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VA loan limit decreases are putting veterans in high-cost areas in a tough spot.
VA loan limits for 2012 have rolled back to pre-2009 levels.
For most VA borrowers, that doesn’t mean much, if anything. But veterans who live or want to purchase in the country’s high-cost areas are certainly feeling the pinch and facing down payment requirements that might put homeownership out of reach.
Let’s start by explaining the VA’s loan limits. There is no maximum loan amount on a VA loan. The loan limits vary by county and represent the ceiling for the maximum guaranty on a loan, which is 25 percent of the loan limit. On any loan above that limit, the borrower is responsible for putting down at least a quarter of the difference between the loan amount and the loan limit. For the vast majority of the country, the loan limit is $417,000, an amount that a lot of VA borrowers don’t get anywhere near.
But in some of the nation’s more expensive counties, that loan limit would put VA loans at a serious disadvantage, which of course would make it difficult for borrowers to use this hard-earned benefit. So years ago the VA instituted higher loan limits for these high-cost areas. Those limits were increased even further after the financial crisis of 2008. For example, the 2011 loan limit for Alameda County, Calif., was $1 million, while the limit for Fairfax County, Va., was $818,750.
At the end of last year, the high-cost loan limits rolled back to pre-2009 levels. There were several attempts in Congress to extend the higher limits but ultimately nothing came to pass.
The 2012 limits fell precipitously in a lot of places. For those counties we mentioned earlier (Alameda in California and Fairfax in Virginia), the limits dropped to $625,500. That means veterans looking to purchase in Alameda County suddenly saw $374,500 slashed from their limit.
The inevitable question is, “So what?”
The “so what” is this: In a high-cost market where home prices haven’t tanked, a VA borrower might have to seek a loan beyond the county limit. Some lenders might balk altogether. Veterans who are lucky enough to find a willing lender will be on the hook for a down payment equal to at least 25 percent of the gap. So, for example, a borrower who wants to purchase a $775,000 home in Alameda County would have to put down at least $37,375 in cash to secure financing. A year before, that same borrower would have been able to purchase without shelling out a single dollar up front.
Again, I know this isn’t an issue that affects the vast majority of VA borrowers. The average purchase loan amount in 2010 was just over $211,000. But any changes that impinge on a veteran’s ability to utilize their VA home loan benefits are worth talking about.
You can check out the complete list of 2012 VA Loan Limits at the VA website.
Photo courtesy of Images_of_Money
3 Comments
that’s all well & good for vet’s that have good credit but for Vet’s such as myself it just seems unfair. I have a certificate of Eligibility & I’m on a VA Pension but since my credit is poor every time I go for a loan I’m told that I need to bring my credit up & I need more income. Well it seems to me that the VA gave me my certificate & their also the ones that give me my Disability pension & it’s not like I’m asking for the whole certificate for a loan to buy a house I just want to borrow enough to buy another Vets house that the Vet is willing to sell me plus enough money for my wife & I to move into it. I feel that if I don’t have enough of an income then they should give me more money since I feel they shafted me when I left the Military claiming that my back problems were only agrevated in the Military . People think I get alot of Money from my pension but they don’t realise that there IS a difference between pension & compensation. Thank You & if you know of any places where I might be able to get my loan please let me know as I’ve been shot down for the last 2 years trying
@Ted: Unfortunately, the credit score is going to be an issue with any lender, VA, FHA, conventional or otherwise. I would point you to the Department of Secondary Approval at Veterans United. Credit experts there work with veterans and active military for free to help them boost their credit and get on the path to prequalification. You can reach a specialist at DSA at 888-392-7421.
@Ted: I would point you to the Department of Secondary Approval at Veterans United. Credit experts there work with veterans and active military for free to help them boost their credit and get on the path to prequalification. You can reach a specialist at DSA at 888-392-7421.
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