Are you a veteran or an active-duty military member looking to buy a home? The VA home loan program can help you achieve that dream. But how much can you borrow with a VA home loan, and what are the costs associated with it?
VA Home Loan Limits
The VA doesn’t set a cap on how much you can borrow with a VA home loan. However, they do have limits on how much they will guarantee. In 2021, the VA will guarantee up to $548,250 for most loans. However, in some high-cost areas, the limit can go up to $822,375.
It’s essential to note that the VA doesn’t lend money directly. Instead, they guarantee a portion of the loan made by private lenders, such as banks and mortgage companies. This guarantee protects the lender if you default on the loan.
VA Funding Fee
One of the costs associated with a VA home loan is the VA funding fee. This fee is a one-time payment made to the VA to help offset the cost of the program. The amount of the fee varies depending on your down payment and whether you’ve used the VA home loan program before.
For first-time users who put no money down, the funding fee is 2.3% of the loan amount. If you put down 5% or more, the fee drops to 1.65%. If you’re using the VA home loan program again, the fee increases to 3.6% if you put no money down and 1.65% if you put down 5% or more.
Other Costs
Like any home loan, a VA home loan comes with other costs, such as closing costs, appraisal fees, and title insurance. The good news is that the VA limits the amount of some of these fees, such as the appraisal fee, to protect veterans from overpaying.
If you’re eligible for a VA home loan, it’s worth exploring all the benefits and costs associated with it. The lack of a down payment requirement and the ability to finance the funding fee can make it an attractive option for many veterans and active-duty military members.
Conclusion
The VA home loan program is an excellent option for veterans and active-duty military members looking to buy a home. While there are costs associated with it, such as the funding fee and other fees, the benefits can outweigh the costs in many cases. If you’re interested in learning more about the VA home loan program, contact a lender that participates in the program.