As of 01 January 2004 military veterans will be able to use their government benefits to purchase more expensive houses as a result of an increase in the limit on GI loans that are bundled into securities for sale to investors on the secondary mortgage market.

The federal agancy, Ginnie Mae, has raised the cap on loans eligable for pooling to $333,7000 from the previous amount of $322,700.

The new limit will not affect borrowers who are looking at using a no-downpayment VA loan. They will still be limited to mortgages of up to $240,000. Repeat buyers will be the ones who most directly benefit from the new increase.

With the higher Ginnie Mae limit, though, those with as much as $23,425 in cash can borrow up to $333,700. For every $4 above $240,000, a borrower must put up $1 of his own money.

Borrowers using their VA loan must pay a one-time funding fee at closing. And under a law passed by Congress in the waning days of the 2003 session, repeat borrowers now must pay a higher rate than first-time users.

As of January 01 2004, the fee is 2.2 percent for active duty personnel and 2.4 percent for reservists. But on subsequent use of a VA loan, the charge is 3.3 percent for all users.

The increase was an overdue one for many people living in high-cost areas where $240,000 doesn’t get you much of a house.

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