VA Loan Changes in 2020

VA Loan Changes 2020 are giving borrowers even more buying power for purchase, construction, and cash-out refinance loans. For Veterans with full entitlement, Freddie Mac conforming loan limits are no longer a factor!

Highlights:

• Eligible borrowers may make purchases to $1,000,000 at 100% LTV.
• 620 Minimum FICO (for each Borrower on all VA High Balance Loans)
• Purchase only
• 50% Max DTI
• 30 Year Fixed Only
• 1-4 Units, Condos, PUDS
• Full Entitlement Required
• Refi: 90% LTV to $1,000,000
• No Non-Arms Length Transactions

The Blue Water Navy Vietnam Veterans Act of 2019, which became effective on Jan 1, 2020,  expands maximum guaranty amounts for purchase, construction, and cash-out refinance loans greater than the Freddie Mac conforming loan limit in certain circumstances. The maximum loan amount varies based on entitlement. For Veterans with full entitlement, Freddie Mac conforming loan limits are no longer a factor. Another thing to note is that VA loans still have an upfront funding fee, and those amounts have increased in 2020.  For example, eligible Veterans who have previously had a VA loan will also pay an increased fee.  This decision enables more Veterans to utilize VA Loans as home prices continue to rise rapidly, far exceeding the previous VA loan limit.

This announcement had two main components that impact your VA mortgage.

The first related to Funding Fee, with loans that close on January 1, 2020 or after a new funding schedule will be required.

Optimal Blue has already adopted the new funding schedule and will properly upload the funding fee based on the characteristic of the loan.  This is the most prudent way for us to ensure that pricing is being accurately quoted and disclosed.   Of course, if the fee needs to be adjusted based on the anticipated closing date, the user can update the Funding Fee % field to the appropriate value.

Another significant change to the funding fee is that there is no longer a difference based on military service type. Veterans who were active duty and those who were National Guard or Reserves will be subject to the same fee. D ue to the integration complexities associated with this type of data change, we have decided that we will NOT make a change to VA Veteran Type/History field at this time. Whether the Active Duty or National/Guard Reserve options are selected, we will calculate the fee based on the current schedules.

As stated above, OB will auto populate the funding fee but if you have changes to the Exemption or the Funding Fee amount please update within OB not Encompass so the Total Loan Amount will populate correctly.    The data will be pushed back to Encompass when the loan is locked or you select push to the LOS.  The underwriters will check the funding fee and add suspension to the files based off the scheduled closing date if necessary.

The second change will impact the VA guarantee on some loan amounts.   On the initial use, VA will guarantee 25% of the loan and it is not tied to the FNMA county limits, they will just guarantee 25%. However, if they have used their guaranty before, that is when we still have to use the FNMA limits to determine remaining equity and then like usual we would require down payment to make sure that between entitlement and equity we have 25%.

On larger loan amounts this could impact the down payment that is required from the Veteran.  If you have a High Balance loan and need assistance the VA underwriting team can help you with that calculation.  Pricing on High Balance /jumbo will not be changed with this announcement.