A few months ago we announced there were going to be reductions to the VA Funding Fees for each VA loan scenario. Then, just before the changes were set to take effect, our friends in Washington (no, not the VA, we like them : ) enacted a law to revert the VA Funding Fee to the previous level.
Lowered Again, then Raised Again
Some lucky borrowers closed within the few day window in which the lowered fees had taken effect. Temporary legislation changed the fees back to the higher levels for about a month. Guess what? That legislation expired and fees went back down again for a few days…before reverting back up once again.
And Finally…
Unfortunately, the dust has now settled and fees are once again back to the levels that they have been for the last few years. We do not anticipate any new changes coming soon. Of course, the last announcements were a surprise as well. So, we’ll keep you posted, but for now, it’s business as usual.
Here are the fees:
Note: First Time Use (Active Duty – National Guard & Reserves add 0.25%)
- No Down Payment: 2.15%
- 5% – 9.99% Down: 1.50%
- 10% Down or More: 1.25%
Subsequent Use
- Less than 5% down, Active Duty & Guard/Reserves: 3.30%
- With 5% down or more, the first time use rates apply
With the new year comes new VA loan limits. Unfortunately, the loan limit for Honolulu has gone down considerably (it remains unchanged for the outer islands). We’ve seen this in the past, it seems like the limit is a pendulum swinging lower one year and higher the next. Here are the new numbers:
- Honolulu County: 2011 VA Loan Limit =$695,750 (2010 Limits – $741,250)
- Hawaii County: 2011 VA Loan Limit = $625,500 (2010 Limits – $625,500)
- Kauai County: 2011 VA Loan Limit = $625,500 (2010 Limits – $625,500)
- Maui County: 2011 VA Loan Limit = $625,500 (2010 Limits – $625,500)
There are a few important things to remember when taking the loan limits into account:
- Loan Amounts up to $625,500 – All Islands – 100% financing (no down payment) is available and at the best possible pricing.
- Loan Amounts from $625,501 to $695,750 – Oahu – 100% financing (no down payment) is available, but due to the loan amount being above the “conforming” loan limits, loans are considered “VA High Balance.” As a result, they may have tighter underwriting rules and pricing that may be anywhere from 0.25% – 0.50% higher in rate.
- Loan Amounts above $695,750 – Oahu (above $625,500 – other isles) – These loans are considered “VA Jumbo” loans and require a small down payment. The down payment required is equivalent to 25% of the difference between the purchase price and the 100% financing maximum (695,500 on Oahu). For example, if the purchase price is $795,750, there is a $100K difference between that and the Oahu limit ($695,750). As a result, 25% of that difference ($25K) would be required as a down payment. All in all, that’s about 3% down, with no expensive monthly payments for FHA or private mortgage insurance…and on Jumbo finaning. The VA Jumbo program remains one of the best deals around.
REMEMBER: The total loan amount, including the VA funding fee, must be below these limits. The VA funding fee is typically financed, which means that it is rolled into the loan amount. So, if you are an active duty, first time VA loan user shopping for a home while trying to stay under the $625,500 limit, you must have a purchase price of under $612,334 (when adding the 2.15% funding fee, the final loan amount is $625,499).
With the new year, comes new VA loan limits. Unfortunately, to the surprise of many, the loan limits for 3 out of 4 Hawaii counties have gone down considerably.
- Honolulu County: 2010 VA Loan Limit =$700,000 (2009 Limits – $783,750)
- Hawaii County: 2010 VA Loan Limit = $625,500 (2009 Limits – $625,500)
- Kauai County: 2010 VA Loan Limit = $625,500 (2009 Limits – $775,000)
- Maui County: 2010 VA Loan Limit = $625,500 (2009 Limits – $681,250)
You would think that the the new loan limits are in direct correlation to the median sales prices in those particular counties, but we found a few anomalies that contradict this as referenced below:
According to City-Data.com, below are the median sales prices for a house or condo in 2008 (most recent numbers I could find):
Now check out the relationship between median sales price and 2010 VA Loan limits for the following three counties:
Now keep in mind that these median sales prices are for 2008, but really, has the values in these counties gone up that considerably since (if at all)?
As a sign of the times, mortgage investors across the country have made it a requirement that a borrower have a 620 FICO score or higher to qualify for a VA loan. Now, this is not a change implemented by the VA Department – this is something that mortgage investors (those who actually purchase note on the secondary market) have now enforced due to the elevated default risk associated for borrowers with sub-620 FICO scores.
Previously, no minimum FICO score requirements existed – as long as the broker/lender received an approval through either Fannie Mae’s or Freddie Mac’s “Automated Underwriting System” (AUS), the Veteran would be approved. Even if the broker/lender did not get an approval through an AUS, there was an option to do a manual underwrite in which a VA approved underwriter could approve a loan based on compensating factors and explanations of previous derogatory credit. The compensating factors would have to validate that the Veteran is worthy of credit approval – and can meet the expected housing obligations. Fast forward to March 2009 and manual underwriting is no longer allowed. The Veteran must get an approval from an AUS in order to qualify for a VA Loan.
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