2020 VA Loan Changes:
What You Need To Know
In June 2019, a new law was signed that allows the Department of Veterans Affairs (VA) to back loans that exceed the current VA loan limit. Homebuyers using a VA loan will now be able to borrow above 2019 limits — without any down payment (visit this link for loan limits by county) The loan limit will be lifted for loans that are guaranteed on or after January 1, 2020. In other words, come 2020, the VA will not cap the size of a loan a veteran can get with no money down, enabling veterans to buy higher-value homes. Allow us to break down these 2020 VA loan changes for you.
With these changes, more buyers can purchase homes with no down payment. Before, VA loan-buyers purchasing a home over their local loan limit had to come up with a down payment bringing the loan down to match that cap.
In a higher-priced market like ours, this change is significant and will help many more service members get into the home of their dreams.
It’s important to note that a VA home loan does not mean the VA issues the loan. Instead, the Department of Veterans Affairs “guarantees” to a lender that you, as a veteran, are a good candidate, allowing you to get a home loan without having to make a down payment. Of course, this guarantee does not automatically mean you’ll secure a loan. You’ll still need sufficient income and meet a lender’s credit requirements to qualify for the amount you wish to borrow.
Questions about financing? Reach out today and we can put you in touch with one of our great lenders!
Also part of this new law is a change to VA loan “funding fees” — for some veterans. The VA charges most veterans a “funding fee.” This fee offsets costs that occur due to VA-backed loans that default and also helps relieve taxpayers from fully backing the loans. Funding fees vary depending on the kind of loan and the borrower’s situation (such as previous VA loans, amount of downpayment, if any).
Typically, disabled and active duty service members pay the lowest funding fees.
In 2020, “first use” loans, no down payment loans, will have a fee of 2.3 percent of the loan up from 2.15 percent. “Subsequent use” loans will carry a fee of 3.6 percent of the loan amount, up from the current 3.3 percent. These increased fees will be in effect for two years, then return to current levels in September 2022 (and drop further after that). VA borrowers can pay this fee upfront or roll the cost into their loan. Veterans receiving disability benefits are exempt from the funding fee. Additionally, another change coming in January exempts Purple Heart recipients still on active duty from the funding fee.
The Bottom Line
These 2020 VA loan changes are good news for VA-eligible house-hunters in the DMV. These buyers can now buy a home at any price point in our area without having to put a down payment down on the difference between the limit and the purchase price, meaning less cash down. Additionally, they can enjoy VA interest rates higher price points. Given that our market is one of the most expensive in the country, eliminating the loan limit allows local veterans to have more buying power and explore more real estate options. While these buyers still have to qualify for the loan, this change greatly improves their ability to find the home of their dreams!
Are you a service member looking to buy or sell in the Washington, DC area? Please reach out so we can put our 25+ years of expertise to work for you!