2020 VA Home Loan Down Payment Changes

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A new law eliminates down payment for all VA home loans in 2020. Additionally, veterans will pay a higher funding fee in 2020.

2020 VA Home Loan Down payment requirements appear to be changing – for the better! While Conforming VA Mortgages already require 0% down, a new law should change the minimum down payment for JUMBO VA Loan Amounts to 0% as well.

The Act amends 38 U.S.C. § 3703(a)(1) to expand maximum guaranty amounts for purchase, construction, and cash-out refinance loans greater than the Freddie Mac conforming loan limit

Circular 26-19-23

The “Blue Water Navy Vietnam Veterans Act of 2019eliminates down payment requirements on VA JUMBO Loans. The Act was signed into law on June 25th, 2019. It goes into effect January 1, 2020.

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2020 VA JUMBO Loan Down Payment Changes

VA Loans exceeding Conforming Loan Limits are called “VA JUMBO” or “VA High Balance” loans. In 2019, Most Counties Local Conforming Loan Limit was $484,350. Currently, a VA JUMBO Loan requires a down payment.

As a result, prior to the new law going into effect and the resulting 2020 VA Loan changes, veterans borrowing more than the $484,350 on a VA mortgage (or applicable local Conforming Loan Limit) had to make some kind of a down payment (see below for more). However, starting in 2020 VA JUMBO Loan down payments should drop to 0%.

In other words, prior to the new law going into effect VA Loans exceeding $484,350 (or applicable Conforming Loan Limit) required a down payment. However, after the new 2020 rule changes, VA no longer requires a down payment – regardless of VA loan amount.

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New Rule vs. Old Rule – Down Payment

At present (prior to 01/01/2020) the down payment on a VA JUMBO Loan depends on purchase price and local conforming loan limit. The pre-2020 VA JUMBO down payment calculation looked like this:

Old Way: Purchase price – Local Conforming Loan Limit x 25% = VA JUMBO Down Payment

This calculation should change on 01/01/2020. VA JUMBO Down Payment Requirements should drop to 0% regardless of loan amount.

To help better understand this let’s assume the following facts are true for a sample VA homebuyer:

  • Purchase Price $600,000
  • Local Conforming Loan Limit of $484,350

CURRENT – Pre 2020 VA Jumbo Loan Down Payment Example
Step 1: $600,000 (price) – $484,350 (Conforming Limit) = $115,650
Step 2: $115,650 x 25% = $28,912
Down Payment = $28,912

NEW – 2020 VA JUMBO Down Payment Example
Step 1: 600,000 x 0% = $0
Down Payment = $0

Based on the 2020 VA Loan changes, the same veteran could put $0 down on a $600,000 purchase using a VA JUMBO loan. Prior to the 2020 changes, this same $600,000 purchase came with a $28,912 down payment requirement for a veteran using a VA JUMBO loan.

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What the 2020 VA Loan Changes Mean for Veterans

In short, the 2020 VA Loan changes should mean qualified veterans getting a VA loan for more than local conforming loan limits will no longer have to put any money down. For reference, the majority of Counties had a maximum Conforming Loan Limit of $484,350 in 2019.

Whether Conforming Loan Limits go up should not impact down payment requirements in 2020 for VA JUMBO home loans. Differentiating between a VA Conforming and VA JUMBO loan may still anchor off of FHFA’s Conforming loan limits. If true, this may still impact VA Loans a little (but again – not with regard to down payment).

Pricing may differ between Conforming VA Loans and VA JUMBO Loans in the secondary market. In turn, interest rates may differ between VA Conforming and VA JUMBO Loans. Additionally, underwriting guidelines as well as credit score based interest rate adjusters may differ between Conforming VA Loans and VA JUMBO Loans. The mortgage industry is still preparing for the 2020 VA Changes so there are a few wrinkles needing an iron.

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Veterans eligibility and VA entitlement still must be met under new 2020 VA mortgage rules. VA home loan entitlement and bonus entitlement impact max loan amount eligibility. Additionally, down payment requirements are still dependent on a veterans entitlement. This is true for any VA Loan amount or type. For example, a veteran with less than full basic entitlement may need to put money down on a Conforming VA Loan even after the 2020 changes.

By Jeremy House

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