2018 VA Loan Limits Increase to $453,100
Buying a home in 2018? You’ll want to know your VA loan limits. Check the reference here to find the maximum loan the VA will guarantee without a down payment in your area.
VA Loan Limit Basics
New 2018 VA loan limits are effective January 1 – December 31. The baseline limit has increased for 2018, up to $453,100 from $424,100 in most areas. In some places where homes are more expensive, limits are higher.
First, let’s clarify what loan limits are not. VA loan limits are not a cap on the amount you can borrow with a VA loan. A limit is simply a cap on the amount the VA is willing to guarantee. Qualified Veterans can use their home loan benefits to buy a home even if it exceeds the limit, a fact that is discussed further below.
Generally, the VA is willing to back up to 25 percent of a VA loan within the limit. This is known as the VA Guaranty. The guaranty secures enough of the loan for approved lenders to offer terms with no down payment and no monthly mortgage insurance premium (MMIP). The VA does charge most borrowers a funding fee to offset the cost of its guaranty. Regardless, the lack of down payment and MMIP can save significant cash out-of-pocket compared to other loan programs.
High-Cost Ceiling Raised to $679,650
Some areas of the U.S. have expensive housing markets, and to accommodate this, limits in certain places are higher than the baseline limit of $453,100. By FHFA’s definition, these high-cost housing areas are ones in which 115% of the local median home value is above the baseline loan limit. In other words, these are areas where the average home is notably more expensive. Limits in these areas are set at the median home value.
In the 48 contiguous states, the high-cost ceiling is $679,650, which is 150% of the baseline of $453,100. Special legislation exists for Alaska, Hawaii, Guam, and the U.S. Virgin Islands where loan limits can exceed $679,650. For example, Honolulu, HI has a loan limit of $721,050.
Places like Key West, FL, Virginia Beach, VA, and Los Angeles, CA, have homes priced well over the limit in many popular neighborhoods. Limits are specific to each county. It’s common to find homes exceeding the limit in some of the most expensive housing communities.
VA Loan Over County Limits
In San Francisco, it costs $1,100,000 for an average home. This is $420,350 over the ceiling. So, if you can qualify, and want a VA loan that exceeds the county limit, you’ll need to make a down payment.
Even in a case such as this, these loan benefits can be a significant advantage to a Veteran. The down payments for loans over the limit are factored only on the portion over the limit – a small fraction of what could be required for a conventional loan. If you do make a down payment on a VA loan, you can expect it to be 25% of only the amount above the loan limit. The money saved on down payments for eligible borrowers can amount to tens of thousands.
What Determines Loan Limits?
To get an idea how loan limits might change each year, home prices can provide a clue. The Federal Housing Finance Agency (FHFA) publishes a Home Price Index (HPI) each year. This federal agency uses the HPI and the HERA formula, which stands for Housing and Economic Recovery Act of 2008, to calculate loan limits.
The average home price in third quarter of 2016 was 1.7 percent above the value for the third quarter of 2007 (pre-crisis), per the FHFA report. It’s no coincidence that for 2017, the baseline loan limit was increased by the same amount. And another baseline increase in 2018 shows that home prices are on a healthy uphill climb.
More About Home Prices
Home prices have been on a steady rise since the housing crash in 2008, according to the FHFA. In the third quarter of 2017, all 50 states saw home prices increase from a year ago. In fact, home prices increased an average 6.5% nationally. Here are some other findings according to the 2017 Q3 HPI:
• All 100 major metro areas saw home prices up from a year ago.
• Top increases were: 1) District of Columbia 11.6%; 2) Washington 11.5%; 3) Hawaii 10.0%; 4) Arizona 10.0%; and 5) Nevada 9.6%.
• The strongest metro area was Seattle-Bellevue-Everett, WA, up 14.6%.
• The weakest metro area was Camden, NJ, up just 0.5%.
• The strongest region was the Pacific, up 8.9% from last year.
• The weakest region was the Middle Atlantic, up 4.8% since Q3 2016.
VA Loan Limit Table
Are you curious about your loan limits? Look yours up using the VA loan limit table below. If you don’t see your county, you can assume your loan limit is the baseline $453,100. The loan limit table lists only high-cost places where limits are over the baseline.
If you have questions, speak to one of our VA specialists at 800-217-1596.