Posted on Feb 14, 2016
Is the proposed VA loan limit elimination a good idea?
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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/
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/
Home Loan
Department of Veterans Affairs (VA)
Money
VA Loan
Finance
Edited 8 y ago
Posted 8 y ago
Responses: 16
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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.
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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.
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.
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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.
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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.
The lenders should make the call as to how much can be loaned.
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LTC Jason Strickland
Seems like rational thinking to me, Capt (Join to see). Especially in places like California, DC, and the north east.
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Capt (Join to see)
Most people do not want to hear it, but, a major factor in the housing bust was that the government put pressure on the banks to lend to people so that they could share in the American dream. My wife worked in credit reporting and they literally laughed at some of the aps being considered for approval.
And, very few can afford a house without a loan.
And, very few can afford a house without a loan.
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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?
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?
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COL David Turk
Just a note, in today's market, 30 year loans should be a lot less than 6.125%. I haven't checked recently, but I believe they, are closer to 4%. This does not negate the points are in the post.
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Sgt Aaron Kennedy, MS
COL David Turk Understood. I just pulled up the NFCU website and Amortization Tables, and that was the first available numbers. It provided "simple math" which highlighted the point. Lower interest rates drop the price though.
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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.
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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.
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.
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LTC Jason Strickland
I understand your perspective, SFC Michael Jackson, MBA. Housing costs do vary across the country. However, I worry that eliminating the ceiling on these guaranteed loans will expose the government (and thereby you and I as taxpayers) to undue risk. I'm still undecided on this issue, but feedback from the RP community continues to provide great insight.
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no, if your income doesn't mean you qualify, then you should not buy it, loan guaranteed or not.
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LTC Jason Strickland
Sounds like good math to me, CW3 Kevin Storm. Don't spend more than you earn. Thanks for the comment.
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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.
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.
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LTC Jason Strickland
You're probably right, PO1 Glenn Boucher. I can see the possibility of predatory lenders trying to exploit this for their gain.
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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.
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LTC Jason Strickland
Agreed, SGT Christopher Premore. No matter the cap, an individual still has to qualify for a loan.
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