During June of 2019, the Blue Water Navy Vietnam Veterans Act of 2019 was signed into law and changed many requirements for VA loans including maximum loan amounts. Keep in mind, the VA limit only provides Veterans with the maximum amount which can be borrowed without a down payment. Veterans who plan on making a down payment are limited by county or by state depending on where you live. In the Washington DC area, median home prices are currently $626,905 while in Virginia, the median home value is $285,229. For most VA eligible borrowers, this means a down payment may not be required to qualify for a VA guaranteed loan.
Borrowing Limits and Cost Limits
Veterans should be aware that loan limits are not the same as cost limits. Loan limits apply only to the amount the VA will approve a loan for while cost limits do not apply to any loan, including VA loans. In years past, the VA loan limits reflected Federal Housing Finance Agency's limits and reflected the amount of the total VA guaranty for the loan.
Another important item to be aware of is any person who is eligible for a VA loan and has other VA guaranteed loans may be subject to different restrictions. This holds true for any borrower who has previously defaulted on a VA guaranteed loan.
VA Loan Changes for 2020
It is also important to note other changes which went into effect with this law because it does have an impact on many veterans. Some of the changes which may impact you include:
- Conforming vs. Jumbo Loans - veterans who lived in higher valued areas were facing numerous challenges because they were subject to county-specific conforming loan limits. The newest law provides relief from this restriction. Veterans can now obtain no-down payment VA-backed loans regardless of where the cost or location of the home.
- Eligibility Changes - two groups of veterans are now given greater access to VA loans. These include those who are currently active duty members of the armed services and have been awarded a Purple Heart and Native Americans. For Purple Heart recipients who close on their home while on active duty, their funding fee is waived. For Native American veterans the $30,000 cap on loans for building or purchasing a home on Federal trust land has been lifted.
- Funding Fees - Veterans and Service members will pay an increased funding fee of 0.30 percent (increased from 0.15 percent) while National Guard and Reserve will now have their fees decreased to match regular service members. Those who have been previously exempt from the funding fee including those with service-related disabilities and surviving spouses will remain exempt from funding fees.
Application Process Remains Unchanged
Veterans who wish to use their VA benefits to purchase a home will still be required to obtain a Certificate of Eligibility (COE). Additional documents required may include a DD Form 214, NGB Form 22, or VA form 26-1817 or a signed statement of service. Your loan officer can help you determine which forms you will need to apply for a VA-guaranteed loan.
Credit and Income Eligibility
VA loans have less restrictive credit qualifications than many conventional loans but you will still be required to show you have a good credit history as well as enough income to pay your mortgage, insurance, and taxes. In most cases, a borrower's debt to income ratio must not exceed 41 percent.
If you are eligible for a VA loan and looking to purchase a new home, reach out to one of expert local loan officers at First Savings Mortgage to get the process started or to answer any further questions you may have about VA loans and loan limits.