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Is my loan limit only $36,000?

VA entitlement is $36,000The Department of Veterans Affairs has not established a maximum for the amount a borrower can use to finance their home. Although, it is important to understand that a limit does exist on the total amount of assumable liability that the VA can take on. This impacts how much a lender will be willing to fund a buyer. Loan limits are variable by county because the price of the home is dependent on the housing market it is located in. The basic entitlement accessible to eligible veterans is $36,000; the average amount a lender is willing to fund is usually for four times the total of the entitlement.

A bonus entitlement is also available for veterans; this represents a hypothetical monetary sum for use on a second home purchase. The entitlement equates to $144,000 or greater, for a borrower purchasing property that requires an amount exponentially greater than what is covered with the basic entitlement.

Loans distributed as part of the VA loan program are paid for by banks, private lenders, and mortgage companies. No set amount has been established as what a borrower can qualify for.

The amount of $36,000 is the baseline insured by the VA. It is beneficial to understand that the Department of Veterans Affairs does not distribute loans, opting instead to guarantee them via investor protection from borrower default. When the loan program was conceived the pros of loan distribution versus guaranteeing them were weighed, but the federal government determined that the guarantee was a more sustainable means of veterans attaining home ownership. The VA will guarantee either 25 percent of the principal loan amount or $36,000 whichever is greater.

Your overall loan limit will be determined based on the results of an assessment of your ability to repay the loan. Your debt to income ratio as well as your loan to value will be heavily weighted in assessing the amount you qualify for. To find out what your loan limit is, you must fill out a VA home loan application.

Click here for the encrypted and secure VA home loan application.