2019 VA Loan Limits Up With Home Prices
On November 27, 2018, the VA announced updated VA loan limits for 2019, with the limit for most U.S.
counties and territories increasing by nearly 7%. Higher loan limits will increase the percentage of homes
that can potentially be financed with a VA loan and no down payment. This enhances the impact of the VA
loan benefit for Veterans, especially considering that home prices have risen steeply for several years,
making saving for a down payment more challenging for those who don’t enjoy this benefit.
VA loan limits have increased for three years in a row. The 2019 limits are set at $484,350, an increase of
$31,250, from the previous year. The ceiling for high-cost counties also increased, to $726,525, up from
$679,650 in 2017. Veterans have gains in home values to thank for the hike in loan limits, as all nine
regions of the country saw an annual rise in home prices in 2019. The Mountain region saw the most gain at
just under 9%.
2019’s VA loan limits may be good for Veterans who are hunting for a more expensive home. With soaring
limits, a qualified borrower may be able to get a larger loan without having to cough up cash for a down
payment. Homebuyers in 2019 will be able to take advantage of higher loan limits, a robust housing market,
and what are predicted to be historically low interest rates.
VA Loan Limits Explained
VA loan limits don’t “limit” the amount a Veteran can borrow using their home loan
benefits, as the name implies. Instead, loan limits are the maximum loan amount that the VA is willing to
back without a down payment. Typically, about 25% of a Veteran’s VA loan, up to the limit, is
guaranteed for the lender by the government. For loans over the limit, lenders will ask the borrower to
secure 25% of the amount above the limit in the form of a down payment. But with the new loan limit at
$484,350, and the average VA loan being around $255,000, it is reasonable to expect that most loans will be
obtained without a down payment.
How Are Baseline Loan Limits Calculated?
A baseline loan limit is simply the loan limit for most U.S. counties and territories where home prices are
more in line with the national average. Over a decade ago, the baseline loan limit was $417,000, as defined
by the Housing and Economic Recovery Act (HERA) of 2008. Generally, loan limits are intended to reflect
home prices in a specific location. But due to the 2008 housing crisis, it took time for the market to
recover, and due to stipulations in HERA, the baseline loan limits stayed at $417,000 for nearly a decade.
Then in 2016, home prices rose almost everywhere. The FHFA published its third-quarter house price index
(HPI), showing that the average prices had risen 1.7% above Q3 2007, which was right before the housing
bubble burst. As a result, the baseline loan limit for 2017 was adjusted to reflect the correction in the
housing market. Loan limits rose again for 2018. And due to a robust 2018 housing market, home prices rose
again in almost all 50 states. Hence, VA loan limits are up again for 2019.