One of the most common questions veterans have is whether they are able to borrow more than the value of their home with a VA loan.
The short answer is yes, but only under certain circumstances. VA loans come with what’s known as an entitlement amount, which essentially sets a limit on how much money you can borrow with the loan. This entitlement amount is determined by the VA and based on a variety of factors, such as the borrower's income level and the county in which the property is located. Generally speaking, the entitlement amount for a VA loan is equal to 25% of the conventional loan limit in the area, which is currently $510,400.
For borrowers who are looking to borrow more than this amount, there is an additional type of VA loan known as the Jumbo Loan. Jumbo loans are designed for those borrowers who need to borrow more than the conventional loan limit. Typically, jumbo loans require a down payment of at least 10-15%, which can be paid in cash or in the form of a gift from family members. The interest rates on jumbo loans may also be slightly higher than those on traditional VA loans.
Another option for borrowers looking to borrow more than the value of their home with a VA loan is to utilize something called a Cash-Out Refinance. A cash-out refinance allows a borrower to take out a loan that is greater than the amount they owe on their existing loan. In this case, the borrower would use the cash-out refinance to take out the additional funds they need. However, it is important to note that these types of loans often come with higher interest rates than traditional VA loans.
In summary, Veterans who are looking to borrow more than the value of their home with a VA loan do have some options. They can either apply for a Jumbo loan, which usually requires a down payment, or they can opt for a Cash-Out Refinance, which may come with higher interest rates. It is important to understand the different types of VA loans available and their terms before making a decision. Ultimately, each borrower will need to determine which loan type best meets their individual needs and financial situation.
In conclusion, VA loans are a great option for veterans buying a home. If they are looking to borrow more than the value of their home with a VA loan, they should consider applying for a Jumbo loan or a Cash-Out Refinance, which may require a larger down payment and potentially a higher interest rate. Borrowers should research the different types of loans available and their requirements to make sure they choose the right loan for their specific needs.
This article was contributed on Nov 03, 2023
