Understanding the VA Max Loan Amount for 2023

The VA home loan program is a valuable benefit for eligible veterans, active duty service members, reservists, and surviving spouses. It allows borrowers to purchase a home with no down payment or obtain a cash-out refinance. However, there are limits on the maximum loan amount the VA will guarantee. This article will explain how the VA max loan amount is calculated for 2023.

VA Loan Entitlement

The key factor in determining a borrower’s max VA loan amount is their available VA entitlement. Entitlement refers to the amount of the loan that VA guarantees, which is a percentage based on the loan amount. For example, on a $200,000 loan VA may guarantee 25% or $50,000.

Each eligible borrower has a total entitlement amount available to them usually $36000. This is not a lifetime limit, as entitlement can be restored after paying off a VA loan in certain cases. However, entitlement that has been used on a previous loan but not yet restored will impact the max loan amount for a new VA loan.

The 25% Guaranty

For VA loans over $144,000, the way VA calculates the guaranty changed as of January 1, 2020. Now the maximum VA guaranty is simply 25% of the total loan amount for borrowers with full entitlement.

For example if a borrower has full entitlement and wants to purchase a $500000 home, the maximum guaranty would be

$500,000 x 25% = $125,000

This applies for purchase loans, cash-out refinances, and construction loans over $144,000. The county loan limits no longer factor in for borrowers with full entitlement.

Impact of Reduced Entitlement

For borrowers who have used some of their entitlement on a previous VA loan, the calculation changes. In this case, the max VA guaranty may be limited by either:

• 25% of the total loan amount

OR

• 25% of the county loan limit minus any entitlement already used

Whichever of those two calculations is LOWER determines the max guaranty amount. This prevents borrowers with reduced entitlement from exceeding VA’s maximum exposure in high cost areas.

Let’s look at some examples to illustrate this.

Example 1: Partial Entitlement

• Borrower used $70,000 entitlement on a prior VA loan

• Seeking a new VA loan for $200,000

• Home is located in a county with $600,000 VA limit

• 25% of $600,000 = $150,000

• Minus $70,000 entitlement already used

• Leaves $80,000 remaining entitlement

• 25% of $200,000 loan amount = $50,000

Since $50,000 is lower, that is the max VA guaranty on this $200,000 loan.

Example 2: No Entitlement

• Borrower used full $36,000 entitlement on prior VA loan

• Seeking $144,000 VA loan

• County limit is $300,000

• 25% of $300,000 = $75,000

• Minus $36,000 entitlement already used

• Leaves $0 remaining entitlement

• 25% of $144,000 loan amount = $36,000

With $0 entitlement left, the borrower cannot use their VA benefit without restoration of entitlement.

Worksheet for Calculating Max VA Guaranty

When applying for a VA home loan, it’s helpful to use a worksheet to calculate your max VA guaranty based on your specific situation. Here is a simple worksheet:

VA Guaranty Worksheet

Total Entitlement Available: $_________

Entitlement Used on Prior Loans: $_________

Remaining Entitlement: $_________

(Total Entitlement minus Entitlement Used)

Loan Amount for New Loan: $___________

25% of New Loan Amount: $__________

(0.25 x New Loan Amount)

County Loan Limit: $____________

25% of County Loan Limit: $__________

Maximum VA Guaranty: $____________

(Lesser of 25% Loan Amount or Remaining Entitlement)

Filling out this worksheet for your specific loan amount, entitlement status, and county limit will tell you the maximum amount the VA can guarantee on your new loan. This is an important figure for determining if you need a down payment.

When a Down Payment Is Needed

For borrowers with full entitlement, the VA guaranty will cover 25% of any loan amount. That eliminates the need for a down payment, even on jumbo loans over the conforming limit.

However, borrowers with reduced entitlement may find the max VA guaranty does not cover 25% of the new loan amount. In that case, a down payment is needed to make up the difference between the guaranty percentage and 25% coverage.

For example, if the max VA guaranty is only 10% on a $300,000 loan, the borrower would need around a 15% down payment to reach 25% coverage. This ensures the loan is fundable in the secondary market.

Resources for Determining Your Max VA Loan

Determining your exact maximum VA loan amount requires looking up your specific county loan limit and working through the entitlement calculations. Here are some useful resources:

• VA County Loan Limits – Search VA limits by state and county

• VA Guaranty Examples – Review detailed case studies

• VA Loan Limit Calculator – Estimate your county limit and max loan

• Contact a VA Lender – Get personalized assistance from a loan officer

Understanding the nuances around max VA guaranty can be challenging. Be sure to consult a VA-approved lender early in the process to determine your maximum borrowing power for 2023.