If the new Veterans Loan Limit is $692,500, how the heck is your client getting a VA loan higher than that?
A couple weeks ago, I told you that Veterans Affairs had dropped the loan limit from $843,750 all the way down to $692,500. We had some clients that listened to the message and quickly got deals done to take advantage of the higher limits. Most Veterans and real estate pros are now aware that you can still borrow over the limit!
Here is how—The VA loan limits are simply what a Veteran can do 100% financing up to. Without getting too technical, the VA guarantees 25% of the VA loan to the VA lender. That means if the borrower stops paying the mortgage, then VA helps with the costs of that problem up to 25% of the balance. Their guarantee stops at $692,500. If the Veteran wants to borrow more than $692,500, they need to do a small down payment. Here is an example
Home price = $800,000 —Difference between sales price and area loan limit is $800,000 – $692,500 = $107, 500 x 25% = down payment borrower needs $26,875. So the borrower is putting in 25% equity between the area loan limit and the sales price. That combines with VA’s 25% guarantee so that the whole loan has 25% coverage.
I urge you to compare that to their alternatives of JUMBO, conventional, and FHA. The down payments on those prices would range from $110k approx. to $160k. Kind of a great deal for Vets right? They earned it!
With a small down payment, you can exceed the area loan limits. Of course, we help you and the Veterans calculate this down payment when we are doing the pre approval process. This way they can shop confidently for the home knowing exactly how much cash they need in the deal to make it work.
I find that many people don’t fully understand the VA home loan benefit and how it applies to them. We are here to help. We also find that there are many people that in the area with VA loan eligibility that can afford these higher price points. We often do VA loans for $800k-$1 million. This is because of the down payment flexibility and also that rates on VA loans are lower than conventional or JUMBO.
Please contact us with any questions. We are the top VA lender in Virginia (Scotsman Guide, leading mtg industry publication) and look forward to helping your clients in 2014!
To your success,