Due to a new way of calculating the VA loan guarantee, 2012 loan limits decrease in some U.S. counties.
In 2012, the VA loan limits are calculated with a new method, which caused a decrease in limits in certain areas. New VA loan limits range from $417,000 to $625,500 in the 48 contiguous states. In Hawaii, Guam, Alaska and U.S. Virgin Islands, VA loan limits range from $625,500 to $938,250.
VA loan limits are calculated based on the median home price per county. Some U.S. counties are seeing significant decreases in their conforming loan limits. For instance, Nantucket was once a place where a VA-guaranteed loan of up to $1,094,625 could be obtained by a qualified veteran for zero money down. Today, the VA will still back 25% of each veteran’s loan in Nantucket, but only for loans up to $625,500.
The new way of calculating the guarantee is only partly responsible for the reduced limits. Another contributing factor is the drop in home prices across the country. According to S & P indices, home prices have not increased annually since 2006.
The U.S. Department of Veterans Affairs publishes VA loan limits each year. The term “loan limit” should not be taken literally. The word “limit” in this context actually means the maximum amount of loan the VA is willing to guarantee with no money down from the VA-eligible borrower.
The VA generally guarantees 25% of each loan over $417,000 up to the conforming loan limit. The federal backing is what VA-approved lenders consider loan security. Therefore, a down payment from the borrower is not always necessary. Loans over the conforming loan limit will require some cash from the borrower to cover the difference not guaranteed by the VA. And, a qualified VA borrower with ample entitlement can essentially use home loan benefits to obtain a loan of any amount.
The VA loan limits for 2012 are effective for veterans’ loans closed January 1, 2012 to September 30, 2012.
VA loan products include purchase, streamline refinance and cash-out refinance loans. To learn more about VA loan limits, speak to an approved lender.
Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender