VA Loan Limit Increase: Understanding the Changes

Explore the Blue Water Navy Act's impact on VA loan limits, its history, and how removing the cap transformed the VA loan landscape.

The Blue Water Navy Vietnam Veterans Act of 2019 ushered in a new era for VA loans, offering increased benefits and flexibility to veterans. This article will provide a brief history of the Blue Water Navy Vietnam Veterans Act, discuss the previous VA loan limits, and explore how the removal of the cap has impacted the VA loan landscape. By understanding these changes, eligible borrowers can make more informed decisions when utilizing the VA home loan program.

A Brief History of the Blue Water Navy Vietnam Veterans Act

Origins and Background:

  • The Blue Water Navy Vietnam Veterans Act (Public Law 116-23) was signed into law on June 25, 2019.
  • The Act aimed to extend disability benefits to veterans who served in the Blue Water Navy during the Vietnam War and were exposed to Agent Orange.
  • It also brought significant changes to the VA home loan program, providing increased benefits to eligible veterans

Impact on the VA Home Loan Program:

  • The Act removed the loan limit cap for VA loans, allowing qualified veterans to borrow higher amounts without a down payment.
  • This change went into effect on January 1, 2020, providing more flexibility for veterans purchasing homes in areas with higher property values

VA Loan Limits: What Were They?

Loan limits before the Blue Water Navy Vietnam Veterans Act:

  • Prior to the Act, VA loan limits were based on conforming loan limits set by the Federal Housing Finance Agency (FHFA).
  • For example, in Lee County, Florida, the 2019 VA loan limit was $484,350, meaning eligible veterans could borrow up to that amount without a down payment.
  • VA loan limits capped the amount a veteran could borrow without a down payment but did not limit the overall loan amount.

Why Were VA Loan Limits Lifted?

Key reasons for removing the loan limit cap:

  • Increase homebuying opportunities for veterans, particularly in high-cost areas.
  • Support veterans’ financial well-being by eliminating the need for down payments in many cases.
  • Simplify the VA loan process by removing the complexity of varying loan limits based on location.

The New VA Lending Landscape: No Loan Limits

Key aspects of the removal of VA loan limits:

  • Veterans can borrow higher amounts without a down payment if they have sufficient entitlement and meet eligibility requirements.
  • Lenders still have the discretion to set their own loan limits based on the borrower’s creditworthiness and ability to repay the loan.
  • The removal of the cap has led to a more flexible and accessible VA home loan program for veterans in high cost areas.

Real-life examples:

  • Before the change: A veteran looking to purchase a $600,000 home in Lee County, Florida, would have needed a down payment of $28,912.50 (25% of the difference between the home price and the 2019 VA loan limit of $484,350).
  • After the change: The same veteran can now potentially purchase the $600,000 home without a down payment, provided they have sufficient entitlement and meet other eligibility requirements.

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