As of January 1, 2020, VA made an important change to the 2020 VA loan limits. More specifically, they updated the down payment requirements for Jumbo VA loans. For decades, veterans and service members were restricted to loan limit caps based on the county the property was in. VA had their own limits which was mainly based on Fannie Mae conforming loan limits. Eventually they adopted Fannie Mae’s limits as the true guide to follow when determining down payment requirements in high cost counties. Now VA has eliminated the county loan limits altogether.
WHAT DOES THIS MEAN?
Qualifying Veterans and service members may now purchase a home with no down payment, regardless of the purchase price. Before, VA could not back zero down VA loans over the county loan limits. The veteran would need a down payment that satisfied the guarantee over and above the county loan limit. Now, VA has the ability to guarantee any amount, regardless of the Conforming county loan limits.
WHAT CAUSED THE CHANGE?
A bill was signed by President Donald Trump on June 25th, 2019, the “Blue Water Navy Vietnam Veterans Act of 2019”. The main purpose of the bill was to extend service connection for Agent Orange related medical conditions. However, the bill included two features that opened the door for veterans buying homes as well.
VA LOAN PROGRAM CHANGES
The Blue Water Navy Vietnam Veterans Act made four very important changes that affected the VA loan program.
- VA county loan limits removed – Extends zero down VA loans to all areas in the continental U.S.
- Purple Heart exemption – Purple Heart recipients exemption
- Native American loan limit change – Limits removed for homes on Federal Trust Land.
- VA Funding fee changes – VA funding fee was increased for some veterans and service members and slight decrease for Reserves and National Guard.
IMPACT OF 2020 VA LOAN LIMITS CHANGE
Moving forward, the changes to the 2020 VA loan limits will obviously have a positive impact on veteran home buyers in high cost counties. Although minor, this could also affect these same buyers looking to use their 2nd Tier eligibility. It would limit the ability to have 2 VA loans at the same time. It shouldn’t really affect too many people but it is something to note as a possibility.
All in all, there were some very positive things that changed and should make things a little easier for veteran home buyers moving forward.