Active duty and veteran homebuyers have something big to look forward to in 2020. As a result of the Blue Water Navy Veterans Act of 2019, there will be no more limits on VA loans.

The Advantages of VA Loans

VA loans are backed by the U.S. Department of Veterans Affairs and are available only to military service men and women, both active and retired. They are designed to help our military families buy homes with more affordable interest rates, lower down payments (in many cases no down payment) and better overall terms than traditional mortgage loans.

Because VA loans are so desirable, there have always been limits placed on how much one can borrow. Starting in 2020, that limit will be removed. Those seeking VA loans will be able to borrow as much as their financial situation will allow. A borrower will still have to qualify for a loan and prove they can afford the monthly mortgage payments.

One big advantage of a VA loan is that you don’t have to put as much down toward the home as a traditional loan. Many borrowers will qualify for a loan with no down payment whatsoever. Of course, it’s a smart idea to put down as much as you can, as that will help you secure a better interest rate and lower the amount of interest you pay over the life of the loan.

More Opportunities for Veteran Homebuyers

Without these loan limits, however, veterans will be able to buy in more expensive areas while still benefitting from the great terms of a VA loan. As long as you are approved for whatever loan amount you are seeking, you can borrow as much as you need. This may allow for some military families to buy bigger homes in nicer neighborhoods rather than being limited to “starter” homes under the old loan limits.

“It gives the veterans the opportunity to buy homes in the areas they want to be in,” says Kyle Reed, a Texas-based real estate professional. “It opens up some areas in cities to VA loans … that maybe veterans didn’t have access to before without putting a bunch of money down.”

VA loan limits varied throughout the country based on median home prices. In a more expensive area like San Diego, the limits were obviously higher than parts of rural middle America. Without the loan limits in place, it definitely opens up more opportunities for veteran home buyers. However, lenders will still want to protect themselves.

Lender Considerations

The VA typically backs up to 25% of a VA loan, so any lender is still at risk if they approve a mortgage loan beyond what a buyer can actually afford. Banks, credit unions and mortgage brokers will likely impose more restrictions on their ends so that excessive loan amounts aren’t being approved. This may involve requiring higher credit scores and better debt-to-income ratios, and a lender can still impose their own loan limit caps.

Another factor to consider is that the removal of VA loan limits only applies to a borrower’s primary home. Buying a second home with a VA-backed loan will still have limitations.

Overall, we’re excited to see these VA loan limits lifted because we have such a strong military influence here in San Diego County and our home prices are so high. This will really help a lot of our local veterans and active duty service men and women when it comes to buying homes in this real estate market.

If you are looking to get pre-approved for a VA loan in San Diego County, call Transparent Mortgage today at (619) 701-3906 or email me at beau@tspmortgage.com

Beau Hodson

Beau Hodson

About the Author Since 2003, Beau has been a mortgage professional and is a leading mortgage broker and lender in San Diego. As Founder and Senior Mortgage Advisor at Transparent Mortgage, he is truly committed to serving the needs of his clients and raising industry standards for integrity and transparency.