The Department of Veterans Affairs recently published a circular (policy letter) announcing the official VA loan limits for 2015.
According to Circular 26-14-39, which can be found on the department’s website, the maximum guaranty amounts for VA loan limits in 2015 will be the same as those defined by the Federal Housing Finance Agency (FHFA). In other words, they will match the conforming loan limits set for next year. These caps range from $417,000 to $625,500, depending on the borrower’s location.
VA Loan Limits to Follow ‘Conforming’ Amounts in 2015
In the past, the Department of Veterans Affairs established its own guidelines for loan limits. This authority was granted to the department in 2008, under Public Law 110-389, the Veterans’ Benefits Improvement Act. This act gave the VA authority to increase the maximum guaranty amount “for certain loans guaranteed by the Secretary of Veterans Affairs.”
The authority granted by this law expires on December 31, 2014. This is what prompted the recent policy letter regarding VA loan limits. In 2015, VA’s effective loan limits will reset to match the conforming amounts established by FHFA.
View the full list here:
The maximum size limits set by FHFA apply to loans purchased by Freddie Mac and Fannie Mae. They are established at the county level and are based on median house prices. Currently, FHFA’s conforming loan limits range from $417,000 – $625,500. The latter number applies to high-cost areas with a higher median home price. VA loans will follow these standards as well, at least in 2015.
Down Payments on Larger Loans
Contrary to popular belief, the VA does not have a maximum loan amount. They do have limits as to the amount they will guarantee, and those are outlined above. But mortgage lenders have the ability to offer financing above the VA loan limits.
In such cases, the veteran may be required to make a down payment to cover the difference between (A) the amount being borrowed and (B) the cap for the county in which the property is located. But even in these situations, the veteran would likely enjoy significant cost savings in comparison to other mortgage products.
Example: The 2015 VA loan limit for Moore County, North Carolina is set at $417,000, as in most modestly-price markets. So if a home buyer in this market has full VA entitlement, the Department of Veterans Affairs will provide a 25% guaranty on a home loan up to $417,000. If the home buyer makes an offer to buy a house for $480,000, the mortgage lender could require a down payment of 25% of the $63,000 difference. This would mean a down payment of $15,750, providing the lender a full 25% guaranty.
Note: In the same example, a borrower using a conventional (non-VA) home loan product would have to pay a down payment up to $111,000. So there is a clear advantage to using the government-guaranteed option.
Heads Up: Lower Limits in Some Counties
In some counties, the 2015 VA loan limit will decrease compared to the previous year. This is due to the alignment with FHFA conforming amounts, which are lower than current VA caps in some counties.
In such cases, the Department of Veterans Affairs will “honor the previous higher limit on a purchase loan provided the sales contract has been ratified” and the standard mortgage application has been signed prior to January 1, 2015.
The information above was adapted from Department of Veterans Affairs Circular 26-14-39, which will be rescinded in January 1, 2016.
Where to Learn More
This article provides an update on VA loan limits for 2015 and is meant to serve as a basic overview of the subject. To learn more about this subject, we encourage you to visit the official program website located here: www.benefits.va.gov/homeloans/. The department’s website provides information on minimum eligibility requirements, the application process, and more.
To find the caps for your particular county, visit the conforming loan limits section of the Federal Housing Finance Agency’s website.