VA Home Loan Limits in California: What You Need to Know

If you’re a veteran or active-duty servicemember looking to buy a home in California, you may be eligible for a VA home loan One of the great benefits of VA loans is that they don’t have conventional conforming loan limits like conventional mortgages backed by Fannie Mae or Freddie Mac. However, there are still maximum VA loan limits that can impact the financing options in certain counties in California

In this comprehensive guide, we’ll explain everything you need to know about VA home loan limits in the Golden State so you can maximize your financing when using your VA benefits to buy a home in California.

What Are VA Home Loan Limits?

VA home loans are guaranteed by the Department of Veterans Affairs. This means if the borrower defaults, the VA will reimburse the lender. Because of this guarantee, lenders are more willing to offer 100% financing to eligible borrowers which means no down payment is required.

The VA does not set maximum or minimum loan amounts for VA loans However, most lenders who sell VA loans on the secondary market have to follow guidelines set by Ginnie Mae (GNMA) which does impose limits These are typically referred to as VA loan limits.

The 2022 baseline GNMA limit for a VA loan is $647,200 but limits vary by county and can be as high as $1,233,550 in the most expensive markets. You can borrow above the VA loan limits but will need to make a down payment for the portion of the loan that exceeds the limit.

Why Do VA Loan Limits Exist?

VA loan limits were implemented to reduce the financial risk to the Department of Veterans Affairs. By capping the maximum loan size in each county, the VA reduces potential losses in the event of default. This allows them to continue offering the VA home loan program to benefit veterans, military members, and surviving spouses.

VA loan limits also allow the government-sponsored enterprises (GSEs) Fannie Mae and Freddie Mac to purchase VA loans on the secondary mortgage market more easily. The GSEs are limited in the size of loans they can buy so the VA limits make VA loans conforming within those guidelines.

How Are VA Loan Limits Calculated?

The VA does not actually set the loan limits for VA loans. As we mentioned above, that job falls to Ginnie Mae, the agency that securitizes and packages VA (and FHA loans) into mortgage-backed securities which are then sold to investors on the secondary mortgage market.

Ginnie Mae determines the maximum mortgage amount for each county in the U.S. by taking the conforming loan limit set by the Federal Housing Finance Agency (FHFA) for Fannie Mae and Freddie Mac loans and adding a certain percentage.

For example, if the conforming limit set by the FHFA in a county is $600,000, Ginnie may add 6-10% to determine the VA loan limit for that county. This is why VA loan limits tend to be higher than conforming limits.

The process of setting VA loan limits was changed slightly with the passing of the 2008 Economic Stimulus Act which allows for higher limits in certain higher cost counties. This has led to VA loan limits in excess of $1 million in the most expensive markets like San Francisco and Los Angeles.

Current VA Loan Limits for California Counties

Here are the current 2022 VA loan limits for select counties in California:

• Los Angeles County: $1,233,550
• Orange County: $1,233,550
• San Diego County: $1,233,550
• Alameda County: $1,233,550
• San Francisco County: $1,233,550
• San Mateo County: $1,233,550
• Santa Clara County: $1,233,550
• Sacramento County: $715,000
• Riverside County: $647,200
• San Bernardino County: $647,200

A full list of 2022 VA mortgage limits for all counties in California can be found on the VA website.

As you can see, limits range from just over $647k in more affordable areas to over $1.2 million in high cost counties like San Francisco, Silicon Valley, and Southern California.

This allows veterans and military members to qualify for VA loans up to $1,233,550 with no down payment in the most expensive markets in California if their income and credit qualify.

What If You Want to Borrow Above the VA Limit?

Due to the high home prices in California, you may need or want to borrow more than your county VA loan limit. This is absolutely possible with a VA jumbo loan.

VA jumbo loans allow you to borrow above the limit while still enjoying the benefits of the VA loan such as no monthly mortgage insurance and no down payment. You will need to pay a VA funding fee and meet underwriting and credit requirements.

The main caveat is that for loan amounts above the VA limit, you will need to make a down payment of 25% of the amount over the limit.

For example, if the VA limit in your county is $647,200 and you want to buy a $900,000 home, you would need to make a 25% down payment on the amount over $647,200. In this case, 25% of $252,800 is $63,200. This would be required in addition to your VA funding fee.

While VA jumbo loans require you to bring extra cash to close, they allow veterans and servicemembers to buy more expensive homes while still enjoying the powerful benefits of the VA loan program.

How Much Can I Borrow with a VA Loan?

While the VA home loan limits establish a cap on 100% financing, your personal loan amount will be determined by your income, credit score, and debts.

Most lenders want your total monthly debts including the mortgage payment to be less than 41% of your gross monthly income. They also calculate your residual income after debts and mortgage to ensure you have enough left over for living expenses.

A good mortgage lender will help you determine the maximum you qualify for based on your financial profile before you go house hunting. This helps you set a realistic home buying budget.

VA guidelines do not set a minimum credit score but most lenders want at least a 620 FICO score or higher to qualify. The higher your credit score, the better mortgage rate you can get.

It’s recommended you check your credit reports and score so there are no surprises during the mortgage process. Having an existing VA disability rating can also help you get approved if you have some credit dings.

Tips for Making the Most of Your VA Benefits in California

Here are some tips to maximize your financing when using a VA loan to buy in California’s competitive housing market:

• Shop multiple lenders as quotes can vary significantly. Compare interest rates and fees.

• Look up the limit in the county where you want to buy to gauge the maximum you can borrow with zero down

• Improve your credit score – every 10 points can save 0.25% on your mortgage rate.

• Pay down existing debts so you have lower DTI ratios that allow you to qualify for more

• Consider a VA jumbo if you need to go over the limit but keep in mind the 25% down requirement

• Ask lenders if they offer down payment assistance programs to supplement your VA financing

• Get pre-approved – this will make your offer stronger in a bidding war

Using your hard-earned VA home loan benefit in California can really maximize your purchasing power. Just make sure you know the VA loan limits for the area you want to buy in so you can take full advantage!