Thursday, September 20, 2007

Homeownership Opportunities for Veterans Increase

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Homeownership Opportunities for Veterans Increase Terry Howell September 14, 2007

New Policy Increases Homeownership Opportunities for Veterans

In an August 30 press release the Government National Mortgage Association (Ginnie Mae) announced that it has eliminated the $417,000 home loan limit on Department of Veterans Affairs (VA) mortgage loans that can be used as collateral for Ginnie Mae securities.

"We expect this change will expand the availability of low-cost financing and increase homeownership opportunities for America's veterans, particularly in high-cost areas, by encouraging lenders to make more VA loans," said Michael J. Frenz, Executive Vice President of Ginnie Mae.

Frenz was referring to home loan realities like that in California. Although 10 percent of the nation's veterans live in California, less than one percent of the VA loans in the Ginnie Mae securities portfolio issued during the last two years were to California veterans because loan limits were below most house prices in the state. "Now, more than ever, America's veterans and their families have a greater chance to make their dreams of homeownership a reality, thanks to today's action by Ginnie Mae," said Judith Caden, Director of Loan Guaranty Service at the VA.

"This change is another example of our joint commitment to ensure VA benefits keep pace with the needs of our veterans in today's housing market."

This policy change is designed to make it easier for lenders to help veterans and servicemembers use their VA Home Loan benefit to purchase homes valued at more than $417,000. However the Department of Veterans’ Affairs is careful to point out that Ginnie Mae’s new policy does not change the current VA Home Loan Guaranty program rules and loan limits.

The most attractive feature of the VA Home Loan Guaranty program is that it eliminates the need for eligible veterans and servicemembers to provide cash down payments for homes valued at $417,000, or less, by guarantying 25 percent of a home’s purchase price. The new Ginnie Mae policy will require borrowers to use the VA Home Loan Guaranty in combination with a cash down payment to guaranty the loan for homes exceeding the VA limit. This means that veterans and servicemembers who wish to purchase homes priced higher than the VA limit, will be required to provide an additional cash down payment to ensure the loan is guarantied for at least 25 percent of the of the purchase price.

For example, a veteran wishing to purchase a home valued at $600,000 will need to provide a cash down payment of $45,750 – 25 percent of the difference between the $417,000 VA loan limit and the actual purchase price of $600,000.

"This is an outstanding initiative that will greatly benefit veterans and their families who reside in high-cost areas, and who continue to make significant contributions to the growth and prosperity of our nation every day," said George Lisicki, the national commander of the 2.3 million-member Veterans of Foreign Wars of the U.S. and its Auxiliaries. "This is what 'Supporting the Troops' is all about."

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