Refinancing & New VA Loan Limits
Many Veterans are interested in how refinancing affects their VA home loan entitlement. We hear questions like, “Do the new VA loan limits apply to me if I refinance?” and “How can I restore my VA loan entitlement by refinancing?” Today we’re going to look at what these new limits are and how they might impact a Veteran’s decision to refinance.
Current VA Loan Limits
Starting in 2020, the VA lifted its limits on the amount of money that eligible Veterans can borrow without making a down payment. This is big news for thousands of Veterans, but it doesn’t make the VA loan limit irrelevant. This number still matters for two main reasons:
1) Veterans with diminished entitlement are still subject to the limit
2) Lenders still use this number to determine loan terms and conditions
The VA’s loan limits have historically been based on the conforming loan limits published by the FHFA. Every year this number goes up to meet increases in housing costs, and counties that have a higher cost-of-living have higher loan limits. The 2020 maximum conforming loan limit baseline is $510,400, but in more expensive counties, this number can go up to $765,600.
Do the VA Loan Limits Apply to Me?
If you already have an active VA home loan or have defaulted on a VA loan in the past — and you haven’t restored your entitlement since then — your entitlement will be diminished, and you’ll be subject to the VA loan limits. The loan limit that applies to you will be the one that was in place when you first used your entitlement. For example, if you took out a VA home loan in 2015, any remaining entitlement would be a portion of the 2015 conforming loan limit.
Even if you have full entitlement, lenders will still consider the conforming loan limit when determining your loan terms. Lenders use a variety of factors to assess how risky a given loan is, including credit scores and financial statements, and these conforming loan limits are just another piece of the puzzle. The main factor for borrowers considering VA loans that are above the conforming loan limit will be the higher interest rates offered with VA jumbo loans..
Refinancing to Restore Eligibility
A restoration of VA loan entitlement enables military borrowers who have previously used a VA loan to utilize the VA guaranty again. There are several ways for Veterans to restore their VA home loan eligibility, including paying off the VA loan in full, having an eligible Veteran substitute their entitlement, or refinancing the property to a conventional loan. Refinancing is often the easiest way for Veterans to restore their full entitlement and take out another VA loan.
Want to find out what your refinancing options are? Speak with a VA loan expert.
What About Jumbo Loans?
Loan amounts above the conforming loan limit are known as jumbo loans. VA jumbo loans have enabled Veterans to take out VA home loans on properties well above the conforming loan limits, but a down payment was typically required. Under the new rules, Veterans can now get a zero-down VA loan of any size, provided they meet the lender’s requirements. This also means that those who have taken out a jumbo VA loan in the past may want to consider refinancing into more favorable loan terms, especially if a new proposed loan balance now falls below the updated conforming loan limit
The VA has its own refinancing program, known as the Interest Rate Reduction Refinance Loan (IRRRL). Pronounced “Earl,” this program provides a streamlined refinancing process for Veterans who have a VA home loan. As the name implies, this program is all about reducing interest rate payments for you, the Veteran. One of the best parts about IRRRL is that there’s no need to go through the full underwriting process or have an appraisal done. This means less paperwork and fewer fees. The VA IRRRLs benefits are tremendous.
Find Out What Your Options Are
Every year, the VA’s home loan rules evolve and mortgage interest rates change. It can be confusing to keep up with all of the rule changes and figure out when to refinance, especially when you’re busy taking care of your family and getting work done. That’s why you need more than just a lender — you need an advocate who will fight to get you the best rates and the best loan terms possible.
The team at SoCal VA Homes is comprised of Veterans helping Veterans achieve their homeownership goals. Providing a first-class VA home loan experience and real estate representation is our way of honoring those who serve.
When you choose to partner with us to refinance your VA loan, we can help you lower your monthly payments by converting your adjustable-rate to a secure fixed rate or by reducing your existing fixed rate. You can refinance and reduce your monthly payments quickly and easily, and even get an extra $6,000 for energy-efficient home improvements.
Ready to discover the possibilities? Call a Sr. VA Loan Technician at 949-268-7742 today.