VA loan limits do not represent a limit or maximum loan amount. Technically, there are no limits to VA loans. There are only limits to how much the VA will guarantee. The VA will guarantee up to 25% of the loan amount to lenders if you fail to repay your loan.
The amount that the VA will guarantee depends on the amount of your VA entitlement. If you have full rights, as stated in your Certificate of Eligibility, a VA loan limit does not apply. You can borrow the maximum amount the lender will approve without a down payment, and the Department of Veterans Affairs will guarantee up to 25% of the loan. Servicemembers and veterans who have one or more active VA loans, or who have defaulted on a VA loan, will continue to be subject to loan limits.
In addition, all borrowers who have used a VA loan to finance a home and who have since fully restored their rights, are also fully entitled. The limit on your VA loan or how much you can borrow without making a down payment is directly based on your entitlement. The amount you can borrow without a down payment will be lower if you have a reduced right to the VA and are subject to a loan limit. Therefore, if you can and are willing to make a down payment, you may be able to borrow more than the county loan limit with a VA-backed loan.
Entitlement is important because most lenders, including Rocket Mortgage, will not grant the loan without a combination of entitlement and down payment from a borrower that equals 25% of the loan amount. That's the maximum that a capped VA loan borrower can finance without a down payment in those counties. The guarantee makes these types of loans more attractive to the lender, which, in turn, can help the borrower obtain favorable loan rates. In many ways, a VA loan is one of the most lenient options for borrowers who have poor credit.
For the purposes of this discussion, VA loan limits can be defined as the amount you can borrow without having to make a down payment. VA loan limits are set by the Department of Veterans Affairs (VA) and are the amount you guarantee, not a limit on how much you can borrow.