Maximum Loan Amount

(Lender’s Handbook, Chapter 3, Topic 3)

Unlike other home loan programs, there are no maximum dollar amounts prescribed for VA guaranteed loans. Limitations on VA loan size are primarily attributable to two factors:

• The reasonable value of the property shown on the Notice of Value (NOV), AND
• The lender’s requirements in terms of the secondary market. Based on full entitlement available, VA’s guaranty for purchase money mortgages will equal 25% of the Federal Home Loan Mortgage Corporation’s (FHLMC) conforming conventional loan limit. For 2008, the FHLMC conforming loan limit is $417,000, and 50% higher for loans in Alaska, Hawaii, Guam and the U.S. Virgin Islands.
• The Government National Mortgage Association (GNMA) announced that, effective in September 2007, it would accept VA loans in excess of $417,000 provided that overall coverage on the loan was at least 25%. For veterans with full VA entitlement, the veteran would generally be required to make a down payment of 25% of the difference between the value of the property and $417,000. Lenders should contact GNMA for specific requirements.

EXCEPTIONS TO THE “NO DOWN PAYMENT” PROVISION

Yes, there are several exceptions:

• If the purchase price exceeds the reasonable value of the property, a down payment covering the difference must be made in cash from the borrower’s own resources.
• VA requires a down payment on all Graduated Payment Mortgages (GPMs).
• If a veteran has less than full entitlement available, a lender may require a down payment in order to meet secondary market requirements. The general “rule of thumb” in the secondary market is the VA guaranty, or a combination of VA guaranty plus down payment, must cover at least 25% of the loan. To determine the exact secondary market requirements, please contact the investor directly.