With the new year comes new VA loan limits. Unfortunately, the loan limit for Honolulu has gone down considerably (it remains unchanged for the outer islands).

We’ve seen this in the past, it seems like the limit is a pendulum swinging lower one year and higher the next. Here are the new numbers:

  • Honolulu County: 2012 VA Loan Limit =$695,750 (2011 Limits  $741,250)
  • Hawaii County: 2012 VA Loan Limit = $625,500 (2011 Limits $625,500)
  • Kauai County: 2012 VA Loan Limit = $625,500 (2011 Limits $625,500)
  • Maui County: 2012 VA Loan Limit = $625,500 (2011 Limits $625,500)

There are a few important things to remember when taking the loan limits into account:

  • Loan Amounts up to $625,500 – All Islands – 100% financing (no down payment) is available and at the best possible pricing.
  • Loan Amounts from $625,501 to $695,750 – Oahu – 100% financing (no down payment) is available, but due to the loan amount being above the  conforming loan limits, loans are considered VA High Balance. As a result, they may have tighter underwriting rules and pricing that may be anywhere from 0.25% – 0.50% higher in rate.
  • Loan Amounts above $695,750 – Oahu (above $625,500 – other isles) – These loans are considered VA Jumbo loans and require a small down payment. ?The down payment required is equivalent to 25% of the difference between the purchase price and the 100% financing maximum (695,500 on Oahu). For example, if the purchase price is $795,750, there is a $100K difference between that and the Oahu limit ($695,750). As a result, 25% of that difference ($25K) would be required as a down payment. All in all, that’s about 3% down, with no expensive monthly payments for FHA or private mortgage insurance…and on Jumbo financing. The VA Jumbo program remains one of the best deals around.

REMEMBER: The total loan amount, including the VA funding fee, must be below these limits. The VA funding fee is typically financed, which means that it is rolled into the loan amount. So, if you are an active duty, first time VA loan user shopping for a home while trying to stay under the $625,500 limit, you must have a purchase price of under $612,334 (when adding the 2.15% funding fee, the final loan amount is $625,499).