VA loan limits are set on a state-by-state basis. These limits, similar to limits on Small Business loans, Farm Service Agency loans or Federal Housing Administration loans set a maximum dollar amount for the size of the loan guaranty and the loan as a whole. To understand these limits, you must first understand how the guaranty works.

VA Home Loan Guaranty

A guaranty from the VA is like insurance on a mortgage. The loan still comes from a private lender. Then, the VA promises to purchase the mortgage out of default if you, the borrower, cannot make payments. This program is designed to make loans to veterans less risky for lenders. Veterans are often considered risky borrowers due to a variety of factors, including their relatively short credit history, history of moving from place to place, and even low incomes. You do not have to be a veteran to qualify; active duty service individuals are also eligible for the loan. If you are a veteran who has been discharged, the discharge must be honorable in order to remain qualified for the loan program and other forms of veteran assistance.

Loan Guaranty Limits

When you apply for a VA loan guaranty, you must first get your certificate of eligibility for the guaranty from the VA. You can fill out this application online in a few easy steps. In a matter of days, you will have a response that tells you how much the VA will be willing to insure on your home loan. You can get a larger loan than this, and this is not even a promise the VA will guaranty your loan. This is simply a jumping off point for you to show lenders you are eligible for a VA guaranty up to a certain amount.

State-by-State Loan Limits

From this point, you will begin searching for a loan from a private lender. The lender will be aware of VA loan limits in your area. These limits are based on the cost of property, taxes, incomes and other demographic factors in the area where you intend to purchase your home. These limits are set annually. They are guidelines for lenders, but they are not absolute. Similar to how the government sets loan limits for organizations like Freddie Mac and Fannie Mae, there are exceptions, such as a large down payment or very high salary, that can change these limits to a higher level.

Standard Loan vs. Jumbo Loan

When you do go over the VA loan limit, or any loan limit for that matter, you have what is considered a jumbo loan. There is no specific framework for a jumbo loan. However, they are generally ill-advised. A jumbo loan will carry large mortgage payments each month. It will also have very high interest rates contributing to these payments. This means, if you lose your job at any point in the future, you could face an immediate crisis. This is particularly risky on a VA loan because default means you will lose your eligibility for all federal loans in the future.

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