VA Streamline Loan Limits
VA does not have a fixed maximum loan amount for any of the loans it guarantees, especially for VA streamlines. Irrespective of the veteran’s entitlement, VA provides a guarantee of at least 25% of the streamline loan amount, determined using the IRRRL worksheet calculation outlined below. The maximum loan amount for a VA streamline home loan can also be calculated using the VA Form 26-8923.
The VA streamline maximum loan amount should be calculated as follows:
- Find the outstanding mortgage balance on the current VA loan
- Add all the allowable closing costs such as appraisal, credit report and discount points (2%)
- Add the cost of any energy efficiency improvements
- Add the funding fee (0.50%)
- Add any outstanding late payments and related charges
If there are any late mortgage payments, the lender processing the streamline refinance is required to get a prior approval from VA. This requirement applies to all lenders including those with automatic approval authority.
The VA loan limits have no bearing on a streamline refinance transaction. The outstanding VA loan balance can be refinanced to a newer VA streamline loan in any of the following situations:
- To lower the interest rate, or
- To switch from an adjustable rate loan to a fixed rate mortgage, or
- To increase or decrease the loan term
Even for other loans such as those used for purchasing, VA does not set a fixed limit on the loan amount that can be borrowed for financing a home. The maximum amount a VA lender approves is based on the liability cover provided by the VA loan guaranty. The loan limits also vary from county to county depending on the median sales price in a given area. VA also uses the FHFA county limits for determining the maximum guaranty amount in high cost housing areas.
In case of purchase loans, a veteran or an eligible person with a full, unused entitlement can borrow up to the maximum VA loan limit without the need for any down payment. The minimum entitlement amount available for each eligible veteran is at least $36,000. Most lenders will lend up to four times this amount without requiring down payment.
The veteran’s credit, income and employment history is assessed by the lender underwriting the loan according to VA streamline guidelines. The outcome of this assessment also plays a role in determining the actual loan amount that will be approved. The property must also be appraised at a level sufficient to cover the loan amount.
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