VA Loan Guarantees To Reach More Than $484,000 In 2019

Military veteran with family

Military veterans in the U.S. may find this year to be an easier time for their home purchases, due to the Department of Veterans Affairs’ plan to raise the loan guarantee limit. The VA intends to guarantee conventional loans worth up to $484,350, up from $453,100 in the previous year.

In general, loan limits vary depending on where you plan to buy a house. If you are planning to take out a VA loan in South Florida, the amount that can be guaranteed may be more or less than the national limit. While VA loans eliminate some of the requirements by lenders, there are still some underlying expenses that you should be aware before proceeding with a transaction.

Check High-Cost Areas

High-cost areas are defined as places where the average home price costs 115% more than the national limit. Hence, the VA may increase the guaranteed amount up to $726,650. Experts at PRMI South Florida will suggest that you should check the median price in your county to determine if you live in a high-cost area. Any amount in excess of the nationwide limit will still be counted as a conventional loan.

Otherwise, the mortgage will be considered a jumbo loan and this could incur a different interest rate, aside from a down payment. In this case, staying within the assigned limit in your county will be the best option. While VA loans have no required down payment and more lenient credit requirements, borrowers still pay a one-time funding fee and possibly some closing costs.

Unique Closing Costs

Closing costs for VA loans are quite different in a way that lenders are restricted from charging a fee for attorney services. Eligible borrowers must not also pay settlement charges, prepayment penalties and mortgage broker commissions. However, lenders may charge not more than 1% of the principal amount as an origination fee.

Origination fees can be charged by itemizing the charges to consist of the 1% rate, or simply charge a flat rate without any additional processing fees. Overall, the closing costs for a loan may be equivalent to 3% up to 6% of the loanable amount. For instance, a $225,000 mortgage would incur closing costs from around $6,750 to $13,500.

Pros And Cons

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Like any other loan type, VA housing loans has its fair share of benefits and disadvantages. Veterans can assume a new loan without paying closing costs and appraisal fees, but take note that some lenders are not required to grant a loan assumption.

In case you want to assume a VA mortgage, you should be aware of a potentially huge down payment if the veteran owner sells the house for a price that is higher than the existing balance.

Conclusion

Veterans should focus on avoiding a large down payment when planning to use the housing benefit, which is arguably its main purpose. When you stick to this goal, it would be easier to make a decision. Shop around for different rates from at least three mortgage lenders to come up with a good comparison of prices.