It won’t affect most of us but there are areas where the maximum VA loan amount far exceeds the current conforming loan limit of $417,000. The VA will guarantee 25% of the loan amount up to $417,000 and higher in certain areas determined to be “high cost” due to the value of local real estate. In such areas, the conforming loan limit may be as high as $625,500 or even higher in such places such as Hawaii or the U.S. Virgin Islands.
Back in 2008 when Congress was scrambling around trying to “fix” the economy one piece of legislation ultimately affected VA loans. The Housing and Economic Recovery Act of 2008 was packed full of provisions and one of those established the maximum loan amount for conforming loans, those underwritten to Fannie and Freddie standards. Such loan limits were increased to not exceed 115% of the median home price for the area, not to exceed $625,500.
At very near the same time, another piece of legislation made its way to the public affecting VA loans limiting the VA loan amount up to 175% of the conforming limit for the area. That means a veteran could borrow as much as $1,094, 625 and still receive the VA loan guarantee. Yet this legislation is set to expire at the end of this year.
In high cost areas veterans can borrow more than the maximum conforming loan limit but unless Congress acts, the limits will revert to the $417,000 to $625,500 amounts. Again, that really doesn’t affect a whole lot of us, but for those who are in that crowd, if you’re in that market don’t wait to buy. On January 1, 2015 it could all change.
