The new year is finally upon us, and while everyone’s busy clearing out clutter and checking off resolutions, we should also take a look at what changes are taking effect in mortgage and real estate market and how they will affect us in 2020.
For many, the new year means renewal and focus on self-improvement, but for our government, it generally means it’s time to break out the new laws and regulations, and real estate is no exception. The federal agencies that regulate the mortgage market periodically make changes to lending limits or government loan guidelines, but this year, there has been a flurry of changes across the industry.
Conventional Loan Limits
The Federal Housing Finance Agency (FHFA) publishes conforming loan limits for conventional loans underwritten for and delivered to Fannie Mae for all states and U.S. territories. In 2020, the new conforming loan limit for single-family residences in all contiguous states increases to $510,400. For Alaska, Guam, Hawaii, and the U.S. Virgin Islands, the limit increases to $765,600.
Loan limits did not decrease in any states, and only 43 counties across the country did not see a limit increase. The increase in the conforming loan limit will allow more borrowers to obtain a mortgage at extremely competitive rates, especially in higher-priced markets.
Veteran’s Administration Loans
One of the biggest and most anticipated changes in 2020 was the elimination of loan limits on VA loans. With the passage of the Blue Water Navy Vietnam Veterans Act, VA loan limits based on Fannie Mae guidelines no longer apply to borrowers. These changes are great news for veterans, especially those who live in high-priced communities.
VA loan limits were restrictive on how much a veteran could borrow under the program, but rather how much of a down payment they must contribute. Typically, a borrower needed a 25% down payment for a home purchase under the VA guidelines if the loan exceeded the Fannie Mae base limit of $484,350.
Now, with the passage of the new law, veterans can borrow up to 100% of the purchase price with zero down payment regardless of the cost!
Funding fees did increase slightly from 2.15 percent to 2.30% for first-time borrowers, and 3.30% to 3.60 percent for subsequent refinance or purchases. Active duty veterans who are Purple Heart recipients are exempt from these fees.
Non-QM and Non-Traditional Mortgages
A booming economy and rising housing market are good for everyone, including borrowers who may not be able to qualify for a traditional mortgage because they are self-employed or retired.
This year, new and innovative loan programs are being introduced to the marketplace that makes it easier for borrowers to qualify based on bank statements or business revenue without having to provide tax returns.
These new programs opens up the mortgage market to a group of borrowers that have been sidelined for the past several years. Millions of Americans who may not qualify for a conventional loan due to fluctuating income, lack of tax returns, or dings on their credit, can now apply for non-qualified mortgage loans that allow higher LTVs, higher DTI ratios, and offer flexible payment options.
With these and other changes on the books for 2020, it’s a very good time to be a borrower; with more options, more programs, and the availability of historically low rates available to more consumers than ever before.
Ready to get started? Give us a call or get started on your loan application today at ovmfinancial.com/quickstart
Written By: Dominic Bartolone