Overview
Effective for loans closed beginning January 1, 2020, VA will guaranty 25% of the loan amount for Veterans with full entitlement seeking a purchase or cash out refinance loan in excess of $144,000, regardless of the FHFA Conforming Loan Limit. Veterans with full entitlement seeking a purchase or cash out refinance loan that exceeds the FHFA Conforming Loan Limit for the subject’s county, but is less than the CMS maximum loan amount, will no longer require a down payment or equity to meet the 25% guaranty requirement.
Guaranty calculations remain unchanged for Veterans who have less than full entitlement available or are seeking a purchase or cash out refinance loan amount of $144,000 or less.
Vet-Vet Joint Loans
For loans above $144,000 to two veterans who are not married to each other (Vet-Vet Joint Loans), and
- All Veterans have full entitlement: The maximum guaranty is 25% of the loan amount without regard to the FHFA Loan Limit for the subject’s county.
- One or more Veteran has partial entitlement: The maximum guaranty is 25% of the lesser of the loan amount or FHFA Loan Limit for the subject’s county.
Married Veterans using Dual Entitlement
For loans above $144,000 to two Veterans who are married to each other and using dual entitlement, the maximum guaranty is 25% of the loan amount so long as one of the Veterans has full entitlement. If both Veterans have partial entitlement, then the maximum guaranty is 25% of the lesser of the loan amount or FHFA Loan Limit for the subject’s county.
Maximum Loan Amounts
As a reminder, the maximum VA loan amount for Carrington Mortgage Services is $765,600 for a 1-unit property, $980,325 for a 2-unit property, $1,184,925 for a 3-unit property, and $1,472,550 for a 4-unit property.
The maximum LTVs for VA transactions remain unchanged at:
- 100% for Purchase transactions, plus any financed Funding Fee, or
- 90% for Cash Out Refinance transactions, including any financed Funding Fee
Please Note: IRRRLs, which always receive a 25% guaranty, are subject to the CMS maximum loan amounts but are not impacted by the guaranty calculation guidance in this announcement. Refer to CMS VA Underwriting Guidelines for additional information.
Examples
|
Veterans with Full Entitlement |
|
|
Loan Type |
Scenario |
|
Purchase |
Veteran has full entitlement, and is purchasing a home for $650,000 in a county where the FHFA Loan Limit is $510,400. The maximum guaranty available is $650,000 * 25% = $162,500. No down payment is required. |
|
Cash Out |
The subject property already has a VA loan with $80,000 of entitlement tied to it. The Veteran is seeking a cash out refinance loan on a property appraised at $650,000 in a county where the FHFA Loan Limit is $510,400. There is no other previously used unrestored entitlement. Since the $80,000 of outstanding entitlement will be restored for the purposes of the subject transaction, full entitlement will be available to the veteran. The maximum guaranty is $650,000 * 25% = $162,500. No equity is required to meet the guaranty requirement, however the loan amount is limited to 90% LTV, so the maximum loan amount available is $650,000 * 90% = $585,000. |
|
Concurrent |
The veteran’s departing residence has $80,000 of entitlement tied to it, and is being sold. The veteran is purchasing a home for $650,000 in a county where the FHFA Loan Limit is $510,400. There is no other previously used unrestored entitlement.
The maximum guaranty available for the purchase transaction is 25% of the FHFA Loan Limit less the amount of entitlement tied to the departing residence: ($510,400 * 25%) - $80,000 = $47,600. A down payment of $114,900 is required, which is the difference between the required guaranty of $162,500 and the available guaranty of $47,600. |
Examples (continued)
|
Veterans with Partial Entitlement |
|
|
Loan Type |
Scenario |
|
Purchase |
Veteran has $80,000 of entitlement not restored, and is purchasing a home for $650,000 in a county where the FHFA Loan Limit is $510,400. The required guaranty is $650,000 * 25% = $162,500. The maximum guaranty available is ($510,400 * 25%) - $80,000 = $47,600. A down payment of $162,500 - $47,600 = $114,900 is required. |
|
Cash Out |
The Veteran has $80,000 of entitlement tied to the subject property, which will be restored for the purposes of a cash out refinance. The Veteran has $36,000 of entitlement previously charged off that will not be restored. The subject’s appraised value is $650,000 in a county where the FHFA Loan Limit is $510,400, and the veteran is seeking the maximum loan amount available for a cash out refinance. The guaranty required is $650,000 * 25% = $162,500. The maximum guaranty available is ($510,400 * 25%) - $36,000 = $91,600. The required equity is the difference between the required guaranty and the available guaranty $162,500 - $91,600 = $70,900 The maximum available loan amount is $650,000 - $70,900 = $579,100. The LTV $579,100 / $650,000 = 89.1% complies with VA cash out lending restrictions. |
Additional examples, including examples for Joint Loans and married Veterans using dual entitlement are available at Exhibit A of Circular 26-19-30.
Contacts
Please contact CorrespondentRM@carringtonms.com with any questions.
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