Veterans, have you ever wondered what the 2022 VA Loan Limits are? This blog post will go over the loan limits and also provide some information on it works. So, if you’re curious about VA Loan limits (2022), read on!
What Is A VA Loan?
A VA loan is a kind of loan that’s backed by the U.S. Department of Veterans Affairs. It’s a great benefit for veterans, as it can help them get into a home with no down payment and no private mortgage insurance (PMI).
VA loan limits are the maximum amount that a veteran can borrow for a home loan. This conforming loan limit is identical to those defined by the Federal Housing Finance Agency (FHFA) for mortgages. They do not limit your borrowing amount; rather, they establish the maximum amount you can finance with no down payment.
Types Of VA Loans
There are several types of VA loans, each with its own loan limits. Below, we’ll go over them:
Purchase VA Loans
A VA purchase loan is a financial institution-offered loan that is backed by the VA. If you meet the requirements for credit and income set by the lender, have a valid Certificate of Eligibility, and will live in said home–you can be approved for this type of loan.
Purchases made with a VA-backed loan generally do not require a down payment, have fewer closing costs, better terms and interest rates, and no penalty for paying it off early.
If you’re a veteran using a VA-backed purchase loan, you don’t have to get private mortgage insurance (PMI). You can use these loans for buying, building, or repairing homes- even ones with up to four units.
Native American Direct Loan (NADL) Program
If you have served in the military and are either a Native American or have a spouse who is one, you may qualify for a Native American Direct Loan (NADL) from the Veterans Administration (VA).
This type of loan is available only for federal trust land managed by the VA – usually, a reservation belonging to a Native American tribe –. With this loan, you can buy an existing home, build your own primary residence, renovate an older home that needs repairs or improve upon your current living situation.
In addition to regular qualifications, Native Americans can qualify for a NADL to refinance a property. However, there are additional requirements in place specifically for them. For example, their tribe must have a Memorandum of Understanding with the VA that outlines how the loan program can be used on tribal lands.
There are also three conditions that must be met in order to apply. You must have a Certificate of Eligibility, show that you can cover the monthly mortgage payments and other housing costs, and prove that you will live in the home as your primary residence.
The VA Streamline is a refinance option for those with an existing VA loan who want to lower their interest rate and/or change the terms of their loan. One key advantage offered by this is that you can still qualify even if your home is worth less than what you owe on it.
There’s also a decreased funding fee, and the loan typically doesn’t necessitate an appraisal. You may occasionally see these referred to as interest rate reduction refinance loans (IRRRLs).
Cash Out Refinance
A cash-out refinance allows you to use the equity in your house as collateral for a loan. You may either refinance your existing loan or spend it on whatever else you require it for, such as renovations, education, or anything else.
The cash-out refi, shortened for ‘cash-out refinancing,’ is an option if you have a COE and meet the credit and income requisites that the lender has.
If so, it can be used to pay off other debts or even your home loan or a prior VA loan with a lower interest rate which subsequently reduces your monthly payment. This is similar to a home equity line of credit (HELOC) offered by banks to customers, allowing them to borrow against their home’s equity and secure the loan with their equity in the property.
In order to qualify for most VA loans, here are a few of the requirements you need to know about:
Certificate of Eligibility (COE)
The VA issues this certificate to verify that the service member has met minimum requirements and qualifies for a VA loan. Depending on their service status, they’ll need either a DD214 or a statement of service document. If the applicant is a surviving spouse, they will need to fill out different paperwork.
There is no minimum credit score set by the VA, but lenders may have their own guidelines. Most lenders require a 580 median FICO score as a minimum, which can be impacted by other loan factors.
Debt-to-income ratio (DTI)
Your DTI ratio is the percentage of your gross monthly income that you typically use to pay off debts each month- this includes both installment and revolving debt payments.
The house or home must be your primary property.
VA Loan Limit (Full Entitlement)
The majority of people who get a VA loan will have full entitlement. You won’t have a loan limit if you have complete entitlement as of 2022. The VA will guarantee 25% of whatever the VA-approved lender is willing to approve you for.
Here are some scenarios where you can have full entitlement
- You’ve used your previous VA loan entitlement on a property, but you’ve subsequently sold and fully paid it off.
- You’ve never used your VA loan entitlement.
- You may have had a VA loan that wasn’t completely paid off due to foreclosure or short sale, but you have since repaid the VA.
- If you paid off your VA loan without selling the property, you can have your entitlement restored. You are only able to do this one time.
If you’re not sure whether you have full entitlement, check your COE. If you have complete coverage, the basic entitlement on your COE will be $36,000. The number is based on the assumption that the typical home cost is $144,000, although this isn’t accurate in most areas of the country for a long time. As a result, VA officials recognized the notion of bonus rights as a concept.
When your COE states you have a number larger than zero, but under $36,000, it means you still have remaining entitlement. This is also called impacted entitlement, which then requires a loan limit if you want to buy a home without making any sort of down payment.
A VA loan is one of the most forgiving options for individuals with less-than-perfect credit, as it is more flexible than other types of loans. In as little as two years after filing for Chapter 7 bankruptcy or losing your home through foreclosure, you may qualify for a VA loan.
If you’ve had a previous foreclosure or short sale, you might have to make a down payment based on your maximum entitlement, which is equal to 25% of your loan limit.
If an individual has impacted entitlement, the maximum guarantee set by the VA for loans exceeding $144,000 is whichever of the following amount is less:
- 25% of the total loan amount
- 25% of the county loan limit
The 25% down payment requirement is significant because most lenders will refuse to provide a loan without a down payment of at least that amount.
If you want to calculate your VA Loan limit, you can use this helpful tool.
When Do VA Loan Limits Apply?
Veteran homeowners or those considering a VA loan should know that there are still federally-mandated limits in place. In most counties across the U.S., the limit for a single-family home will be $647,200 in 2022.
This is the maximum amount a VA loan borrower who is subject to the limit can borrow for no money down. Higher limits are set in high-cost locations like Honolulu, New York, and San Francisco counties, where the one-unit residential limit is $970,800 by 2022.
Bottom Line (VA Loan Limits 2022)
If you’re a veteran or active duty service member, you may be eligible for a VA loan. The Department of Veterans Affairs doesn’t lend money directly, but it does guarantee a portion of the loan, which gives lenders confidence to provide financing to qualified borrowers.
There are several factors that go into determining whether your maximum VA loan and whether you qualify for a VA loan, including your credit score, debt-to-income ratio, and employment history. You’ll also need to obtain a Certificate of Eligibility from the VA, which can be done online.
Once you’ve been approved for a VA loan, you’ll need to find a lender who participates in the VA home loan program. Not all lenders do, so it’s important to shop around and compare rates and terms before choosing a loan.
If you’re ready to start house hunting, a VA loan can help you purchase your dream home with little to no money down. Just be sure to compare lenders and shop around for the best deal before committing to a loan.