WASHINGTON -- 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.

Effective on Jan. 1, Ginnie Mae, the federal agency that pools mortgages guaranteed by the Department of Veterans Affairs, raised the ceiling on loans eligible for pooling from $322,700 to $333,700.

Borrowers seeking no-downpayment VA loans will still be limited to mortgages of no more than $240,000. But those who have some cash to put into the deal now will be able to borrow an amount up to the new Ginnie Mae limit.

The change "will help mostly repeat buyers who have some equity from the sale of a previous residence," said Keith Pedigo, director of the VA's loan guaranty service.

In fiscal '03, the VA backed a record 490,000 loans totalling nearly $63 billion. In nearly a third of those loans, borrowers used their GI home loan benefit for a second or third time.

The vast majority of the country's 24 million veterans qualify for the benefit, which is known as an "entitlement."

VA loans are made by mortgage companies, banks and other lenders. If the borrower defaults, the VA promises to reimburse the lender for losses up to the amount of the VA guarantee.

The guarantee is equal to 25 percent of the loan amount, up to a maximum of $60,000. Consequently, an eligible veteran can borrow up to $240,000 without putting up any of his own money.

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.

Mortgage rates on VA loans are usually slightly above the market for conventional loans. But there is no mortgage insurance because the loan is guaranteed, not insured.

However, borrowers 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 Jan. 1, the fee is 2.2 percent for active duty personnel and 2.4 percent for reservists. But on a subsequent use, the charge is 3.3 percent for all users.

The new Ginnie Mae limit is the same as the ceiling that went into effect on Jan. 1 on loans that can be purchased by Fannie Mae and Freddie Mac.

The two giant government-sponsored enterprises buy loans from local lenders and package them into securities for sale to investors world-wide.

Also on Jan. 1, the maximum loan amounts that can be insured by the Federal Housing Administration were raised to $290,319 in high-cost areas and $160,176 in most other places. By law, the FHA ceiling is set at 87 percent of the Freddie Mac limit in high cost areas and 48 percent of the Freddie Mac ceiling elsewhere.

The limit on the VA guaranty was last raised in January 2002, when it was increased for the first time in seven years from $50,750 to $60,000.

Although housing interests would like to see an even higher ceiling, the VA's Pedigo says that neither Congress nor the White House has shown any interest in another increase.

But one is "certainly needed," Pedigo says. "$240,000 doesn't get you much of a house in most high-cost areas."

Since the loan guarantee program was enacted in 1944 as part of the Servicement's Retirement Act, better known as the GI Bill, more than 17 million veterans have used the benefit.