In recent years, VA loans have become a critical instrument in helping veterans and their families buy homes. The limits for the no-to-low down payment home loans, guaranteed by the U.S. Department of Veterans Affairs, have dropped notably for 2015. But as a new analysis from the Urban Institute points out the lower loan limits probably won’t have a significant effect on veterans, even in the DC area, which has some of the most concentrated populations of veterans in the country.
Though Congress cut the loan limits by as much as 40 percent in parts of the country, the change “will not significantly reduce credit access to the tens of millions of veterans, active members of the military, and select members of the National Guard and reserves who will be eligible for VA mortgages in 2015,” the Institute found. The VA loan limits were changed to match up with the maximum loan guaranteed by Fannie Mae and Freddie Mac loans (GSEs).
The limit is $417,000 for a one-unit home in most places, but jumps to $625,500 in “high-cost” areas, including the DC area. Previously, the VA could guarantee loans of up to $1 million in some high-cost counties. In New York City, that equals a reduction of 36.1 percent; in DC, it’s a reduction of 9.7 percent from the previous ceiling.
So why won’t vets be affected? Most of the loans originated in 2013, the Institute found, weren’t above the GSE limit despite the high ceilings, even in places where the limits were $1 million. The most impacted area — at least according to the 2013 data and limits — would be Alexandria, Virginia, and there it would affect 1 percent of mortgages.
“While the effect of the loan-limit change is small nationwide, it could potentially have a more noticeable impact in communities where veterans are concentrated, and where the cost of homes is relatively high,” the Urban Institute noted. “Virginia is the prime example of this; but even there, the effect is very modest.”
This article originally published at http://dc.urbanturf.com/articles/blog/urban_institute_lowered_va_loan_limits_probably_wont_impact_dc-area_vets/9367
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