VA Home Loans and Home Refinance Improvements
Federal Military Loan Benefits Updated for VA Loan Applicants
Nov 5, 2009
When President Obama signed into law the Veterans' Benefits Improvement Act of 2008, important changes were make to the VA Loan Guarantee Program which broadened benefits for those both seeking VA home loans and military loan holders seeking a home refinance. This article details some of the Federal changes made by passage of this 2008 act.
VA Home Loans and Adjustable Rate Mortgages
Based upon previously-passed Federal law, the VA Loan Guarantee Program had the authority to not only guarantee a standard military loan, but adjustable rate mortgages and hybrid adjustable rate mortgages as well. However, this authority was scheduled to expire in 2008, and there was some concern that, because of Federal fiscal restraints as well as political maneuverings within Congress, the VA Loan Guarantee Program might not be renewed on time.
However, with passage of the 2008 act, President Obama guaranteed that those seeking VA home loans will have both adjustable rate mortgages and hybrid adjustable rate mortgages guaranteed through the VA Loan Guarantee program through 2012. Given the increased foreclosure rates, particularly for military personnel, this came as a great relief to veterans. Of course, this benefit will need to be renewed again in 2012.
VA Home Loans and Home Refinance Provisions
Prior to 2008, the VA Loan Guarantee Program could only guarantee 90 percent for a regular, military loan holder seeking a home refinance. However, with passage of the 2008 act, home refinancing can now be guaranteed up to 100 percent, a significant change.
In addition, regular and purchase loan guarantee maximums were equalized by passage of the 2008 act.
VA Home Loans and Guaranty Amounts
For military loans closed between January 1, 2009 and December 31, 2011, a temporary increase in the "maximum guarantee amount" was instituted, the details of which follow:
- VA home loans valued at $417,000 or less were not altered regarding maximum amounts, and previous Federal law still applies.
- For VA Home loans valued over $417,000, the VA Loan Guarantee Program will guarantee a minimum of 25% of the principal. The maximum guarantee levels depend upon a given property's location.
Regarding guaranteed levels as determined by geographic location, the 2008 act specifies the following:
- For all locations in the United States other than Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the maximum guaranty amount is the greater of 25% of (a) $417,000 or (b) 125% of the area median price for a single-family residence, but in no case will the guaranty exceed 175% of the Freddie Mac loan limit for a single family residence in the county in which the property securing the loan is located. This translates to a potential maximum loan amount of $1,094,625.
- In Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the maximum guaranty amount is the greater of 25% of (a) $625,500 or (b) 125% of the area median price for a single-family residence, but in no case will the guaranty exceed 175% of the Freddie Mac loan limit for a single family residence in the county in which the property securing the loan is located. This translates to a potential maximum loan amount of $1,641,937.50.
The above location information was quoted from a Veterans Benefits Administration circular published in late 2008, and is where the information for this article was gleaned.
The 2008 act is scheduled to expire on December 31, 2012, before or at which time the above benefits will need to be renewed at the Federal level in order to remain effective for those either with VA home loans or those seeking a home refinance on a military loan.
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