VA home loan amount actually guaranteed
David A Anderson, Wadena County Veteran Service Officer
The U.S. Department of Veterans Affairs guarantees a generous portion of each VA loan. How much the VA guarantee ends up being depends on the loan amount. The VA guarantees a portion of these loans for a lender. This is not money paid to a veteran, or for their benefit. Instead, the VA guarantees a portion of these loans to help lenders offset the risk of loans. By doing so, it encourages lenders to make loans available to veterans on competitive terms. Also, regardless of how much the VA will guarantee, or how high the VA loan limit is in a particular county, a veteran will have to qualify for the loan based upon income, credit, and other requirements.
VA eligible borrowers may be interested to know how much the VA guarantees on mortgages obtained through military home loan benefits. To understand the VA guarantee, one might think of VA loans in terms of small, medium and large. This table shows the maximum guarantee amounts for loans ranging from small to jumbo:
VA Loan Amount Maximum Guarantee Special Provisions
Up to $45,000 50 percent of loan amount 25 percent of Streamline Loans
$45,001 - $56,250 $22,500 Same as above
$56,251 - $144,000 40 percent of the loan amount, Same as above
with a maximum of $36,000
$144,000 or more Up to an amount equal to Same as above
25 percent of the county loan limit
Small VA loans under $144,000 may have a larger guarantee. Proportionately speaking, loans under $144,000 can get a larger guarantee. As much as half of a VA loan under $45,000 can be guaranteed. The proportion of VA guarantee goes down as the amount of the loan goes up. When you obtain a Certificate of Eligibility (COE) for the first time, you may notice that your available entitlement is $36,000. This amount only refers to loans up to $144,000.
Medium VA mortgages between $144,000 and $417,000 have up to 25 percent government backing - Realistically speaking, most VA loans are for larger than $144,000. The average VA loan is around $210,000. The VA guarantees up to 25 percent of loans over $144,000. The percentage depends on whether a borrower makes a down payment. Most VA loans are obtained without a down payment; therefore, most VA loans receive 25 percent backing by the federal government. The conforming loan limit for most U.S. counties is $417,000. And, the VA is willing to back up to 25 percent of all VA loans up to this limit. Many borrowers get their COEs and scratch their heads because it says that their entitlement is only $36,000. Remember this is only for loans up to $144,000. An experienced VA loan officer can calculate your entitlement for loans above this amount. Most borrowers with full entitlement intact will have an additional $68,250 of VA backing available.
Large VA home loans over $417,000 and up to conforming loan limits also get 25 percent VA guarantee. A larger category of VA loans exists and is named so for its size Jumbo. Jumbo VA loans are those over VA conforming loan limits. For most counties, that limit is $417,000. However, certain high cost counties can have conforming limits higher than $417,000. This is to adjust for the higher cost of real estate in some areas. It's rare, but some counties have VA loan limits that exceed $1 million, other counties have limits above $417,000 but less than $1 million. VA borrowers in counties where the conforming limit is higher than $417,000 can expect VA backing of 25 percent up to the limit. Therefore, it's possible for qualified borrowers to obtain large VA loans with no down payment. However, Jumbo loans over the conforming limit will require a down payment to cover the amount not guaranteed by the VA.
To find out how much the guarantee will be on your VA loan, contact an approved lender.
As always please see your local County Veterans Service Officer if you have any questions. You can contact your local VSO at (218) 631-7617 or by email at firstname.lastname@example.org and as always have a great week.