VA limits

VA Loan Limits Update

December 1, 2011

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VA Loan Limits Update

The VA loan limit is one of the most important aspects of the VA home loan program for borrowers and lenders alike. While the Department of Veterans Affairs does not have a maximum dollar amount established for VA home loans, it does have an effective loan limit based on the local housing market conditions in each county.

There is a VA maximum loan amount calculated for a no-money-down transaction, and a maximum VA loan guaranty amount for each county which represents the absolute maximum a qualified borrower could get by making a down payment and meeting other criteria.

These limits assume the borrower has full VA loan entitlement; according to the VA, “a veteran with full entitlement available may borrow up to the 2011 VA limit…and VA will guarantee 25 percent of the loan amount.  If a veteran has previously used entitlement that has not been restored, the maximum guaranty amount available to that veteran must be reduced accordingly.”

Near the end of every year, the Department of Veterans Affairs issues the new VA loan limit tables for the following year, but a recent update at VA.gov states, “VA has not yet received the county median prices on which loan limits are calculated, although we expect to have the information in the very near future.  Once received, we will post loan limits on our website.”

In a separate, untitled publication issued December 1st, 2011, borrowers are told of changes to the way VA loan limits are to be calculated in the future. “The method to calculate loan limits for VA loans will change in 2012. Loan limits for counties in the contiguous US will range from $417,000 to a possible maximum of $625,500, depending on the median county price. In Hawaii, Guam, Alaska and US Virgin Islands limits will range from $625,500 to a possible maximum of $938,250.”

But that’s not the full story–the VA hints at more changes coming in the wake of anticipated Congressional action. “It’s possible Congress may pass legislation affecting the way our limits are calculated and if so we will post any changes on our website.  We expect that any changes would result in slight increases to some limits – but no decreases.  Please note that ‘loan limit’ is the maximum loan a lender can make and still receive a 25 percent guaranty, provided the veteran has sufficient entitlement.”

As mentioned, there’s not additional information on the 2012 VA loan limits at the time of this writing–we’ll provide any updates as they become available. Borrowers planning on VA loan applications in 2012 should monitor this issue as the VA loan limit changes could affect loan amounts when it’s time to make an offer on a home.

The good news announced that there is no anticipated decrease in VA loan limits is reassuring to some, but it’s important to note that any such assumption is subject to change by Congressional action–until such changes are signed into law, speculation about decreases or increases is simply that.

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