The Department of Veterans Affairs just announced new higher loan limits for 2011. These limits apply to the VA Zero Downpayment Loans that close from January 1, 2011 through September 30,2011. The new loan amount for San Diego will be $537,500, a $100,00 increase from the 2010 limit of $437,500. This is fantastic news for veterans and active military wishing to purchase real estate in 2011.
The VA guarantees loans up to 25% of the local VA limits. If a veteran-borrower wanted to purchase a home priced above local maximum limits he or she would have to deposit a larger downpayment in order to make up the difference between 25% of the local maximum and 25% of the purchase price.
Here is an example from Kevin Kueneke with Primary Residential Mortgage:
If an eligible veteran with full entitlement purchases a home in San Diego county of equal or lesser value than $537,500, then no down payment will be required. VA will guaranty up to 25% of the local limit ($537,500) which equals $134,375. However, if that same veteran wishes to purchase a home priced at $550,000 then they would need to bring in the difference between 25% of the local limit and 25% of the purchase price.
- Maximum Guaranty Amount In San Diego County = 25% of $537,500 = $134,375
- 25% of Purchase Price $550,000 = $137,500
- Difference between $137,500 and $134,375 = $3,125
The required down payment in this example of $3,125 is less than 1%…not too shabby. The greater the difference between the purchase price and the VA local limit, the greater the percentage down payment.
- Purchase price of $600,000 in San Diego County will require down payment of $15,625 which is only a 2.6% down payment
- Purchase price of $650,000 in San Diego County will require down payment of $28,125 which is only a 4.3% down payment
- Purchase price of $700,000 in San Diego County will require down payment of $40,625 which is only a 5.8% down payment