There are compelling reasons to choose short-term mortgages and long-term loans. Nevertheless, the best way to decide is to consult with a WA State home finance and real estate professional.
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VA Loan Limits in Washington Repealed
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.”
VA Fees Increase in 2020
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.
More Good News for Military Home Buyers
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.
Interested in to Applying For a Mortgage in Washington?
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.