VA Lending Limit

S. 2486, the Veterans Benefits Act of 2004, was signed by the President on December 10, 2004.

Maximum Guaranty Amount. The law changes the maximum guaranty amount of $60,000, for certain loans in excess of $144,000, to an amount equal to 25 percent of the Freddie Mac conforming loan limit determined under section 305(a)(2) of the Federal Home Loan Mortgage Corporation Act for a single family residence, as adjusted for the year involved. To illustrate, the maximum guaranty for 2005 would be $89,912. This is 25 percent of the 2005 Freddie Mac conforming loan limit for a single family residence of $359,650. Under Freddie Mac's charter, maximum original loan amounts are 50 percent higher for first mortgages on properties in Alaska, Hawaii, Guam and the U.S. Virgin Islands. This higher amount would also apply to VA loans in these areas.

Specially Adapted Housing

The law expands eligibility to the $50,000 Specially Adapted Housing (SAH) grant to veterans with permanent and total service-connected disabilities due to the loss of, or loss of use, of both upper extremities such as to preclude use of the arms at or above the elbows. Detailed instructions to VA field stations will be forthcoming. In addition, Title 38, Section 1151, is amended to specify eligibility where any veteran has suffered an injury, or an aggravation of an injury, as the result of hospitalization, medical or surgical treatment, as if it were service-connected for benefits under Chapter 21, relating to SAH.

VA Funding Fee

A VA funding fee of 2.00 percent of the loan amount (2.75 percent for reservists) is also payable at the time of loan closing. This fee may be included in the loan and paid from the loan proceeds. The funding fee does not have to be paid by veterans receiving VA compensation for service-connected disabilities, or who but for the receipt of retirement pay would be entitled to receive compensation for service-connected disabilities, or surviving spouses of veterans who died in service or from a service-connected disability. If the veteran makes a downpayment of at least 5 percent, but less than 10 percent of the purchase price of the property, the funding fee is reduced to 1.50 percent of the loan amount (2.25 percent for reservists). If the veteran makes a downpayment of at least 10 percent, the funding fee is reduced to 1.25 percent of the loan amount (2.00 percent for reservists). If a veteran who has previously obtained a VA home loan obtains another loan with less than a 5 percent downpayment, the funding fee is 3.00 percent of the loan amount. With a downpayment of at least 5 percent, the funding fee is reduced to the percentages shown above for downpayments of at least 5 percent, but less than 10 percent, and for down payments of more than 10 percent.

Funding Fee Exemption

The law expands the definition of veterans who are in receipt of compensation and thus entitled to a waiver of the VA funding fee. Veterans who are rated eligible to receive compensation as a result of a pre-discharge disability examination and rating will now be considered as receiving compensation as of that date. This means veterans still on active duty awaiting discharge, but who wish to close on a loan before being released from the military, may be entitled to a waiver of the funding fee. Please speak with your loan specialist to determine your eligability.