VA Temporary Raise in Maximum Guaranty Expiring Soon

The Veterans Benefits Act of 2004 changed the maximum guaranty amount to an amount equal to 25% of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act.

On July 30, 2008, the President signed Public Law 110-289, the Housing and Economic Recovery Act of 2008. Section 2201 of the Act provides a temporary increase in VA's maximum guaranty amount through December 31, 2008.

For all locations in the United States other than Alaska and Hawaii, the maximum guaranty amount is 25% of the greater of: (a) $417,000 or (b) 125 percent of the area median price for a single-family residence, up to $729,750. Qualifying customers can now apply for a regular VA Loan with $0 down up to the $729,750 in qualified counties.

This means that eligible borrowers can get up to 100% financing for loans up to $729,750. So, if you are active duty military, a surviving spouse, a reservist or a veteran, now would be a good time to use your VA entitlement.

More Details on Maximum Guaranty
For all locations in the United States other than Alaska, Guam, Hawaii, and the Virgin Islands, the maximum guaranty amount is 25 percent of the greater of: (a) $417,000 or (b) 125 percent of the area median price for a single-family residence, up to $729,750.

In Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the maximum guaranty amount is 25 percent of the greater of: (a) $625,500 or (b) 125 percent of the area median price for a single-family residence, up to $1,094,625. c. Guaranty Limit for Regular Refinance Loans. H.R. 3221 did not make any changes to the guaranty limit for regular refinance loans. The limit remains at $36,000.

Calculating the Maximum Guaranty for Loans over $417,000
The applicable maximum guaranty amount may be calculated using data available online from the Department of Housing and Urban Development. To calculate the maximum guaranty amount for a particular property, go to https://entp.hud.gov/idapp/html/hicostlook.cfm

Select the appropriate state, enter the name of the county, select "Fannie/Freddie for the "Limit Type, and click "SEND. The applicable maximum guaranty amount is 25 percent of the amount in the column labeled "One-Family".

VA Loans Are Surprisingly Flexible
A VA home loan may be used to purchase and improve a home at the same time. You may also use a VA loan to improve your existing home by increasing energy efficiency. There is also a provision for people to use a VA loan to purchase a manufactured home and lot, under the right conditions.

Tips on Getting Approved for a VA Loan
Because your VA loan eligibility depends on your debt ratio, it's a good idea to work on fixing your credit long before actually filling out loan paperwork. The maximum debt ratio allowed for approval is 41%, and your FICO credit scores are also a factor. For example, many lenders expect a score of at least 680 for loans above $650,000.

If you are within a few months of paying off a major debt such as an automobile loan, do so as quickly as possible. You'll most likely need to allow for credit reporting agencies to "catch up" with your newly paid off cards and loans. But, most lenders can do a rapid rescore, which will cut the waiting time down significantly. A rapid rescores typically only takes 3 days, whereas just waiting for the credit bureaus to catch up with your recent payoffs can take 60 days to 6 months.