Are you thinking about using a VA loan to buy a home? Smart move. This unique program offers a lot of benefits, including 100% financing for eligible borrowers.
The 2016 VA loan limit for King County, Washington is $540,500. That’s the most the government will assume, so it affects you as a borrower. Let’s talk more about these limits, and how they relate to home prices within the county.
What Are VA Loan Limits, Exactly?
The Department of Veterans Affairs does not lend money directly to consumers. Instead, they guarantee home loans made by mortgage lenders within the private sector. Essentially, the VA promises the lender it will repay up to a certain amount in the event of borrower default.
But there’s a limit to how much liability the Department will assume, and these maximum amounts are known as VA loan limits.
To be clear, the VA does not limit the amount of money you can borrow to finance your home purchase. That’s up to the mortgage lender. They do, however, put a cap on the amount of liability they will assume. So, by extension, VA loan limits can affect the amount you are able to borrow from a lender.
Current Limit for King County & Seattle Metro: $540,500
In 2016, VA loan limits are the same as the conforming limits set by the Federal Housing Finance Agency (FHFA). They are identical, at least for this year.
The current VA loan limit for King County is $540,500. In fact, this limit applies to the entire Seattle metro area, which also includes Snohomish and Pierce counties.
The limit for most other counties in the state of Washington is $417,000. The caps are elevated in the Seattle metro area due to higher housing costs. Median home prices are higher in and around Seattle, compared to other parts of the state, so the VA loan limits for King County are higher as well.
An Increase Over Last Year
At the end of 2015, the FHFA announced that conforming loan limits would stay the same for most U.S. counties in 2016 — with the exception of 39 counties. King County was one of those exceptions.
In response to rapidly rising home prices, FHFA decided to increase the conforming loan limit for the entire Seattle metro area in 2016. And since the VA limits are “tied” to the conforming caps in 2016, they also went up.
Here’s the difference:
- 2015 loan limit for King County: $517,500
- 2016 loan limit for King County: $540,500
This year-over-year increase gave VA borrowers an extra $23,000 worth of “leeway.”
How They Stack Up to Area Home Prices
So how do the current loan limits compare to home prices in King County? Can you buy a moderately priced home in the Seattle metro area within the above-stated limits? Will the caps go up again in 2017?
Let’s take a look at recent home price trends to answer some of these questions.
In July of 2016, the Northwest Multiple Listing Service (NWMLS) published a news release with the latest home-pricing trends for King County. According to that release:
“In King County … the median price surged 13.3 percent from a year ago, rising from $450,000 to $510,000. For single-family homes only (excluding condos), prices in King County rose 14.7 percent, from $500,000 to $573,522. Condo prices skyrocketed nearly 22 percent compared to a year ago. The median sales price last month was $350,000.”
You’ll notice two things, right off the bat:
- Home prices in the county have risen considerably over the last year or so, increasing by double digits.
- The single-family median home price, excluding condos, is now higher than the VA loan limit for King County.
This doesn’t mean VA borrowers are priced out of the market. Far from it. The median price is simply the midpoint of the market, meaning half of all homes are priced above it, and half are priced below it. This just means VA borrowers might have fewer homes to choose from these days, as a result of rapidly rising prices.
Which begs the question: Will the FHFA increase conforming loan limits for the Seattle metro area in 2017? And will this lead to a corresponding increase for VA limits? Unfortunately, it’s just too early to say. These announcements are typically made in late November or early December, for the year following.
With that being said, it’s possible we could see higher VA loan limits for King County in 2017. Here’s why. The conforming caps set by the FHFA are partly based on median home values, as required by the Housing and Economic Recovery Act of 2008. And according to the Northwest Multiple Listing Service, the median price in King County (excluding condos) is now higher than the VA limit. Additionally, home prices are expected to continue rising through the rest of this year and into next.
So we might see an increase in VA loan limits next year, for the entire Seattle metro area. We will update this page when new information becomes available, to keep you informed.