VA Maximum Loan Amounts

By
Real Estate Agent with Berkshire Hathaway HomeServices | Pen Fed Realty 3107554

 

 

VA Certificates of Eligibility/Maximum Loan Amounts

MAXIMUM VA LOANS:

While the Veterans Administration sets no maximum VA loan amount, most private lenders have adopted a policy to loan only four times as much as the maximum guarantee from VA with zero down. With a loan guaranty of $60,000, which was the maximum loan guaranty until December 10, 2004, most VA lenders limited the zero down loan to $240,000. (But in December 2004, VA adopted a policy of increasing the loan guaranty to be 25% of the FNMA/FHLMC maximum loan amount, so that it would not take an act of congress to increase the maximum VA loan amounts to keep up with housing prices.) If you take the maximum loan guaranty and multiply that number by 4, you will arrive at the maximum VA loan with zero down payment. Some VA lenders are willing to exceed the zero down loan amount, if the veteran is willing to put 25% down on the amount of sales price that exceeds the VA zero down limit.

CERTIFICATE OF ELIGIBILITY:

All veterans, including reservist and guardsmen who served in the military for a minimum of 90 days during wartime or 181 days of continuous active duty during peacetime periods before September 7, 1980; or 2 years between September 8, 1980 and the present and were not dishonorably discharged may be eligible for a VA certificate of eligibility. Reservists satisfactorily completing 6 years became eligible for VA certificates of eligibility October 28, 1992. This certificate allows these veterans to obtain home loans from private lenders. The Veterans Administration of the U.S. will provide loan guarantees to the lenders actually making the loans. This loan guarantee acts much like a down payment on a conventional mortgage, as it is the lender's security against foreclosure losses if the veteran does not repay the loan as agreed. The maximum loan guarantee available to qualified veterans is adjusted annually and is tied to FNMA/FHLMC maximum loan amounts. (See page 15 for more details on who is eligible for certificates of eligibility.)

The original loan guaranty issued when the VA program began in 1944 was $2,000. The chart below shows when the VA has raised the eligibility over the years to reflect higher loan amounts as house prices increased. The eligibility increases are always retroactive to all veterans, no matter when they served. This retroactive or partial eligibility can be used to obtain more than one VA loan over the years. Also once the VA property is sold and the loan is paid off, the veteran can re-use his eligibility.

* On December 10, 2004, the VA eligibility was indexed to FNMA/FHLMC maximum loan amounts and no longer required an act of congress to increase the maximum loan amounts.

 

 

PARTIAL ELIGIBILITY:

Many veterans have remaining eligibility from previous VA loans or they were granted retroactive increases in eligibility over the years. This partial eligibility can be used to obtain VA loans as long as the veteran intends to occupy the property. Most lenders will loan 4 times the partial eligibility remaining. Many older certificates of eligibility may show very low guaranty amounts, such as $27,500. If the veteran has not used his eligibility, the certificate can be upgraded to the full guaranty in effect as the time.

LOAN ASSUMPTIONS:

VA loans made before March 1, 1988 are fully assumable without loan qualification at the original interest rate. All the vet or non-vet assuming the loan has to do is produce the cash to assume the loan. In fact, it is even legal to borrow the money to assume the loan and no one is required to occupy the property. This was because no due on sale clause was written in the original VA loans. VA loans made after March 1, 1988 require the person assuming to qualify for the assumption, but the original interest rate remains the same and a vet or non-vet can assume them. Qualified investors may also assume them, even though they do not intend to occupy the property. The veteran does not have any contingent liability under the new qualified assumptions, whereas, they have contingent liability on assumptions made before March 1, 1988. VA assumptions rules allow veteran sellers to sell their VA homes made after March 1, 1988, on installment sales, as long as the title does not change hands. See VA assumption policy for loans made after 3/1/88.

ONE TIME RESTORATION OF ELIGIBILITY:

When a veteran pays off their VA home loan, but has not sold the property, VA allows a one-time restoration of eligibility. Once the veteran receives his eligibility back, he is free to purchase again, without tying up his eligibility in the original property. The original property could be kept as an investment in this situation.

DATE ELIGIBILITY INCREASED:

INCREASED TO x4 =

MAX Zero Down Loan

DATE ELIGIBILITY INCREASED:

INCREASED TO x4 =

MAX Zero Down Loan

December 28, 1945

$ 4,000

$16,000

December 18, 1989

46,000

184,000

July 12, 1950

7,500

30,000

October 13, 1994

50,750

203,000

May 7, 1968

12,500

50,000

December 27, 2001

60,000

240,000

December 31, 1974

17,500

70,000

December 10, 2004 (Begin Indexing)

83,425

333,800

October 1, 1978

25,000

100,000

January 1, 2005

89,913

359,652

October 1, 1980

27,500

110,000

January 1, 2006

104,250

417,000

February 1, 1988

36,000

144,000

Comments (4)

John Combs
Alan Deblat Real Estate Corp. - Oceanside, NY

Thank you for  the VA info. I am working with a Veteran now to find him a home.

Jan 24, 2011 12:28 AM
Anonymous
Kelly Klein

John,

Many agents don't know the first thing about VA Loans.  It can increase your business by just knowing the information.  Good luck with your buyer.  Have a great day.

Kelly

Jan 24, 2011 12:49 AM
#2
Kristin Johnston - REALTOR®
RE/MAX Platinum - Waukesha, WI
Giving Back With Each Home Sold!

Hi Kelly, I have a seller who was told that they can apply for HAFA, but they have a VA loan...they are not eligible, right???

Jan 24, 2011 02:25 AM
Rita Norman
Walnut Creek, CA
Your Agent in Walnut Creek CA

Kelly: We are working with Clients that are applying for a VA Loan. Your post is very timely. Thanks! ~Rita

Jan 28, 2011 01:47 AM