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VA Lending Limits

Mortgage Library: Ask a Mortgage Related Question: Answers: VA Lending Limits

Question:

Hello,

I'm an eligible veteran shopping for a VA Loan. The house we'd like to purchase is in Bedford NH (Hillsborough County) where the loan limit is $417K. The price of the house is ~$500K. I've found 2 internet based lenders, VAMortgageCenter and BMS (a subsidiary of First National Bank of Hays), who are willing to go above the lending limit if I pay 25% of the amount over $417K. However, none of the major banks or institutions that I know are reputable, as well as the local lenders, will issue a VA loan in that NH county over $417K. Should I stay away from these internet brokers? One local broker who was aware of the VA Jumbo product says that no one will touch a VA Jumbo since the sub-prime mortgage fiasco. He related there's no secondary market for the loan...he couldn't find an investor. How can these internet based brokers find investors?

Thanks!

A.B.
Bedford
New Hampshire 

Answer:

Dear A.B.,

On October 10th, 2008, the President signed Public Law 110-389, the Veterans' Benefit Improvement Act of 2008. For 2009, qualifying customers can now apply for a regular VA Loan up to the maximum in qualified counties for no money down. This law also allows for $0 down payment loans in qualified counties to go up to $729,750 on loans closed through December 31st, 2011.

The VA has no specified dollar amount for a "maximum loan." However, the maximum loan amount depends upon the value of the property and the lenderís needs in the secondary market. Although VA guaranteed loans do not have a maximum dollar amount, lenders who sell their VA loans in the secondary market must limit the size of those loans to the maximums prescribed by the Government National Mortgage Association (Ginnie Mae or GNMA). For your county (Hillsborough, NH), the maximum is $417,000. Because of this, many lenders who write VA loans will not agree to underwrite a VA loan amount that is more than $417,000 (or the limit for your county if higher). 

However, some lenders will underwrite VA loans for more than the limit in your county. Generally speaking, these lenders are known as "portfolio lenders." A portfolio lender is a bank or other lending institution that makes mortgage loans with the intention of holding the loans in their investment portfolios or "in house." Some brokers are affiliated with portfolio lenders who will agree to allow them to originate these loans.

For loan amounts over and above the county limit of $417,000, you will have to put down the 25% guaranty required by GNMA. For a $500,000 mortgage, the 25% guaranty required by GNMA is $125,000 ($500,000 x 25%). But thatís not your down payment.

Remember, the VA provides you with a 25% guaranty for loans up to $417,000. The "rule of thumb" for GNMA is that the VA guaranty, or a combination of the VA guaranty plus the downpayment and/or equity in the home, must cover at least 25 percent of the loan. Your available entitlement is $104,250, which is 25% of $417,000. For loan amounts above $417,000, your veteranís entitlement + the down payment must equal at least the 25% guaranty amount, or $125,000. Because the VA is providing a guaranty of $104,250 (25% of 417,000), the total you will be required to put down is the difference between $125,000 and $104,250, which is $20,750 ($125,000 - $104,250). You can still roll the VA funding fee into the mortgage.

Sincerely,

Lew Corcoran
Sr. Mortgage Consultant
Northeast Community Mortgage
Toll-Free Phone: (800) 549-2349
Visit my website at www.LewCorcoran.com


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