No More VA Loan Limits In 2020
Starting on January 1st, 2020, there will be changes to the VA loan limits. Because of the Blue Water Navy Vietnam Veterans Act of 2019, VA loan limits will be eliminated and VA loan fees will rise. This new law was signed into law by President Trump earlier this year.
This bill has been a decades-long fight so that certain veterans can receive health care benefits for diseases related to Agent Orange exposure. The changes with the VA loan will help finance these benefits.
What Are VA Loan Limits?
VA loan limits are the maximum amount that the VA can guarantee without the borrower having to put anything down as a down payment. The limits have been based on the Federal Housing Finance Agency On Conforming Loans.
In 2019, the limit for most average counties was $484,350 with being as high as $726,525 in high priced areas. The limits are not a cap on the price of a home you can buy, but if you go over the limits, you would have to pay a down payment. That would be 25% of the difference between the county loan limit and the loan amount.
VA Loan Limits 2020 Changes
After this change in 2020, borrowers would still need to have enough income to qualify for the price of the home and meet their lender’s credit requirements. Lenders might also have their own limits.
In addition, loan limits will still apply for those who have more than one active VA loan or those who have defaulted on a previous loan. So basically, just because there will be no VA loan limits, that doesn’t mean you can get whatever amount loan you want to get.
VA Loan Funding Fees To Go Up
With the VA funding fee, a borrower can either pay that out of pocket or roll the amount into the loan. The fees for first-use, zero down payment loans will be 2.3% of the loan in 2020, up from 2.15% in 2019. Fees for subsequent-use loans will be up to 3.6% from 3.3% in 2019. These fees will stay the same for two years until 2022 when they will go back down to current levels.
VA Funding Fees To Remain Same for Some
Also, in 2020, VA funding fees will be the same for regular military, the National Guard and the Reserves. Previously, they have been higher for the National Guard and the Reserves. Active duty with Purple Hearts will also be exempt from the funding fee.
Currently, veterans receiving VA compensation for a service-connected disability, or veterans who would be entitled to receive compensation for a service-connected disability if they did not receive retirement or active duty pay, or a surviving spouse of a veteran who died in service or from a service-connected disability do not have to pay the funding fee.
The VA loan was created in the 1940s and this change in 2020 will allow more veterans to buy a home without needing a down payment, regardless of the price of the home.