Summary: Federal officials usually increase loans limits based on price appreciation year after year. But now, VA loan limits no longer apply (with the exception of certain demographics).
Home prices across the state of Washington have risen steadily over the past year or so. According to one recent report, the median home value for the state climbed 11.3% over the past 12 months alone.
Usually, that would prompt federal housing officials to increase loans limits, including those for VA loans. But now, VA loan limits are no more. That gives buyers a lot more borrowing power.
Military home buyers will have more financing range next year, without having to make a down payment on their purchase.
However, those who already have more than one VA loan or who have defaulted in a loan in the past will still be subject to loan limits.
VA loan limits are the maximum loan amounts that the Department of Veterans Affairs are able to back without the need for borrowers to a down payment. Instead of paying mortgage insurance – which is required for conventional loans with less than a 20% down payment and FHA loans – borrowers pay a one-time VA funding fee to help cover the government’s costs for guaranteeing these loans.
As a result of the recently passed Blue Water Navy Vietnam Veterans Act of 2019, which became effective as of January 1, 2020, VA loan limits are eliminated and VA funding fees have gone up.
However, the removal of VA loan limits doesn’t mean that borrowers can borrow as much as they want without paying a down payment. They’ll still need to qualify based on creditworthiness, income, and the home’s appraisal. Further, individual lenders can still require limits on VA loans – or any other type of loan – as per their own businesses.
Note: Having said all that, loan limits will still apply to military members and their families who have more than one active VA loan or who have loan defaults on a previous loan.
The U.S. Department of Veterans Affairs typically used the “conforming” loan limits established by the Federal Housing Finance Agency, applying those caps to the VA home loan program. From a home buyer’s standpoint, these limits represent the maximum amount that can be borrowed without making a payment.
Before VA loans were eliminated, borrowers were allowed to take out a certain amount without a down payment. But it was still possible for VA-backed home buyers in Washington to borrow more than these limits. But that typically required a down payment of some kind.
Borrowers who wanted to finance 100% of the purchase price (with no down payment at all) typically had to stay within the official VA loan limit for their county. But this is no longer the case. Now, eligible veterans can get no-down payment VA-guaranteed mortgages in all parts of Washington State, no matter what the prices of the homes are.
It says as much on the Department of Veterans Affairs website:
“VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you. The loan limits are the amount a qualified Veteran with full entitlement may be able to borrow without making a down payment.”
Also on the website:
“Veterans seeking to obtain what are commonly referred to as “jumbo” loans, or Veterans living in higher-cost markets, will no longer be subject to the Federally-established conforming loan limit maximums.”
As noted earlier, the VA funding fee has increased in 2020. The amount that you pay will depend on the amount of your down payment and if you’ve ever taken out a VA loan in the past. This fee can be paid upfront or can be rolled into the cost of the mortgage.
For “first-use” VA loan applicants, the fee is now 2.3% of the loan amount, an increase from the previous 2.15% in 2019. For “subsequent use” VA loan applicants (who have taken out a VA loan before), the fee is 3.6% of the loan amount, up from the previous 3.3%.
For those putting down a 5% down payment or more, the fees are 1.65% for both first use and subsequent use applicants. For those putting down 10% or more, the fees are 1.4% for each type of use.
In a recent article, we listed some reasons why 2020 could be a great year to buy a home in the Seattle area. Many of those reasons apply to the rest of the state as well.
For starters, Home prices in Washington are expected to slow down in terms of price increases. The current health crisis is certainly having an effect on this, and it will be interesting to see where prices will go into the foreseeable future.
Further, interest rates are extremely low and have recently dipped to their all-time lows. This makes homebuying much more affordable. Military buyers can lock in at a very low rate today, which will translate into thousands of dollars in savings over the life of their home loan.
At Sammamish Mortgage, we offer several mortgage programs to borrowers in Washington State, as well as the rest of the Pacific Northwest region, including Colorado, Idaho, and Oregon. We are a family-run business and work hard to help borrowers realize their dreams of owning a home. Contact us today if you have questions about applying for a mortgage.
Summary: Are you a veteran interested in taking advantage of not requiring a down payment for a mortgage? If so, the VA loan may be perfect for you. The question is, how much can you afford in a home purchase…
Buying a home is a huge investment for homebuyers, and it usually requires the financial assistance of a mortgage. If you are planning to buy a home in Idaho, you’ll want to get to know what your mortgage options.
There are certain mortgage programs available that can make financing your Denver home more affordable, including FHA loans. This article will go over all the ins and outs of FHA loans, and help you decide whether or not you should use an FHA loan to buy a house in Denver this year.
FHA loans are a popular financing option among home buyers in Colorado. They are especially popular among first-time buyers, due to the relatively low down payment that is allowed. Below, we have answered some frequently asked questions relating to Colorado…
Summary: Taking out a mortgage in Oregon requires some knowledge in order to make sure you only commit to something you’re well-versed in. This article will answer some of the more common questions when it comes to conventional mortgages in…
The 30-year fixed-rate mortgage loan is still the most popular financing option among home buyers and homeowners in Washington State. But the adjustable-rate mortgage (ARM) loan is still a popular loan option among homebuyers looking to get lower rates. In…
First-time home buyers in Washington State have a lot of options when it comes to choosing a mortgage loan. And because different borrowers have different priorities, there is no single mortgage product that works best across the board. The best…
Despite sparse home inventory, the National Association of REALTORS reports that 4.59 million “existing homes” were sold in February on a seasonally-adjusted, annualized basis.
Summary: Home prices in the Boise area have increased rapidly over the past year or so. As such, federal housing officials recently announced that the 2021 conforming loan limit for Boise will be increased. Boise’s median home prices have increased…
FHA loan limits in Snohomish County have increased for 2021 as a result of an increase in home prices in the county. FHA home loans are a great option for many homebuyer hopefuls who may not have the down payment…