Today I want to talk to you about a new circular that dropped for the VA. It is circular number 26-22-18, and it is about the new Federal Housing Finance Agency 2023 conforming loan limits.
Now, if you have your full entitlement available, this won’t affect you. Generally speaking, the conforming loan limits determine whether or not your loan is a jumbo or a conforming loan. But if you only have partial entitlement available, that means you’ve used your VA home loan before and haven’t disposed of the house.
Perhaps you were stationed at one base, bought a home, and are now moving to another location, but you don’t want to sell the first home. And you would like to purchase another home at your new location. That’s where the conforming loan limits come into play. If you seek a loan of at least $144,000 or greater, you will use these conforming loan limits to calculate your remaining entitlement in those cases. The amount of your remaining entitlement is calculated by taking 25% of the conforming loan limit and subtracting the existing entitlement that you’ve already used and did not restore.
Conforming Loan Limits of Circular 26-22-18
Let’s talk about what those conforming loan limits are. In most of the United States, the new conforming loan limit is $700,200. In high-cost areas like Guam, Hawaii, US Virgin Islands, and Alaska, the conforming loan limit is $1,089,300. Let’s say you are looking to purchase a home in El Paso County, Colorado, and you have previously used your VA loan to buy a home for $300,000. That would mean you would have used $75,000 of your entitlement which is 25%. That’s the VA guarantee, 25% of $300,000. To find out your maximum entitlement available, you take that conforming loan limit for El Paso County, which is $726,200, and you divide that by four. So you’re taking 25% of the conforming loan limit, which is $181,550. Subtracting the previously used entitlement, which we said with $75,000, leaves you with $106,550 of entitlement remaining. But again, that’s not the loan amount; that’s just 25% of your maximum loan amount. If you multiply that by four, you get your maximum loan amount, which is $426,200. So that is the loan amount you can use to purchase a home without putting in a down payment—this is where these conforming loan limits come into play.
Guidelines of Circular 26-22-18
Something to keep in mind is that if you purchase a multi-family home using your bonus entitlement, only the single-unit loan limits apply. The conforming loan limits do not apply to the interest rate reduction refinance loan. Those you can refinance at any time, regardless of how much entitlement you use you’ve used before. And finally, the circular mentions that if your county’s 2023 conforming loan limit is lower than the 2022 conforming loan limit and your application was signed before one January 2023, then they will use that higher loan limit from 2022 for loans closing after January one. But again, that application has to be signed before one January 2023.
I know that calculating bonus entitlement can be complicated and confusing. So if you have any questions, please get in touch with us on our vetted VA Facebook page, or contact any vetted professional using the map on vettedva.com. Hopefully, this helped, and you found it very useful.
We look forward to seeing you on the page.