Before you determine your budget for purchasing a home with a VA loan, you’ll want to get a solid understanding of the interplay between VA entitlement and VA loan eligibility.
First off, to really understand this relationship and how it affects your VA Loan, you have to first understand that the VA is not the one lending the money to you. As is implied by their name, lenders are the ones lending you money for your next home and the VA makes it easier for them by guaranteeing or insuring your loan up to a certain amount. This makes it possible for lenders to approve loans to a veteran who might not otherwise get approved. It is referred to by the VA as loan entitlement.
How Much Is The Guarantee?
It depends, but the VA can guarantee up to 50% of a home loan, all the way up to $45,000. On loans that are between $45,000 and $144,000, the VA will guarantee a minimum amount of $22,500 and a maximum of 40% of the loan up to $36,000. This guarantee is also subject to however much entitlement is available to the veteran applying for the loan.
What if a loan is more than $144,000 for the construction or purchase of a home or residential unit or to refinance a previous VA loan? In this case, the maximum guarantee can be either 25% of the total loan amount or $104,250, whichever is lower. You can expect these loan limits to change annually as the formulas around them fluctuate.
For more VA loan guarantee examples, check out this printout.