approval and better rates.
✅ Lower Your Debt-to-Income Ratio (DTI)
- Aim for a DTI below 41% for easier approval.
- Pay down credit cards and other debts before applying.
✅ Work With a VA Loan Specialist
- VA-approved lenders understand the complexities of VA jumbo loans and loan limits.
- A knowledgeable lender can help you structure your loan efficiently.
✅ Use a VA Loan Calculator
- Many lenders provide VA loan calculators to estimate your eligibility and potential down payment needs.
Conclusion: What’s Your Best Option?
Exceeding VA loan limits doesn’t mean you can’t get a larger loan—it just means you’ll need to adjust your approach. Whether it’s making a small down payment, seeking VA jumbo loans, or exploring alternative financing, you have options.
📌 Next Steps:
✔ Check your VA loan entitlement status.
✔ Use a VA loan calculator to estimate your borrowing power.
✔ Consult a VA loan specialist to explore the best financing solutions.By understanding your choices, you can confidently move forward in your home-buying journey—whether you’re a first-time homebuyer, seasoned investor, or real estate professional!