How Much of a Home Can I Buy With a VA Loan

By Tom Streissguth

If you are a veteran of the U.S. armed services in search of a home and mortgage, you may be able to obtain help from the Veterans Administration in the form of a VA-backed loan. The VA guarantees a portion of the mortgage if you meet certain requirements, and it will repay the lender the guaranteed amount if you default on the loan. This allows lenders to extend loans to borrowers who may not otherwise qualify.

If you are eligible for the program, you may apply for a mortgage with a lender such as a bank or a mortgage company. Lenders have their own guidelines that help them make the decision on the loan. They are not required to make the loan. While you normally must provide a down payment on a home loan, it's not always required for a VA-backed loan. This helps many people without much in the way of savings to afford a loan.

The basic loan guarantee limit is $36,000. That means if the VA backs the loan, the agency will guarantee $36,000 of it against default. If you are buying or building a home for more than $144,000, the VA imposes a different limit on the entitlement amount. This limit is 25 percent of the "county loan limit."

A county loan limit is the maximum amount of a loan that the VA will guarantee in that particular county. As of 2001, the county loan limit for most states is $417,000. If you are using a VA-backed loan to buy a home for more than $144,000, the guarantee limit is 25 percent of $417,000, or $104,250.

In certain counties with higher real-estate values, county loan limits are higher. For example, in Fairfax County, Virginia, the county loan limit is $768,750. In Nantucket, Massachusetts, and in the counties of Pitkin and San Miguel, Colorado, the limit is $1,094,625---the highest of all county limits. Throughout the state of Alaska, the county loan limit is $625,500.

You must have a certificate of eligibility from the VA in order to apply for a VA-backed loan. You may request the certificate by filing Form 26-1880, which is available online for you to download and print. You must have proof of military service, although this condition may be waived under certain circumstances. When you present the certificate to the lender, they will run your application through the normal credit check and request an appraisal. Approval depends on your income, the value of your property, and your credit history.

There is no limit to the size of the loan you obtain with a VA guarantee. The only limit is on the portion of the loan that is guaranteed. For lenders, however, there is an important consideration: They cannot re-sell VA-backed loans above the county loan limit in the secondary mortgage market. For that reason, as a practical matter lenders will not extend loans past the county loan limit, as the secondary market represents an important source of income and risk management.

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