Thanks Bruce! Good info for all of us. I love working with Veterans! I think the whole process can be overwhelming for any buyer. Many buyers just have NO idea how everything works the you have the VA telling people they are able to get a NO money down loan GUARANTEED and so many other things I have heard that are a little off. Thanks again for putting this info out there.
I’ve been covering some of the basics of VA home loans in my recent posts, including what the VA does and does NOT do for the buyer. There are a few other basics first time home buyers and RE agents new to the VA loan process should know.
One common question the new VA loan applicant wants to know is how much they can borrow with a VA guaranteed loan. There are many reasons for asking—some buyers want to know what the ceiling is, regardless of what they can afford. They want to know, just in case they are able to borrow up to the maximum some day. There’s nothing wrong with dreaming big.
Other buyers are more practical. They want to know if there’s a ceiling on what they can get approved by the VA because they want to compare that limit to what they have budgeted for. Practicality is good.
But the Department of Veterans Affairs doesn’t have a specific dollar amount set for a maximum VA home loan. For starters, the VA doesn’t issue the loan, it only guarantees a certain amount in case the borrower defaults.
The maximum guarantee is based on the market value of the property listed on the Notice of Value, plus the lender’s own requirements.
But even when the maximum loan amount is known based on these factors, does that mean the borrower is qualified to get that full amount? As with conventional loans, not in every case. The lender must be willing to extend the credit—the VA can’t force a lender to issue credit in any case, it can only work with the lender to make the loan more attractive.
I harp on this a lot, but it’s another reason why first time home buyers are encouraged to start planning for a VA mortgage early—they might not realize they are able to be pre-approved to borrow X amount of dollars. Does “Amount X” give them enough room to negotiate when buying a house in a particular market? Does the buyer need to raise or lower their expectations?
Good questions for a newcomer to ask in the earliest stages of VA home loan planning.