Is the proposed VA loan limit elimination a good idea?

2016-02-14T07:24:55-05:00

Good news or bad news?
I'm all for excellent benefits for our military community, but to guarantee a loan beyond $417,000 for those who may not be able to afford it sounds like risky business.
http://www.militarytimes.com/story/military/benefits/2016/02/12/va-home-loan-limit-would-end-under-proposed-law/80236662/

VA home loan limit would end under proposed law

In legislation passed by the House on Feb. 9, loan guarantee limits would be removed. It’s unknown whether the Senate will take similar action.

Response by SFC Joe S. Davis Jr., MSM, DSL made Feb 14 at 2016 7:29 AM

2016-02-14T07:29:41-05:00

LTC Jason Strickland I think its ok, its based on your situation and finance. Veterans deserve all the limit they can get, their DUTY HONOR COUNTRY is priceless. You have to use COMMON sense and don't live above your means.

Response by Sgt Aaron Kennedy, MS made Feb 14 at 2016 8:05 AM

2016-02-14T08:05:10-05:00

i don't necessarily think the cap should be part of the Dept of VA side of things, but part of the "Lender Regulations." We saw things get tightened down after housing bubble burst, so that should correct the issue.

The problem with the $417k cap is that it's been the same for who knows how many years. A $400k loan at 6.125% ends up being about $2400/month payment. On Quantico, the Average rank was Major (O4), and the BAH is $2298 (2016). I have a hard time saying that Maj+ can't afford the MAX housing rate. Now this won't be true on the enlisted side, WHILE active... but once out... why not?

Response by Capt Private RallyPoint Member made Feb 14 at 2016 8:20 AM

2016-02-14T08:20:17-05:00

There are places where $417,000 does not buy much of a house.
The lenders should make the call as to how much can be loaned.

Response by COL David Turk made Feb 14 at 2016 8:21 AM

2016-02-14T08:21:20-05:00

As a reminder, while the VA guarranties the whole loan, technically they are on the hook for the "lost" portion of the loan. That is, what amount is not covered after the house sells for, and the associated cost of selling the house.

The vet still has to qualify for the loan, which means they are going to have to have the income stream available to support the higher loan amount. I don't believe a lot of vets are going to have that level of income, but for the few that do, the VA should be there for them.

Response by MSG Patrick Quinn made Feb 14 at 2016 9:28 AM

2016-02-14T09:28:36-05:00

There already are exceptions for high cost areas, but I agree with removing the cap. Regardless of the cap, the veteran still needs to qualify for the mortgage with debt to income and other underwriting requirements. http://www.military.com/money/va-loans/home-purchase/va-loan-limits-for-high-cost-counties.html

Updated: VA Loan Limits for High-Cost Counties

The VA loan limit for 2016 is $417K. But it could actually be substantially more if you buy a home in a “high-cost” county.

Response by SSG Private RallyPoint Member made Feb 14 at 2016 9:53 AM

2016-02-14T09:53:35-05:00

No there should be a cap now should we raise that cap is another question because of areas that have high home cost maybe but a cap should remain.

Response by LTC John Shaw made Feb 14 at 2016 9:53 AM

2016-02-14T09:53:53-05:00

I know folks that live in high cost areas need the high limit raised. It concerns me how much risk the Fed continues to take on with little equity by the home owner. I hope that veterans don't get overwhelmed in debt.

Response by CW4 Private RallyPoint Member made Feb 14 at 2016 10:57 AM

2016-02-14T10:57:45-05:00

Personally, I think it is a great idea. As it stands now, I have bought a house at each of my duty stations over the last 10 years. Each of those VA loans were well under the limit, but added together I am now reaching my limit. I'll have one more PCS move before I retire and would be forced to either sell or refinance under a non-VA loan to get another house. Removing the limit will allow me to continue to buy houses and rent them out well past my retirement without worrying about a limit.

Response by CAPT Kevin B. made Feb 14 at 2016 12:59 PM

2016-02-14T12:59:42-05:00

I'm OK with removing the cap, but.... The article was short on what goes with it insofar as the lenders are concerned. I don't want the taxpayer getting burned because the lenders get lazy or there's some social imperative. Remember how Freddie/Fannie hosed everyone by making banks issue loans with high risk. Show me how the risk gets managed before I bite.

Response by LCDR Private RallyPoint Member made Feb 14 at 2016 2:40 PM

2016-02-14T14:40:54-05:00

Seems like it's not the best idea. My wife and I combine for a pretty decent living, but when you combine mortgage, insurance, possible HOA fees, taxes, student loan repayment, car liens, the cost of children/schooling, I don't think we would be able to afford more than $300k comfortably. Even that would be difficult, and our earnings are much higher than average. I'm sure there are plenty of veterans who can afford more than $400k, or even much higher, but I'm sure there are also many others who might reach a bit too high if it was available, and possibly put themselves in a sticky situation down the road. I'm all for personal responsibility in making financial decisions, but the government needs to exercise some responsibility as well.

Response by SGT Christopher Premore made Feb 14 at 2016 3:41 PM

2016-02-14T15:41:49-05:00

I say as long as you are financially able to afford a higher limit there shouldn't be a set price. They should ensure though that you can afford it and you are not going to default.

Response by PO1 Glenn Boucher made Feb 15 at 2016 2:08 PM

2016-02-15T14:08:59-05:00

I think if you have the income then why not be afforded the higher loan cap with the VA. But the problem is that you will see many lenders getting creative to help qualify service members and veterans into loans that they cannot afford.
Its not the VA limits as much as the lenders being shady. If you show the VA that the service member / veteran is capable of handling the loan on paper then the VA will probably have no problem with approving the loan amount and if the paperwork is shady then your only setting up the service member / veteran for failure.

Response by CW3 Kevin Storm made Feb 15 at 2016 2:27 PM

2016-02-15T14:27:28-05:00

no, if your income doesn't mean you qualify, then you should not buy it, loan guaranteed or not.

Response by SFC Michael Jackson, MBA made Feb 15 at 2016 4:21 PM

2016-02-15T16:21:19-05:00

houses costs more just about every year and considerbly higher in some areas. a $400,000 house certainly isnt the same in California as it is in Texas.
by placing a cap, the VA is dictating the amount veterans can spend on a house. Ultimately, it should on the veteran to decide his living accommodations and limits, not the govt.

Response by Col Joseph Lenertz made Feb 16 at 2016 11:38 AM

2016-02-16T11:38:33-05:00

I agree with removing the cap. I would still keep the specific loan amount qualified for based on the individual's demonstrated ability to repay the loan.

Response by Capt Dante K made Apr 4 at 2016 10:34 AM

2016-04-04T10:34:16-04:00

There currently isn't a limit on how much you can borrow, just the amount you can borrow without needing a down payment. For every dollar above the conforming loan limit, you'll have to pay 25% down. You would still have to qualify for the loan. The legislation just allows you to have a higher loan amount without a down payment. So the only change would be not having to put a down payment for any limit and seller mandatory paid fees.

In addition:

"The Committee is confident VA's current strict underwriting standards and low foreclosure rates will ensure that veterans still have the required good credit and income to qualify for the loan, and that this change will not result in a significant increased amount of foreclosures.”