VA home loans can offer eligible Veterans, service members and surviving spouses valuable benefits, including the possibility of buying with no down payment and no monthly mortgage insurance. Two parts of the program commonly cause confusion: VA loan limits and the VA funding fee.
The rules are especially important for borrowers buying in higher-cost areas such as Maryland, Washington, D.C. and Northern Virginia.
Is There a Maximum VA Loan Amount?
The Department of Veterans Affairs does not set a maximum dollar amount that an eligible borrower may finance. For Veterans with full VA entitlement, there is no VA-imposed county loan limit.
That does not mean every borrower can obtain a VA loan of any size. The lender must still determine that the borrower qualifies based on income, debts, credit, assets and other underwriting requirements. The property’s appraised value must also support the transaction.
Individual lenders may have their own maximum loan amounts or additional requirements for larger VA loans.
When Do County Loan Limits Still Matter?
County loan limits can still matter when a Veteran has remaining entitlement because part of the entitlement is tied up in another VA loan or has not been restored.
In that situation, the lender uses the one-unit conforming loan limit for the county to calculate the remaining guaranty. If the available entitlement does not provide the required guaranty for the new loan amount, a down payment may be required.
A borrower with remaining entitlement may still be able to purchase above the county limit by making the necessary down payment and meeting the lender’s qualification requirements.
How Do You Know Whether You Have Full Entitlement?
Your Certificate of Eligibility, or COE, shows your current VA entitlement. A borrower may have full entitlement when:
- The VA benefit has never been used
- A previous VA loan was paid in full and the entitlement was restored
- Another qualifying restoration or entitlement condition applies
Having used a VA loan before does not automatically mean you lack full entitlement. The current COE should be reviewed before calculating the available benefit.
What Is the VA Funding Fee?
The VA funding fee is a one-time charge paid on many VA-backed and VA direct loans. It helps support the program and allows VA financing to offer features such as no required monthly mortgage insurance.
The fee depends on the loan type, whether the benefit has been used before and, for a purchase loan, the size of the down payment. The funding fee can usually be financed into the VA loan or paid at closing.
Current VA Purchase Funding Fee Rates
| Down Payment | First Use | Subsequent Use |
|---|---|---|
| Less than 5% | 2.15% | 3.30% |
| 5% or more | 1.50% | 1.50% |
| 10% or more | 1.25% | 1.25% |
The reduced funding-fee percentages apply to purchase and construction loans with the applicable down payment. They do not apply in the same way to every type of refinance.
VA Refinance and Other Funding Fees
- VA cash-out refinance: 2.15% for first use and 3.30% for subsequent use
- Interest Rate Reduction Refinance Loan (IRRRL): 0.50%
- VA loan assumption: 0.50%
- Manufactured-home loan not permanently affixed: 1.00%
The applicable rate should be confirmed for the individual transaction before a borrower relies on an estimate.
Who May Be Exempt From the VA Funding Fee?
Some borrowers are exempt from paying the funding fee. Examples include certain Veterans receiving—or eligible to receive—VA compensation for a service-connected disability, certain surviving spouses receiving Dependency and Indemnity Compensation, and active-duty service members who have received a Purple Heart.
The Certificate of Eligibility usually identifies the funding-fee status. If a disability claim is pending, additional review may be needed because the effective date of an award can affect how the fee is handled.
Should You Make a Down Payment on a VA Loan?
A down payment is not automatically the best or worst choice. Putting at least 5% down can reduce the funding fee for a non-exempt borrower, and 10% down reduces it further. However, preserving cash for reserves, repairs or other goals may be more valuable than reducing the fee.
We can compare the payment, cash requirement and long-term cost with different down payment amounts before you make that decision.
Planning a VA Purchase in Maryland, DC or Virginia?
The Chris Jordan Mortgage Team can review your Certificate of Eligibility, calculate available entitlement, compare down payment options and provide a detailed estimate for your purchase.
Questions about VA loan limits, entitlement or the funding fee?
Call us at (240) 670-5090 or email us at CJMT@mainstreethl.com.
Ready to explore your options? Start your prequalification online.
VA and lender guidelines are subject to change. Loan approval is subject to borrower, property and program eligibility requirements.
