VA Announces New 2017 Loan Limits
by Shawn Carvin, Senior Mortgage Banker
The Department of Veterans Affairs recently announced updated VA loan limits for 2017. These new limits became effective January 1, 2017. Cutting through mortgage industry lingo, let’s take a look at what these changes mean.
Federally backed VA mortgages
The primary reason VA loans are available with relatively low interest rates and other attractive terms is because the federal government stands behind the loan. If a lender makes a VA mortgage loan and the borrower defaults, the federal government will step in and pay back the lender – this promise is called a guaranty. The federal guaranty makes offering VA loans a low-risk proposition for banks and mortgage companies, which is why these mortgages usually have great rates and terms.
Lower risk yields savings for borrowers
But for this guaranty to apply, the lender must carefully follow all VA loan requirements. One of these requirements is limiting the amount of the loan. While a lender has the option to loan a qualifying veteran, active military member, or surviving spouse more than the VA loan maximum, the federal government will only pay out up to the applicable VA loan limit.
These limits are based on median home values as determined by the Federal Housing Administration, and are often referred to as “conforming loan limits” – in other words, the limits for loans that conform with the federal government’s maximum guaranty for the type of home.
Increasing home prices drive limits upwards
As overall home prices rise, VA loan limits have increased accordingly. In 1980, the national loan limit for single-family one-unit homes was $93,750. By 2000, the national loan limit had increased to $252,700.
Obviously, median home prices vary widely based on location. Over the years, various legislative acts increased VA loan limits for high-cost areas of the United States, including Los Angeles and Orange County. However, in the Housing and Economic Recovery Act of 2008 (HERA), a permanent formula was created to calculate conforming loan limits for FHA and VA loans.
This formula was used to calculate the current conforming loan limits. After holding steady at $417,000 from 2006 to 2016, the national limit increased slightly to $424,100 for 2017, leaving some home buyers disappointed at the relatively small increase.
2017 VA loan limits for Los Angeles and Orange counties
Single-Family One-Unit
- $636,150 (up from $625,500)
Single-Family Two-Unit
- $814,500 (up from $800,775)
Single-Family Three-Unit
- $984,525 (up from $967,950)
Single-Family Four-Unit
- $1,223,475 (up from $1,203,925)