Could VA loan limits go away? | Military Home Loans

Could VA loan limits go away?

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  There is a bill in the House of Representatives (HR-815) that has proposed that VA loan limits go away.  With this change, veterans with full entitlement could get 100% financing on any loan amount, which is a fancy way for saying a veteran could buy a $1,500,000 home with zero down!!! 


  This could have a massive impact for veterans in high-cost areas.  Especially the 66 counties in 12 states that saw their maximum entitlement slashed in 2015.  Over 1.75 Million veterans (8% of all veterans) live in those counties and would have increased access to their benefit thanks to this bill.  California has 11 super high-cost counties with over 680,000 veterans living there, including Alameda, Contra Costa, Los Angeles, Marin, Napa, Orange, San Benito, San Francisco, San Mateo, Santa Clara, and Santa Cruz.


  Current VA county limits are set by the Federal Housing Finance Agency’s limits, which are capped at $679,650 in 2018.  For parts of the country, this essentially denies a veteran access to their VA benefit purely because they live in a high-cost area.  For example, in San Francisco the median home price is $1,500,000.  Even a starter 2 bedroom 2 bath house in a less desirable neighborhood starts in excess of $800,000. Over 25,000 veterans live in San Francisco and currently there are only 206 active VA loans there.  To put this in perspective, in nearby San Joaquin county, there are just over 35,000 veterans, but they have over 3,400 active VA loans. 


  With the current rule, crossing a county line can mean a major drop in buying power.  For example, a veteran currently buying near Pomona needs to know if they’re in Los Angeles County ($679,650 limit) or San Bernardino County ($453,100 limit).   With this change, that same veteran wouldn’t need to worry about which county they were in, and could focus their purchase decisions on other more critical matters to their family. 


  For veterans who have reduced entitlement (currently have another active VA loan, or have lost entitlement due to a previously compromised VA loan) they would still be able to purchase, but would need a down payment.  It’s some funky math, but the down payment needed comes out to exactly 33.4% more than the amount of their previously used entitlement.  For example, if a veteran had a previous VA foreclosure and lost $30,000 of entitlement, but wanted to purchase an $800,000 home.  They would need a $40,000 down payment (1.334 x $30k) and get a $760,000 VA loan (regardless of where they were buying). 


  The bill is sponsored by Rep. Zeldin (NY District 1) and was forwarded by subcommittee to full committee on Oct 25 2017.   The National Associate of Mortgage Brokers is working with the Mortgage Bankers Association to help all veterans have equal access to the benefit they’ve earned, regardless of where they live.


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