VA Eliminates Max Loan Limits for Veterans

By Realty Times Published Feb 4, 2020 06:49 am

VA loans are a godsend for veterans looking to buy a house. Between not having to pay a down payment, the low interest rates, and the lack of mortgage interest, these loans offer just about the best terms around. The one downside to VA loans has been the loan limits. But that’s no longer a problem.

As of January 1, 2020, the VA has removed the maximum limit on home prices as part of The Blue Water Navy Vietnam Veterans Act. Previously, the limit, which was set by the Federal Housing Administration (FHA) and which was subject to an annual adjustment, was $484,350 for most of the country. That meant that if a home was over the limit, the buyer was subject to a down payment. That cash down payment had to be “enough to cover 25% of the difference between the purchase price and the FHA limit,” said Military.com.

With the limit removed, military buyers can now purchase a home at any price without having to come up with a down payment. “This is good news for borrowers in high-priced metros,” said The Mortgage Reports. “Previously, veterans buying in areas like New York, Los Angeles, D.C., and Seattle, were at risk of exceeding zero-down VA loan limits.”

However, because the VA doesn’t lend the funds itself, there still may be a limit imposed by the lending institution. “The lender may still issue a cap and deny a large loan. But the denial won’t be due to VA home loan rules.”

While traditional FHA loans require a minimum of 3.5% down and some other loans for first-time buyers are as low as 3%, VA loans require no down payment for veterans and active duty military. There were 624,544 VA guaranteed loans in fiscal 2019, which was up 2% over 2018.

Another aspect of the Blue Water Navy Vietnam Veterans Act deals with the required up-front funding fee for VA loans. The VA “charges most veterans a ‘funding fee’ when a VA loan is issued,” said Military.com. In 2021, “The funding fee for an active-duty veteran using a VA home loan for the first time will increase from 2.15% of the purchase price to 2.35% of the price.”

Veterans who receive VA disability benefits don’t pay the funding fee, and the fee will also be eliminated for “Purple Heart recipients still on active duty.”