Congress Expected to Boost VA Loan Limit

The House is scheduled to vote on a bill Wednesday that would allow veterans and military personnel to get no-downpayment loans of up to $333,700 -- which is the Fannie Mae/Freddie Mac conforming loan limit.The bill (S. 2486) would index the Department of Veterans Affairs guarantee limit at 25% of the conforming loan limit, effectively raising the government guarantee from $60,000 to $83,435. Currently, the $60,000 VA loan guarantee allows lenders to sell no-downpayment VA loans into the secondary market with a principal balance of up to $240,000. The Senate-passed bill also eliminates the 100-basis-point interest rate cap on the 5/1 hybrid adjustable-rate mortgage. S. 2486 gives the VA secretary the discretion to set the cap on the interest rate adjustment when the five-year fixed-rate period ends and the hybrid loan converts to a one-year ARM.