VA Loans: What's Changing and Why

If you are a veteran, active military, or an eligible spouse of a surviving service member of the U.S. military and you’re looking to buy a home in 2020, it’s important to check out all your options. Through the U.S. Department of Veterans Affairs, a variety of benefits are available to you in order to make your home buying process as easy as possible.

In 2020, we’re continuing to see the housing market pick up speed and we expect home prices to climb (although at a slower pace than in 2019). Because of this, the VA has made significant changes to the VA loan limits for mortgages.

The New VA Mortgage Loan Limits for 2020

VA loans from the U.S. Department of Veterans Affairs no longer have a maximum loan amount. So, what does this really mean?

• Veterans, active-duty service members, National Guard members, and surviving spouses (those who qualify) will be able to get a VA home loan for any amount, with no required down payment.
• Income guidelines are still in place.
• With loan limits now gone you can borrow 100% of what you financially qualify for.
• Loan limits will still be applied if you have one or more active VA loans or if you’ve defaulted on a previous VA loan.
• Mortgage insurance is not needed.
• Often a VA loan comes with a competitive interest rate which is a great value to home buyers. This varies from lender to lender, and not all lenders provide VA loans.
• The VA loan is an affordable option for home buyers who qualify.

 Funding Fees for VA Loans Are Not Going Away

Even with the loan limits going away, there is still an upfront funding fee for all VA loans (unless you are getting a VA home loan as an active-duty service member who’s received a Purple Heart). 2020 brought changes to these funding fees.

Here’s the updated funding fee percentages for VA loans:To explain further, the fee for first-time use went up from 2.15% in 2019 to 2.30% in 2020. The fee for subsequent use went up from 3.3% in 2019 to 3.6% of the loan in 2020. These fees will stay in place until 2022, and you can choose to pay the funding fee up front or just roll it into the total cost of the home loan.

Why the Need for the New Rules?

The VA decided to raise the loan limits due to rising home prices and to help keep up the pace with the current housing market. It also helps veterans who are living or are stationed in areas with a higher cost of living, such as California, Hawaii, New York, or the District of Columbia.

In 2019, the VA loan limit was $484,350 but these high cost areas held you back from buying a home unless you had at least a 25% down payment on the purchase price (above the 2019 limit of $484,350). This may not have been an issue if you were high in ranks or earned six figures. But now all ranks can afford more house for less money down.

Additional VA Loan Benefits:

• You can reuse your VA mortgage benefits over and over
• You don’t have to be a first-time home buyer
• No pre-payment penalty so you’re free to consider future home purchases and refinancing options
• Can be used to buy a house, condo, newly-built home, and other types of properties
• Your eligibility never expires

How Do You Know If You’re Eligible for a VA Loan?

Eligibility is based on specific guidelines established through the U.S. Department of Federal Affairs. These guidelines are typically based on service and discharge requirements.

• You must have satisfactory credit
• You must have sufficient income
• You must have a valid Certificate of Eligibility (COE) to apply for a VA loan 

The VA Home Buying Process

The process for buying a home using a VA loan is similar to buying a home using a conventional or FHA loan. The main difference is making sure you have your COE in place. This COE does not mean you’re guaranteed for a VA loan approval, but it does show that you’re eligible for a VA loan. You must still qualify for the loan based on VA mortgage guidelines. You can apply for your COE online, by mail, or through Churchill Mortgage.

Step 1: Get your finances in order. This will help you know and understand your credit score, and help you budget for a down payment, closing costs, and ultimately a new monthly payment. You can also gather requested documents for asset verifications.

Step 2: Figure out your timeline. This is especially important when you’re getting a VA loan since you may be relocating due to Uncle Sam telling your it’s time for your next military move or change of station move.

Step 3: Connect with a real estate professional. This will help recommend realistic home prices in your market, access homes to tour, and provide negotiating advice.

Step 4: Download the HomeScout app via the App Store or Google Play. With this mobile app, you’ll be able to view 100% of the homes currently for sale and receive price change alerts on your favorite properties.

Step 5: Become a Churchill Certified Home Buyer. This will protect you in bidding wars and positions you as a more a reliable buyer. You’ll also be able to close a lot faster which is a HUGE advantage!

Step 6: Check out neighborhoods, find a home, and sign your contract. Look at homes you’re interested in at different times of the day. Make sure the house (and its location) fits your needs.

The Bottom Line

If you want to become a homeowner and you (or your spouse) has served in the U.S. military, a VA loan could be a good option for you. Don’t forget to check your eligibility for a VA loan and work with a Churchill Home Loan Specialist to determine whether a VA loan is the best option for you and your particular situation.

If you have questions about the process of buying or refinancing a home with a VA loan, click here to speak to a Churchill Home Loan Specialist licensed in your area. Or if you’d like to apply online and quickly start the process, click here.