How Do I Calculate My Maximum VA Loan Amount

Have you ever wondered how much you can actually borrow with a VA loan? Knowing your maximum loan amount is key, whether it’s your first home or your next. Today, I’m excited to walk you through five easy steps to figure out just that, plus three important factors that affect how much you can get with your VA loan.

I’m Rick Elmendorf, your trusted expert in VA loans. With years of experience and a top ranking among loan officers nationwide, I’m here to help veterans and military members like you get the most out of your home financing options.

Stay with me until the end, and I’ll give you free access to my exclusive VA Maximum Loan Amount Calculator. Let’s get started and discover what you can achieve with your VA loan.

The Considerations to Get Maximum VA Loan Amount

Before I outline the detailed steps to calculate your VA loan amount, let’s look at the key factors that impact how much you can borrow and what are the actual VA home loan limits.

These considerations are critical in shaping the terms and capacity of your loan, ensuring that it aligns perfectly with both your needs and eligibility. I’ll ensure we consider the VA loan limits, which are crucial in determining your borrowing capacity. Remember that things will also depend if you have a previously active VA loan.

Consideration 1: Calculate Your Funding Fee

I always highlight how crucial understanding the VA Funding Fee is, as it directly impacts the total cost of your loan. This fee varies depending on several factors, including whether it’s your first time using a VA loan or a subsequent use, your military status, and whether you make a down payment.

VA Funding Fee Chart

The funding fee percentage differs based on your usage, first time or subsequent, and the amount of down payment you choose to make. Here are the detailed charts outlining these percentages, helping you determine the fee you’d be responsible for.

Disability Rating Benefit

Veterans who are receiving compensation for a service-connected disability are free from the VA funding fee. This can significantly reduce the overall cost of acquiring a loan.

Subsequent Use Trick

If you don’t have a disability rating and are considering using your VA loan benefits again, placing a strategic down payment can help reduce the funding fee.

For example, while loans without a down payment tend to have higher fees, contributing 5% or more can significantly decrease these costs. This approach is especially valuable in subsequent uses of your VA loan, where the funding fee is generally higher than on your first use.

Knowing how these fees work, you can plan your home purchase to save potentially thousands of dollars. Don’t worry. I’m here to help you make the best financial decisions for your situation.

Consideration 2: Understanding County Loan Limits and VA Loan Eligibility

As a seasoned expert in VA loans, I want to highlight the importance of knowing county loan limits when determining your maximum VA loan amount.

These limits are especially crucial if your full VA loan entitlement isn’t available. Whether you’re accessing your VA benefits for the first time or you’re a seasoned borrower, grasping how these limits affect you is essential.

County Loan Limits

The VA sets county loan limits that cap the amount you can borrow without a down payment. However, if your full entitlement is available, these limits don’t apply, and you could borrow up to the full value that a lender is willing to offer.

On the other hand, if your entitlement is partially used or you’ve previously experienced a foreclosure or short sale, the limits could significantly impact your borrowing capacity.

Subsequent Use of VA Loans

If you’ve used your VA loan benefits before, the concept of “subsequent use” comes into play. This can affect the funding fee you’ll need to pay, which is higher for subsequent uses unless you make a down payment of at least 5%.

Example

For example, you plan to purchase a property for $1 million and put down 5%, which means you’re set to finance $950,000. This amount determines your funding fee.

However, if an appraisal values the home at less, say, $980,000, you would need to adjust the loan amount accordingly to maintain the benefits of your funding fee status and avoid higher subsequent use fees.

In this scenario, to keep your funding fee advantages while still financing up to 95% of the appraised value, you’d need to finance 95% of $980,000, which equals $931,000.

This adjustment would require you to increase your down payment by an additional $19,000 to cover the gap caused by the lower appraisal. As your guide, I will help to ensure your financing aligns with the VA’s requirements to optimize your loan terms.

This strategic financial planning is crucial for maintaining eligibility for favorable loan conditions despite fluctuations in property appraisals.

Disability Ratings and Their Impact

Having a disability rating with the VA can free you from paying the funding fee, which can be a significant financial benefit.

If you don’t yet have your disability rating by the time of closing, ensure the VA has acknowledged receipt of your disability claim at least 3 business days before closing to qualify for a refund of the funding fee later potentially.

Refunding the Funding Fee with a Disability Rating

The VA is very strict regarding the refund of the funding fee. If you want to get this fee refunded, you must have received VA disability compensation with an effective date before your loan’s closing date.

This is crucial because the VA uses this effective date to determine eligibility for funding fee refunds. For more detailed information on how these effective dates are calculated and their implications, you can visit the VA’s official site here.

Borrowing with Others

Different rules apply if you’re planning to purchase a home with a spouse, another veteran, or even a non-veteran/non-spouse co-borrower. You can combine your entitlements with those of a spouse or another veteran or choose whose to use.

Interestingly, you can also use your VA loan benefits with a non-veteran co-borrower. However, this situation requires careful financial planning and knowledge of calculating the loan guarantee.

Consideration 3: The VA Guarantee

The VA Guarantee is crucial because it is fundamental in shaping your maximum loan amount. As the VA guarantees 25% of the loan amount, this means if you’re borrowing $1 million, I’ll explain how the VA guarantees up to $250,000 of that loan in the event of a default.

This guarantee provides security to lenders and gives you enhanced flexibility, significantly influencing the terms of your loan.

Impact of Previous Financial Challenges

It’s also important to note that having a history of financial difficulties, such as a short sale or foreclosure, does not automatically disqualify you from obtaining another VA loan. In these cases, the VA deducts the amount they had to pay the lender, usually the guaranteed 25%, from your total entitlement.

This deduction affects the remaining entitlement available for your next VA loan but doesn’t eliminate your eligibility. This aspect of the VA loan is crucial for your borrowing limits and preparing for new loan applications, especially if you have previously utilized VA loan benefits under challenging circumstances.

Note: The 25% guarantee is a recurring factor in the VA’s calculations and helps calculate how much you can ultimately borrow under the program.

Let’s proceed with the calculations together. I’ll help you fully grasp how to maximize your VA loan potential.

The Calculations for VA Loan

Calculating your maximum VA loan entitlement involves how much the VA will guarantee, which is crucial in calculating how much you can borrow without needing a down payment.

Calculation 1: Maximum Entitlement

Let’s break down what maximum entitlement means for your VA loan and how it affects the amount you can borrow.

Full Entitlement

If you have full entitlement, meaning there is no current VA loan in place, there are no limits to the amount you can borrow except for what your lender is willing to provide. The VA guarantees 100% of the loan amount approved by the lender, which offers significant buying power.

Charged Entitlement

If your entitlement is partially used due to a previous VA loan, the VA will guarantee 25% of the county loan limit. This means your maximum entitlement varies depending on where the property is located. The VA uses a formula for high-cost counties based on 1.5 times the national conforming loan limit.

To find your maximum entitlement in such scenarios, I can guide you through the necessary calculations:

• Multiply the county loan limit by 25% to determine how much the VA will guarantee. For example, if the county loan limit is $800,000 in a high-cost area, the VA would guarantee 25% of this amount, which is $200,000.

These calculations help oversee the maximum amount you can finance with a VA loan in various scenarios, providing a clear path to how much you can borrow based on your entitlement and the property’s location.

Here’s a link to download the VA Max Calc Worksheet containing the current county loan limits to assist further. You can also find the VA Loan Amounts by county to ensure you have the most accurate and up-to-date information for your calculations.

Calculation 2: Entitlement Based on Sales Price

To finance the home’s full value with a VA loan, you must calculate 25% of the property’s sales price. This amount represents the entitlement needed to cover 100% of the home purchase without a down payment, assuming you have full entitlement available.

For example:

• If the home’s sales price is $650,000, then the calculation would be $650,000 x 25% = $162,500.

This figure, $162,500, is what the VA guarantees on the loan, ensuring that you can secure financing for the home with no down payment required, provided other conditions such as creditworthiness and income are met.

This VA guarantee provides lenders with the confidence to offer more favorable terms, knowing that the VA’s guarantee backs a significant portion of the loan.

Calculation 3: Determining Your Available Entitlement

Calculating your available VA entitlement involves how much of the VA guarantee you can still utilize, especially if you’ve already used some of your VA loan benefits.

1. Calculating your Maximum Entitlement:

I am here to guide you through calculating your maximum VA entitlement and ensure you grasp the full extent of your borrowing capabilities based on the VA’s guidelines.

Full Entitlement

If you do not currently have a VA loan in use, you essentially have unlimited entitlement. This means you can borrow as much as a lender is willing to offer, with the VA guaranteeing 25% of the loan amount.

Partial Entitlement

If you have an existing VA loan or have previously used your entitlement, the amount available will be less. The maximum entitlement in such cases is based on 25% of the county loan limit.

For example, in Fairfax County, Virginia, for 2024, if the county loan limit is $1,149,825, then your maximum entitlement calculation would be:

$1,149,825 x 25% = $287,456.25

2. Calculating your Charged Entitlement:

If you currently have a VA loan, the charged entitlement is the amount of guarantee already used. This is calculated by taking the original loan amount and calculating 25% of it. For example:

•   If your existing VA loan amount was $400,000, the charged entitlement would be:

$400,000 x 25% = $100,000

3. Calculating your Available Entitlement:

To find out how much entitlement you still have available to use on a new loan, subtract the charged entitlement from your maximum entitlement:

$287,456.25 (maximum entitlement) – $100,000 (charged entitlement) = $187,456.25

This remaining entitlement amount ($187,456.25) is what you have available for your next VA loan, which will influence how much you can borrow without needing an additional down payment, subject to the sales price of the property and county loan limits.

Calculation 4: Determining Entitlement for Your New Loan

When calculating the entitlement for your new VA loan, you’ll choose the lesser amount between the entitlement needed to finance 100% of the home (from Calculation 2) and your available entitlement (from Calculation 3).

This ensures you use only what’s necessary and preserve as much entitlement as possible for future use.

• From Calculation 2, I calculate the entitlement needed based on the home’s sales price ($650,000) to be $162,500.
• From Calculation 3, the available entitlement was calculated to be $187,456.25.

Since I chose the lesser of the two values, the entitlement you may use on the new loan would be $162,500.

Pro Tip: With my extensive experience, I recommend leaving at least $1 of entitlement unused if you foresee a possibility of using your VA loan benefit again, such as for an upcoming Permanent Change of Station (PCS) or other moves. In this example, after using $162,500 for the new loan, you would still have:

$187,456.25 – $162,500 = $24,956.25

This strategy ensures you maintain some amount of VA loan eligibility, which can be crucial for securing VA financing in the future without any restrictions.

Calculation 5: Finalizing Your Maximum VA Loan Amount

The final step in calculating your maximum VA loan amount involves combining the base loan amount you can finance with your available entitlement and the additional costs the funding fee covers.

1. Calculate the Base Loan Amount:

First, 75% of the sales price will be considered to find out the part of the purchase price that will be financed through the loan. For a home priced at $650,000:

$650,000 x 75% = $487,500

Add this amount to your available entitlement ($187,456.25 from Calculation 3) to find the maximum base VA Loan amount you can apply for without a down payment.

$487,500 + $187,456.25 = $674,956.25

2. Calculating the Funding Fee:

Next, you need to calculate the funding fee based on the total amount financed and your specific circumstances, such as whether it’s your first time using a VA loan or if you have a service-connected disability.

For general purposes, let’s assume the funding fee is 2.3% for first-time users without a disability.

Look up your specific rate on the VA funding fee chart I mentioned at the beginning of this guide. Multiply the base loan amount by the funding fee percentage:

$674,956.25 x 2.3% = $15,523.99

3. Calculate Total Maximum Loan Amount:

Add the funding fee to your base loan amount to get the total maximum VA loan amount:

$674,956.25 + $15,523.99 = $690,480.24

This figure, $690,480.24, represents the total amount you can potentially borrow under your VA loan entitlement, including the costs covered by the funding fee. This calculation ensures you maximize your benefits while staying within the guidelines set by the VA.

Final Thoughts

The VA loan process and calculating your maximum loan amount might seem complex, but with the right tools and a clear knowledge of the steps involved, you can confidently plan your home purchase.

I have walked through the critical calculations needed to find out your potential loan amount, from your entitlements to factoring in the VA’s funding fee. Each step is personalized to ensure you maximize the benefits your service has earned.

To simplify these calculations and ensure you have all the information you need, I highly recommend downloading the FREE VA Maximum Loan Amount Calculator. This tool will help you easily estimate how much you can borrow, allowing you to make informed decisions as you pursue the dream of homeownership.

Or you can contact me for a consultation call and take the next step towards securing your new home with the benefits you deserve.