VA Lenders Handbook (VA Pamphlet 26-7), Chapter 3, Topic 3 — Maximum Loan

VA Pamphlet 26-7, Chapter 3, Topic 3 — Maximum Loan

Effective 2024-05-14 · publisher's stamp for this provision

Topic 3. Maximum Loan Amount Change Date: May 14, 2024 This chapter has been revised in its entirety. This chapter has been revised in its entirety. This chapter has been revised in its entirety. a. Does VA have Maximum Loan Amounts? There are no maximum dollar amounts prescribed for VA-guaranteed loans. Limitations on VA loan size are primarily attributable to two factors: Lenders who sell their VA loans in the secondary market must limit the size of those loans to the maximums prescribed by secondary market participants. VA limits the amount of the loan as prescribed by the following table: Table 2: VA Maximum Loan Amount Table Loan Type Maximum Loan Loans to Purchase1 (not including construction loans): The lesser of: (1) VA reasonable value, or (2) purchase price plus the cost of any energy efficiency improvements up to $6,0002. (+) plus, the VA funding fee3 (unless the borrower is exempt). One-Time Closing Construction Loans (Construction loans that provide for both the interim construction and permanent financing.) The lesser of: (1) VA reasonable value, or (2) acquisition cost (contract to build plus the balance owed on land, interest reserve, contingency reserve, and permits – if the amounts were not included in the contract to build). (+) plus, the VA funding fee (unless the borrower is exempt). See Chapter 7 for additional information on Construction Loans. Two-Time Closing Construction Loans (Loans to refinance interim construction loans. Does not include refinancing of constructions loans that provide for permanent financing.) The lesser of: (1) VA reasonable value, or (2) sum of the outstanding balance of the interim construction loan plus the balance on any lot liens. (+) plus, the VA funding fee (unless the borrower is exempt). See Chapter 7 for additional information on Construction Loans. Regular refinancing loan (cash- out) 100 percent of the VA reasonable value4 Note: the funding fee may be included in the new loan amount, except that any portion of the funding fee that would cause the new loan amount to exceed 100 percent of the reasonable value of the property must be paid at closing. IRRRLs5 Existing VA loan balance (+) plus the cost of any energy efficiency improvements up to $6,000, (+) plus allowable fees and charges, (+) plus up to two discount points, (+) plus the VA funding fee (unless the borrower is exempt). (Lenders must use VA Form 26-8923, IRRRL Worksheet, for the actual calculation.) Loans to refinance a contract for deed when the Veteran is not the titled owner of the property. The lesser of: (1) VA reasonable value, or (2) outstanding balance of the contract for deed, plus allowable closing costs, plus the cost of any energy efficiency improvements up to $6,0006. (+) Plus, the VA funding 7 (unless the borrower is exempt). Other loans to refinance: an installment land sales contract, or a loan assumed by the Veteran at an interest rate higher than that for the proposed refinancing loan. The lesser of: (1) VA reasonable value, or (2) the sum of the outstanding balance of the loan plus allowable closing costs and discounts plus the cost of any energy efficiency improvements up to $6,000. (+) plus the VA funding fee (unless the borrower is exempt). Graduated Payment Mortgage (GPM) loan on existing property. The VA reasonable value, (-) minus the highest amount of negative amortization, (+) plus the cost of any energy efficiency improvements up to $6,000, (+) plus VA funding fee (unless the borrower is exempt). See chapter 7 for additional information. GPM loan on new home 97.5 percent lesser of: (1) the VA reasonable value, or (2) the purchase price plus the cost of any energy efficiency improvements up to $6,000. (+) plus the VA funding fee. See chapter 7 for additional information. b. Down payment Because VA loans can be for the full reasonable value of the property, no down payment is required by VA except in the following circumstances: If the purchase price exceeds the reasonable value of the property, a down payment in the amount of the difference must be made in cash from the borrower’s own resources8, and VA requires a downpayment on all GPMs9. If a Veteran has less than full entitlement available, a lender may require a down payment in order to make the Veteran a loan that meets GNMA or other secondary market requirements. Lenders should consult with their investor to determine the amount of coverage required and down payment necessary to meet these requirements.

Source: VA Pamphlet 26-7, Chapter 3, Topic 3 — Maximum Loan · source URL · snapshot 89d35da51ce3778a