By Amy Cuculo
The VA home loan program was created by Congress in 1944 to help our servicemen and women buy a home utilizing more flexible and forgiving requirements. Now in its 70th year, the program has been incredibly successful in helping military families, so much so that the VA program has had the lowest foreclosure rate of any product for most of the last six years. The VA has made a commitment through strict underwriting and other risk-control measures to ensure that Veterans not only can purchase a home, but keep them.
On December 31st, legislation defining the maximum allowable amount of a VA home loan guaranty is scheduled to expire. Rather than a borrowing cap like other programs, VA limits reflect how much a buyer can purchase before having to factor in a down payment. In most parts of the country, a borrower can purchase up to $417,000 with no money down. In more expensive markets, VA limits are higher. Veterans and members of the military who live in high-cost areas would be most affected if Congress does not extend the program’s loan limits. A decrease in loan limits could potentially force Veterans to have to opt for different financing or be forced to put down a more significant down payment, possibly making home ownership out of reach. There are roughly 230 high-cost counties, including 70 with limits above $625,500, which would be the new maximum if Congress does not extend the provision. Buying above your county loan limit requires a down payment equal to 25% of the difference between that limit and the home’s purchase price. To put it in perspective, a modest home in a high-cost area could be $700,000. Through the end of the year, a borrower could potentially purchase this house for no money down. If the limit isn’t extended, that same buyer would have to come up with almost $19,000. The annual median income of veterans in 2013 was $36,381.