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As A Result Of The Increasing Home Prices In 2022, There Is a Hike In VA Loan Limits. Important Tips To Consider By Veterans

One of the benefits of serving in the army is access to a VA home loan without any upfront payment. Also, 2022 has given veterans more purchasing ability than before.

For the first time, home prices for the average US individual have reached about $405,000 from the estimations as of March which is a 26.5% bump in price over the past two years, according to Realtor.com estimations.

Recently, the Federal Housing Finance Agency (FHFA) declared that there would be an increase in the home loan limits in 2022 to compensate for the increasing home values, which is supported by the Department of Veterans Affairs (VA). The huge rise has increased the previous limit to $647,200 which is almost a $100,000 increment.

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The managing director of Mortgage Bank of California (MBANC), a national leader, Mayer Dallal stated that most counties in the U.S. would benefit from this $647,000 limit which could skyrocket as high as $1 million for some expensive areas. This is a gradual increase from the agreed loan limit of $548,250 as of 2021. But a couple of service members can go beyond the VA loan limit.

Here is what you should keep in mind

What Are the Limits on VA Loans? And What Are They For?

Veterans Affairs or VA department introduces the VA loan limits which is not the amount that can be borrowed but the amount it assures. Dallal stated that having a guarantee implies that the loan would be backed up and about 25% will be paid if the agreement is violated. This guarantee ensures the approval of the VA that just borrowing without one.

The mortgage advisor with lender Florida Funding, Shannon Barron stated that rather the credit score is reviewed by the lender and determines the amount that can be borrowed by you.

However, depending on your VA allocation, there are limitations to the guaranteed housing loan amount available in the COE- Certificate of Eligibility.

Getting Closer

The veterans Affairs department sponsors the VA loan initiative to limit inequality within the housing sector by allowing service members to own a home in places where they would primarily be rejected. The percentage points among Black to White homeowners in 2019 was around 19.6, based on a study carried out by the Veterans United Housing loans. This difference was already 30%  points among non-military individuals.

How To Estimate Your Loan Limits for VA

If you possess an Eligibility certificate and are fully entitled, loan limit for VA will not apply. The highest amount that can be borrowed without any initial payment can be gotten from your lender and this loan would be supported by the Veterans Affairs Department.

However, if your VA entitlement is reduced, you will be able to borrow a lower amount and you will be subjected to the loan limit. It is important to be aware of your VA entitlement in order to estimate your loan limit.

A point by point analysis of how to estimate your loan limit for VA is provided below.

1. Jot down your recent loan amount along with your corresponding  country’s loan limit.

2. Multiply 0.25 by the loan amount to know you’re the VA entitlement used.

3. Multiply 0.25 by the corresponding country’s  loan limit to discover the highest amount guaranteed by the VA.

4. Subtract the entitled VA amount from the highest amount that would be guaranteed by the VA.

5. Multiply 4  with this figure to know your current loan limit.

An example has been provided below using the steps above.

Note: Bank statement loans are not typical mortgages. A bank statement program is a home loan program that uses bank statements to calculate a borrower’s income.

1. If you collected VA loan of $375 thousand to acquire a home you are currently living. You were transferred to another location and intend to acquire new home with the remainder of the VA entitlement. The corresponding loan limit that would be estimated at your new location will be $647,200.

2. You have utilized $375,000 X 0.25 = $93,750 from the former VA loan.

3. The amount that would be guaranteed by the VA would be $547,200 X 0.25 = $161,800.

4. Your leftover benefits would be $161,800  less $93,750 = $68,050.

5. To estimate the highest amount that can be borrowed without any initial payment, simply multiply your remaining benefit by 4. Here, the amount of loan that would be guaranteed by the VA would be $68,050 X 4 = $272,200.

Dallal noted that qualified veterans or service members are allowed to purchase high-priced homes that go beyond the corresponding loan limit using jumbo loan, though  an initial payment must be made for the difference, also the mortgage insurance might have to be purchased.

Vietnam Veterans, Navy Blue Water Act, 2019

The 2019 Vietnam Veterans, Navy Blue Water Act is a law enacted to recognize the surviving relatives and Vietnam veterans by offering them service disability entitlements. Also, this modified the eligibility of veterans for VA Housing Loan benefit. The major changes implemented are:

Ability to access zero initial payment of VA-supported loans throughout the nation, even in costly markets.

Note: Tax and accounting update is derived from the published report of online research and news platform of Checkpoint and collated by Thomas Reuters.

The removal of the $180,000  limit  loan for veterans that used their benefit for V Native American VA Direct loan, that permits veterans to purchase or develop housing on the land for Federal trust.

Waiver of impaired veterans’ funding fee on VA loans.

More details about the County, VA Loan Limit

Corresponding loan limits predicts the highest amount that can be borrowed to acquire one-unit single-family property, without any initial payment. In many areas, this is limited to $647,200 but a few locations are specified as expensive areas,  with a county loan limit of about a 50% more.