The Department of Veterans Affairs is raising the ceiling for no-down-payment home loans it will guarantee to match local limits used by Freddie Mac — currently as much as $729,000 in high-cost areas.

The increased limits, effective immediately, are in accordance with temporary increases Congress and the Bush administration approved for Fannie Mae, Freddie Mac and FHA loan guarantee programs. The temporary limits expire Jan. 1, and are equal to 125 percent of the local area median home price up to $729,750.

On Jan. 1, loan limits for Fannie, Freddie, FHA and VA will be scaled back to 115 percent of median home price, with a cap of $625,500. The lower limits, part of a sweeping housing bill signed into law in July, still exceed the previous $417,000 conforming loan limit for Fannie and Freddie and a $362,000 cap for FHA in high-cost areas.

HR 3221, the Housing and Economic Recovery Act of 2008, also raised minimum down payments on FHA-backed loans to 3.5 percent, and beginning Oct. 1 will prohibit borrowers from using seller-funded down-payment assistance to meet the requirement. Nonprofits largely funded by home builders that provide seller-funded down-payment assistance are backing legislation that would allow FHA borrowers to continue using the programs.

In the meantime, with private mortgage insurers utilized by Fannie and Freddie requiring minimum down payments of 5 percent in many markets, the VA is currently one of the few available sources of zero-down loans.

***

What’s your opinion? Leave your comments below or send a letter to the editor.

Show Comments Hide Comments
Sign up for Inman’s Morning Headlines
What you need to know to start your day with all the latest industry developments
By submitting your email address, you agree to receive marketing emails from Inman.
Success!
Thank you for subscribing to Morning Headlines.
Back to top
×
Log in
If you created your account with Google or Facebook
Don't have an account?
Forgot your password?
No Problem

Simply enter the email address you used to create your account and click "Reset Password". You will receive additional instructions via email.

Forgot your username? If so please contact customer support at (510) 658-9252

Password Reset Confirmation

Password Reset Instructions have been sent to

Subscribe to The Weekender
Get the week's leading headlines delivered straight to your inbox.
Top headlines from around the real estate industry. Breaking news as it happens.
15 stories covering tech, special reports, video and opinion.
Unique features from hacker profiles to portal watch and video interviews.
Unique features from hacker profiles to portal watch and video interviews.
It looks like you’re already a Select Member!
To subscribe to exclusive newsletters, visit your email preferences in the account settings.
Up-to-the-minute news and interviews in your inbox, ticket discounts for Inman events and more
1-Step CheckoutPay with a credit card
By continuing, you agree to Inman’s Terms of Use and Privacy Policy.

You will be charged . Your subscription will automatically renew for on . For more details on our payment terms and how to cancel, click here.

Interested in a group subscription?
Finish setting up your subscription
×