You're a veteran of America's Armed Forces. You know about loneliness and sacrifice on those long deployments away from your family and friends.
The military is not an easy life.
But, here you are grinning from ear to ear as your agent says, "Thank you for your service" and hands you the keys to your new home. That picture-perfect, newly remodeled two-story on the shady cul-de-sac. What a blessing!
And your VA-backed home loan made it all possible. Now you can watch your kids grow up in a nice, quiet neighborhood and know they will be safe here.
For all veterans out there who have yet to experience this scenario, let's review the VA home loan limits for 2019 and all the details of the VA loan process.
It's important to understand the VA loan limits for your particular region before you start shopping for a home. Here's everything you need to know.
But, first...
How Does a VA-Backed Home Loan Work?
With a Department of Veterans Affairs (VA)-backed home loan, the VA guarantees (or backs up) a portion of the loan you get from a private lender. The lender could be a bank, a mortgage company, or a credit union.
If you default on your VA-backed home loan, the guaranty allows the lender to recoup some or all of their losses. Because there’s less risk for the lender, you're likely to get more favorable loan terms (including no down payment).
The VA has certain standards lenders must follow when making VA-backed home loans. Of course, lenders also have their own standards before making any type of loan. You may need a certain minimum credit score, have income verified, etc.
There is a "funding fee" paid directly to the VA upon origination of a new VA loan. Read more about funding fees here.
Benefits of a VA-Backed Home Loan
There are many benefits to getting a VA loan. Here are some of them:
No Down Payment
As long as the sales price doesn't exceed the home’s appraised value. Options for 100% financing are rarely available in today's mortgage marketplace, outside of the VA.
Read on to learn max VA loan amounts, including high-cost counties.
More Favorable Interest Rates and Loan Terms
The VA stands behind your loan, which reduces the risk for the lender.
Avoid Paying PMI or MIP
- Private Mortgage Insurance (PMI) protects the lender if you end up defaulting on your mortgage payments
- Conventional loans generally require 20% of the total mortgage amount as a down payment
- You pay PMI with lesser down payments
- Mortgage Insurance Premium (MIP)
- Federal Housing Administration (FHA) requires you to pay to protect an FHA loan against default
Fewer Out-Of-Pocket Closing Costs
The seller is required to pay more of the closing costs than other loans, which is important to understand.
No Pre-Payment Penalty
If you pay off the loan prior to its maturity date, there are no extra fees incurred.
Other VA Loan Facts
With a VA-backed purchase loan, you can buy a single-family home, a condo in a VA-approved project, or a manufactured home or lot.
You can also build a new home, and make improvements or add energy efficiency features to your current home.
You can use a VA loan to buy your first home. If you sell or refinance a home bought with a VA-backed loan, you can also use your benefit again.
In addition to a purchase loan, the VA offers cash-out refinance loans and interest rate reduction refinance loans. Finally, there is a program in which the VA acts as the direct lender rather than as the guarantor: the Native American Direct Loan.
How Do You Obtain a Certificate of Eligibility (COE)?
Before you can get either a VA-backed or VA direct loan, you must obtain a Certificate of Eligibility (COE). The COE confirms that you qualify for the VA home loan benefit.
You then present this to your lender during the mortgage loan application process. Click here to apply for a COE.
What Are the VA Loan Limits for 2019?
Okay, so you've received your COE and you've reviewed your current finances. You've got a recent copy of your free credit profile, and you've looked closely at your monthly budget to make sure you know how much you can afford to spend.
View here for some sage advice from the Consumer Financial Protection Bureau.
The 2019 VA loan limit increased to $484,350 in most regions of the country. This applies to all loans closed between January 1, 2019, and December 31, 2019.
This baseline amount, known as the "conforming loan limit", represents a 6.9% increase over 2018's limit of $453,100. There are 3,234 counties and county equivalents in the US.
Of those, 199 are "high-cost" counties where the limit is raised above that standard figure. The maximum VA high-balance loan limit is $726,525.
The two biggest purchasers of mortgages, Fannie Mae and Freddie Mac, are restricted by law to buying single-family mortgages with origination balances below the conforming loan limit (that is, below $484,350 for 2019).
Loans above this limit are known as "jumbo loans". Both figures are determined by the Federal Housing Finance Agency (FHFA) and are reviewed annually.
Can You Buy a House over the County's Loan Limit?
Yes, you can still use your VA-backed loan. Say you’ve found a place you really love, and you're sure it fits into your budget, but it’s over the county’s loan limit.
You can still get a VA loan, but you will need to come up with a down payment.
The VA requires that you put down 25% of the difference between the purchase price and that county's loan limit. Here’s an example:
Let's say the agreed-to purchase price of the home you want is $575,000. The standard baseline limit of $484,350 applies to the county in which the home sits.
So, the difference is $90,650. The required down payment would be 25% of that amount, or $22,662.50. The VA's backing would only cover the standard portion of the loan you get from a private lender.
Your Know What Your Housing Price Range Is - Now What?
So, you have your COE from the VA and you know what the VA loan limit is in the county where you will be looking. You know how your finances are and what your monthly budget can support a mortgage payment.
Time to choose a lender. Shop around with banks, mortgage companies, or credit unions for the best rate and terms that meet your needs. You will most likely receive a "pre-qualification" letter from whichever lender you select.
Next, you need to find a professional real estate agent to represent you in your home search. As with lenders, the best advice is to meet with several different agents to find one you like.
Hommati can help you find an agent that will be perfect for you!
Make sure you understand the fees and commissions involved before you sign any agreement.
Now it's time to shop for your new home! Different housing markets have different "hotness" factors; that is, houses in some areas can list one day and get a full-price, qualified offer the next day. Don't get discouraged! Keep looking.
You've Found Your Dream House, Now Buy It!
Your agent will be invaluable in the sales contract process. Be sure the contract includes the “VA Escape Clause.”
This clause gives you an "out" by providing an option to void the contract if the property appraisal comes in below the sales price.
An inspection by a qualified technician will check for any major defects before you purchase your home. A VA-approved appraiser will provide an expert opinion as to the value of the house, once he has reviewed the property's condition.
Note that the home inspection and the official VA appraisal are separate events.
Once you've closed escrow on your new home, you will get to experience the wonderful feeling that the vet in our opening scenario felt!
Let Hommati Help You with Your Housing Needs
In March 2019, Entrepreneur magazine ranked Hommati #142 on their list of the fastest growing franchises in the world!
We have only one full year of franchising under our belts and there are already nearly 3,000 franchise systems established. Wowza!
Our approach to helping you find the house you deserve as a valued military veteran is second to none. As a recap, VA loan limits for the standard 2019 baseline are set at $484,350.
Whether it's the excitement of becoming a first-time homeowner to moving up to a larger home for your growing family, we want to be your go-to service. Why not contact us today and let us help answer any questions you may have?