Honolulu VA Loan Limits: Are They Really Going Away in 2020?
The Impact of Bill HR 299 on VA Loan Limits & Funding Fees in Hawaii
It's no secret that Hawaii has one of the highest costs of living in the nation and for Oahu residents, this is due largely in part to the island's staggering home prices. A new record high median home price of $835,000 was set in July 2019. Oahu, the "Gathering Isle," sees roughly 2/3 of the state's population at 953,000 people according to the 2010 U.S. census and the pressure of the island's staggering home prices spans the entire demographic; VA Home Buyers included. With all 5 branches of the U.S. Armed Forces on the island, Oahu sees a substantial amount of housing demand from service members utilizing their Base Housing Allowances in both the rental and ownership sectors.
As Oahu Real Estate Market Appreciation Rates continue to outpace Honolulu County incomes and BAH, we see both a strain on affordability and buying power, as the Honolulu VA Loan Limit is currently capped at $726,525 for 100% financing. As of 2019, any VA Loan above $726,525 would require a 25% down payment but that may all change due to the recent passage of Bill HR 299, also known as the Blue Water Navy Vietnam Veterans Act of 2019.
What is Bill HR 299?
The bill was passed in order to raise additional funds to extend medical coverage to veterans of the Vietnam war that weren’t previously covered. Veterans who previously were denied for an Agent Orange related medical condition can now file a new claim under the change to this law. Eligible survivors of deceased Blue Water Navy Veterans also may also find benefit from Bill HR 200 and may file claims based on the Veterans’ service.
The caveat? VA Loan Funding Fees are going up, and VA Loan Limits are going away.
“Due to the recent passage of a new bill, starting January 2020, VA funding fees are going up. The good news is that the VA Home Loan benefit can be offered by lenders without a loan limit and requiring zero down payment in some cases,” explains Rylan Maddox | Homebridge Hawaii HI FIVE Team (NMLS# 973196) “For example, starting in January of 2020, a first-time VA homebuyer could purchase a home for up to $826,525 with zero down payment, but the funding fee would be based on the new, first-time use of 2.3% of the loan amount. So this equates to about $1,200 more in VA funding fees the buyer has to pay than currently.” (In the past, for Honolulu County, any loan over $726,525 would require a 25% down payment based on the overage amount.)
Key Insights into the Bill's Impact on VA Loans & Funding Fees:
- If the Veteran has 100% of entitlement available, guaranty is 25% of Loan Limit (no money down, no limit).
- If the Veteran has ANY entitlement used currently, guaranty will still be based on 25% of Freddie Mac Loan Limit, adjusted per year (remains the same as now).
- The VA funding fee you pay in 2020 will depend on your down payment amount and whether you’ve ever had a VA-backed loan before. If you haven’t, it’s a “first use” loan, and if you have, it’s a “subsequent use” loan. You can pay the fee upfront or roll the cost into the loan.
- The fee for first-use, zero-down loans will be 2.3% of the loan amount in 2020, up from 2.15% for regular military in 2019. The fee for subsequent use loans will be 3.6% of the loan amount, up from the current 3.3%. These fees will stay in place for two years, return to current levels from 2022 to October 2029 and drop further after that.
“We service many VA loans in Hawaii and essentially these changes have a silver lining,” Preston Sims | Homebridge Hawaii (NLMS# 928229) concludes. “Also keep in mind that just like the VA has no credit score requirement, but most lenders do, it remains to be seen which lenders will follow these new guidelines.”
Bringing it full circle, eligible VA purchasers will see higher funding fees, but may see a significant boost in their buying power with no required downpayment, allowing them to compete with Oahu's heightened home prices. If you're interested in exploring your Hawaii VA Loan eligibility, Buying Power, & Oahu Homeownership options, contact Koa Cassady at 808.777.0588 | [email protected]