Your VA Loan Limits for 2011

The U.S. Department of Veterans Affairs (VA) announced the 2011 VA loan limits on December 3, 2010. Each year, the VA publishes its home loan limits for the purpose of establishing maximum guarantee amounts in all U.S. counties, including those with real estate markets that have median home sale prices above the national average. The national VA loan limit for average-cost counties remains at $417,000 for 2011. The loan limits for 2011 are based on trends from the previous year.

The VA Home Loan Guaranty Program does not enforce a “limit” per say on the amount that a VA-eligible veteran can borrow with a VA loan. But, the VA county loan limits are put in place so that the VA can calculate its guarantee amount for each U.S. county.

The VA’s maximum guarantee amount for loans over $144,000 is 25 percent.  Lenders who make VA mortgages can expect that the VA will continue to guarantee 25 percent of the amount published for each county in the 2011 VA loan limits.  The VA guarantee is for each federally-backed loan for veterans with full entitlement.   

With that in mind, each VA-eligible borrower’s entitlement can also be figured based on the loan limit published for the county in which they live. VA entitlement refers to the amount that the Department is willing to sponsor for each VA borrower. When a VA-eligible borrower applies for a federally-backed mortgage from a VA-approved lender, the first thing he or she must do is obtain a Certificate of Eligibility (COE) from the VA Center for Eligibility. The borrower’s basic entitlement will be stated on the COE. It will also be stated how much entitlement is currently being used for other loans. Lenders will have to use the COE to figure out how much the government is willing to guarantee with no money down based on which county the home being financed is in.

Therefore, it is very important for lenders to stay current with the VA loan limits each year in order to determine whether a VA-eligible borrow with full entitlement can borrower up to $417,000 or more with no money down. With the appropriate cash to put down, a VA-eligible borrower can certainly exceed the VA loan limit in any U.S. county as long as he qualifies with credit and income.

The maximum amount for a mortgage that the VA will guarantee per home loan is based on the county in which the borrower finances the home. The 2011 VA loan limits are effective for veterans’ home loans closed between January 1, 2011 and September 30, 2011.

As to be expected, there are some changes to the VA home loan limits from 2010 to 2011. Though most U.S. counties still have a VA loan limit of $417,000, there are some counties where real estate prices are more expensive and are considered high-cost counties.  The VA loan limit list contains only the names of high-cost counties and their loan limit amounts.  It is inherent that if a county is not mentioned on the 2011 VA loan limit list, then its VA loan limit is $417,000. 

Remember, the loan limits for each high-cost county is predicted for the current year based on median prices for the previous year.  That said, a generalized breakdown of the 2011 VA loan limits is that most U.S. counties’ limits stayed the same as in 2010.  However, some high-cost counties’ limits increased and some decreased.  Adjustments to the loan limits are a reflection of changes in the real estate markets in different parts of the country. 

In 2011, there are some increases that are more significant than others. U.S. counties where property values increased more noticeably from 2010 include California, New Jersey, New York and Utah.  Keep in mind that home value increases happened in select counties.  Many find it no surprise that Orange, Sonoma, Santa Barbara, Alpine, Yolo and Monterey Counties in California all experienced increases in their real estate markets from 2010 to 2011.  These California counties have many trophy estates. 

New Jersey is interesting because even though some real estate experts say the housing market there is flat or on the decline, almost all high-cost counties listed on the VA loan limit list for 2011 have bigger limits than 2010. 

Like New Jersey, New York has considerably higher loan limits for 2011, up from $681,250 to $735,000.  One of the most noteworthy increases on the 2011 VA loan limit list is in Utah where the three high-cost counties of 2010 (SaltLake, Summit and Tooele) jumped nearly $100,000 from $516,250 to $612,500 for 2011.

As expected, and as some counties experienced market improvements, others saw a decline in home values.  These counties include: Sacramento, El Dorado and PlacerCounties in California; Ouray and HinsdaleCounties in Colorado; and Greene County, Georgia. 

Whereas many of the changes to the VA loan limits of 2011make perfect economic sense based on last year’s home value trends, counties in Virginia could have economists scratching their heads.  While nearly 70 percent of the east coast state’s counties are missing from the high-cost list for 2011, the counties that remain all have higher loan limits for 2011.  That means that the real estate trends not only are inconsistent throughout the state, but they are downright lopsided. 

Almost every year, there are new high-cost counties on the VA loan limit list.  Counties that “graduated” from average to high-cost in 2011 include: Boulder County, Colorado with a loan limit of $427,500; Blaine County, Idaho with a loan limit of $431,250; and, Barnstable County, Massachusetts with just a slightly higher-than-average loan limit of $418,750.  It will be interesting to see if these counties stay on the high-cost list for 2012.

The loan limits published by the VA should be used by lenders as a guideline. VA-approved lenders may also have investor requirements regarding loan limits, down payments and VA loan credit and income qualifying that may also dictate the maximum amount for each VA-eligible borrower.

For further information about 2011 VA loan limits and individual lender guidelines, talk to an experienced VA loan professional.