New Legislation Proposes To Raise Limits For VA Loans
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Chairman of the Veterans’ Affairs Committee Senator Daniel K. Akaka (D-HI) has introduced legislation to raise the guaranty amount for veterans’ home loans. The initiative will give struggling veterans relief during the housing crisis.
How VA Loans Help Veterans Buy Homes
The VA Home Loan Guaranty was part of the 1944 GI Bill, which gave veterans a federally guaranteed home loan without a down payment.
Although the VA loan is smaller than the other three large federally funded loan programs, it guarantees 2.2 million home loans, or $243 billion to 11,000 new loans per month. More than half of the borrowers are first-time homebuyers and the program is fairly low-risk.
VA mortgages also do not need equity investment up front, which typically increased foreclosures and defaults. However, the foreclosure rate for VA loans is significantly lower than for FHA loans. For example, the delinquency rate during the third quarter of 2007 was 6.58 percent, compared to 12.92 percent for the FHA.
Where Are The Increased VA Loans?The limits of the three programs -- Fannie Mae, Freddie Mac and the Federal Housing Administration (FHA) -- extend to $729,500, while VA loans remain restricted at $417,000. The low ceiling is inhibiting veterans from buying homes, especially in high-cost areas.
How did the other three major federal loans receive huge increases, but the VA loans get left out? House Veterans Affairs Committee Chairman Bob Filner (D-Calif.) said, “I think it was out of ignorance…nobody thought about it, so this just slipped through.”
How New Legislation Will Help Raise VA Loan LimitsThe economic stimulus package approved by Congress just a short while again raised the loan limits on federal loans. However, it did not for the VA Home Loan Program. If the bill passes, thousands of veterans will be able to afford their own homes.
According to Akaka, the bill would, “enable more veterans to utilize their VA benefit to purchase a home.” An estimated increase of over 4,000 loans will help service members with buying a home. More than 25 million veterans are eligible for VA home loans. This new initiative aims to increase the limit temporarily through 2011.
Other Congressmen are rushing to fix the error, such as Filner, who is introducing a bill to raise the VA limit to 150 percent of the Fannie Mae and Freddie Mac maximum. Until some kind of bill passes to rectify the situation, veterans will just have to wait and see before they can bid on a home.
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