The new year for many is often a time to make resolutions and start fresh, but a new year also means new laws, acts and bills will also go into effect. The housing industry will see several new changes in 2020 to both FHA and VA loans that could significantly impact the loan amounts those that qualify can expect to receive.
The Housing and Economic Recovery Act of 2008 mandates that each year the Federal Housing Administration must re-evaluate the FHA loan limits. The Act requires that single-family loan limits be set at 115% of median house prices in the county, known as the floor limit. Most counties fall into this category however there are some exceptions worth noting. In counties the FHA deems as “high-cost,” of which there are 70, the loan limits are set to 150% of the median home price, known as the ceiling limit. Alaska, Hawaii, Guam, and the U.S. Virgin Islands have a higher limit “ceiling” than the rest of the country to account for the higher costs of construction.
Effective January 1, 2020, the FHA loan limit for most of the country will now be $331,760, an increase of nearly $17,000 over 2019’s loan limit of $314,827. This increase reflects the continued rise in home prices we saw in 2019 and the need for first-time homebuyers to be able to qualify for bigger loans to afford a house in their areas.
In those counties deemed high-cost, the FHA’s 2020 loan limit will be $765,600, an increase of nearly $40,000 over 2019’s limit of $726,525. While the vast majority of counties fall into these two categories, there are some that are going to see limits decrease and others that are between the floor and ceiling loan limits, so it’s best to check with your loan officer to see what the FHA loan limits are in your county.
A VA loan is a mortgage loan made by private lenders but partially backed by the Department of Veterans Affairs. There are no limits on how much you can borrow, but there are limits on how much the VA will guarantee.
This past June, after a long battle by veterans’ rights groups, the president signed HR 299, or the Blue Water Navy Vietnam Veterans Act, into law. The primary purpose of this act was to get military personnel who served off the coast of Vietnam medical services and disability compensation for disabilities and diseases connected to Agent Orange exposure. In addition, to fast-tracking this much needed medical and benefits help for these veterans, there are also many items included in the act that make changes to VA loans.
One of the biggest changes to VA loans that will be effective as of January 1, 2020 is the ability for homebuyers who qualify to borrow above the 2019 loan limit of $484,350, without any down payment. The Act also temporarily increases rates for certain loans by 0.15-0.30%, which will help cover the increase in health care costs for veterans who are suffering the effects of Agent Orange exposure as a result of their service. The following loan changes are also included in the act:
- The elimination of funding fee differences for borrowers who are veterans versus those who are members of the Reserve.
- Exempts Purple Heart recipients from paying loan fees
- Authorizes VA-designated appraisers to rely on third parties for appraisal-related information
All these changes to home loans can be confusing, especially for first-time homebuyers, so be sure to talk over all of your mortgage loan options with your mortgage lender and ask about how these changes could affect you.
At Tim Lewis Communities we work closely with experienced lenders who know how to get you the best loan possible so you can buy, and enjoy, the home of your dreams in 2020!
Contact us today to start your home buying journey!