What Exactly is the VA Loan?
The VA Loan is a mortgage that helps veterans finance the purchase of homes with good loan terms and interest rates that are typically better than what you would see on other types of mortgages.
VA home loans aren’t made by the VA itself, but by private lenders such as banks, savings and loans associations, and mortgage companies. VA guarantees the loan if and when the applicant is approved.
People often say the VA guarantees loans, but that’s not accurate. Actually, the VA guarantees a portion of the loan. This still gives lenders a lot more comfort in lending, because if you stop paying, there is a higher chance they won’t lose any money on the deal.
For loans over $144,000, the maximum guarantee amount is 25% of the 2019 VA county loan limit. For most counties in the U.S., this amount is $484,350. For high cost of living areas such as Honolulu or even certain parts of Denver, the amount is $726,525.
What’s the Most I Can Borrow?
There actually is no limit. The issue is, are you trying to avoid a down payment?
In most cases, if you don’t exceed the county loan limit, then you can get that loan with no money down (Yay!).
Once you surpass the county loan limit, the lender will want a down payment from you because the VA will not provide a guarantee for that portion of the money.
Click here for a PDF linking to all the 2019 county loan limits
I want to be clear about this, because it’s confusing.
If you wanted to borrow $800,000 for a house in Honolulu, you might be required to put up a down payment on a VA loan, but it won’t be as big as you think.
You wouldn’t be responsible for the down payment on the entire amount, just for a down payment on the amount exceeding the county loan limit.
$800,000 want to borrow
$726,525 county loan limit
$73,475 amount exceeded county loan limit
The lender may ask you to make a 20% down payment on $73,475, which works out to be about to be $14,695.
That’s way cheaper than paying 20% on $800,000 which is $160,000. Ouch!
So buying a really expensive house (even a 4-plex) in Honolulu or a similar HCOL area with a VA loan may not be possible with no money down, but you might be able to do it with a small down payment.
You CAN, but that doesn’t necessarily mean you SHOULD. There are many factors to consider. Often, expensive rental properties in HCOL areas do not make great rentals, and I recommend against them for military members.
Read my article Real Estate Mistakes Military Members Should Avoid
So bottom line, there is no VA limit to how much you can borrow.
You have to put a down payment on the amount over the county loan limit you want to borrow.