- Purpose. This Circular announces the Department of Veterans Affairs’ (VA) effective loan limits for loans closed on or after January 1, 2019.
- Interest Rate Reduction Refinancing Loans (IRRRLs). The county loan limits do NOT apply to IRRRLs. VA will guarantee 25 percent of the loan amount on an IRRRL, regardless of whether the loan exceeds the limit for the particular county.
- How VA Calculates Effective Loan Limits. It is important to note that VA does not impose a maximum loan amount that a Veteran may borrow to purchase a home; instead, the law directs the maximum amount that VA may guarantee on a home loan. Because most VA loans are pooled in securities that require a 25 percent guaranty, the effective no-downpayment loan limit on VA loans is typically four times VA’s maximum guaranty amount. Lenders may make loans greater than the effective loan limit; however, the Veteran may be required to make a downpayment; typically 25 percent of the difference between the loan amount and the county loan limit. Downpayments required on VA loans are typically far less than downpayments required on other loan products.
- Effective Loan Limit Calculations. The 2019 effective loan limits are posted at: https://www.benefits.va.gov/homeloans/purchaseco_loan_limits.asp. Note that for purposes of determining the VA guaranty, lenders are instructed to reference only the One-Unit Limit column in the Federal Housing Finance Agency (FHFA) Table “Loan Limits for Calendar Year 2019- All Counties” (https://www.fhfa.gov/DataTools/Downloads/Pages/Conforming-Loan-Limits.aspx). While a Veteran may use the VA home loan guaranty benefit to acquire a property up to 4-units in size, VA’s maximum guaranty amount will be based on the One-Unit (single-family residence) limit, as prescribed by FHFA in the aforementioned table. For example, if a Veteran plans to purchase a four-unit dwelling for $700,000, in a county where the FHFA One-Unit (single-family residence) limit is $484,350, then VA’s maximum guaranty amount would be 25 percent of the $484,350.”
- Lender Actions for Closing for Higher-Limit Counties. All loans, excluding IRRRLs, closed on or after January 1, 2019, will be eligible for the higher loan limit.
- Lender Actions after Closing for Lower-Limit Counties. VA will honor the previous year’s higher limit on all loan types, except IRRRL. Note that VA will only permit the use of the previous year’s higher limit for loan applications signed by all parties prior to January 1, 2019.
- Rescission: This Circular is rescinded January 1, 2020.
