Marcus Marion, CMA™ There are fresh prospects with a new year, and for a large number of Americans purchasing a home, that chance will manifest as homeownership. Therefore, we thought it could be useful to give home buyers utilizing VA loans an update on the mortgage and real estate market as 2024 brings new market trends.
1. VA mortgage rates have eased and could decline further
Let’s start with some good news. If you’re planning to use a VA loan to buy a house in 2024, you might be able to benefit from lower mortgage rates. While rates more than doubled last year, they’ve been trending downward in recent weeks.
For veterans of the armed forces, homeownership is cheap and attainable thanks to the VA home loan program. Unlike other government mortgage programs like FHA and conventional mortgages, ongoing mortgage insurance payments are never necessary.
Mortgage insurance is not an added cost for VA loans. Unless they can afford to make a 20% down payment, conventional purchasers frequently have to pay for private mortgage insurance or PMI. There are two types of mortgage insurance available: yearly and upfront, for FHA loans and USDA-backed mortgages.
Many housing analysts and economists expect this downward trend to continue into 2024. That would mean lower borrowing costs for home buyers, including those using the VA loan program.
As of early December 2023, the average rate for a 30-year fixed mortgage loan was 7.22%. And they might be even lower by the time you enter the real estate market.
According to a November 2023 report from the mortgage buyer Freddie Mac:
“Market sentiment has significantly shifted over the last month, leading to a continued decline in mortgage rates. The current trajectory of rates is an encouraging development for potential homebuyers, with purchase application activity recently rising to the same level as mid-September when rates were similar to today’s levels.”
Along with real estate no money down mortgage, the rate you receive when using a VA loan in 2024 is going to depend on a variety of factors. For instance, borrowers with excellent credit often qualify for mortgage rates below the national average. It helps to have a manageable level of debt as well.
2. Loan limits have been increased (for some borrowers)
By definition, the VA loan limit is the maximum amount of money that may be financed with a mortgage guarantee from the Department of Veterans Affairs. Loan limits are one of the prominent factors impacting several VA loan pre-approval process, in addition to fluctuating mortgage rates.
For veterans who are fully eligible for VA benefits and first-time home purchasers, there is no maximum loan amount. Standard VA loan restrictions apply to buyers whose entitlement is less than full; these limits are identical to conforming mortgage loan limits.
The conforming loan limits have been raised by the Federal Housing Finance Agency for 2024. The majority of conventional mortgage loans that are sold to Freddie Mac or Fannie Mae are subject to these constraints. However, they may also have an impact on specific borrowers who make use of VA loans.
Most veteran purchasers no longer find that the VA’s lending restrictions have a substantial impact on the loan application procedure. The total amount of loans that veterans could obtain without needing to make a down payment used to be limited by these county-level regulations. Laws that removed these limitations on qualified buyers were passed in 2020.
Veterans who have previously failed on a VA-backed mortgage and those who wish to retain numerous VA loans concurrently must consider the lending restrictions.
You should have “full entitlement” to the VA loan program if you have never used it previously or if you have used it but paid off the loan through the sale of your house. This indicates that you do not have a formal mortgage loan limit set by the government. How much you may borrow is totally up to the lender.
However, you may have “remaining entitlement” if you have an ongoing VA loan that you are still making payments on or if you have paid it off but still own the house. You would likewise have an official loan limit in this situation.
You might use a VA loan to borrow up to your county’s conforming loan maximum with leftover entitlement and no down payment. However, you will almost certainly need to make a down payment of some form if you borrow more than that amount.
For the majority of US counties, the basic loan ceiling will be $766,550 in 2024. That is a $40,350 rise over the 2023 ceiling. In 2024, the conforming loan maximum in pricey property areas like San Francisco and New York City will be $1,149,825 per year.
3. Low inventory could be a challenge for home buyers
In 2024, if you want to purchase a home in your community with a VA loan, you may see low inventory.
The state of the housing market might differ significantly between cities or metro areas. All things considered, though, there is still a severe inventory deficit in the US. Put simply, there aren’t enough properties on the market to satisfy purchaser’s demands.
Realtor.com researchers predicted in a report that was released in November 2023 that:
“Buyers will finally see lower prices (-1.7%) and mortgage rates of 6.8% (on average), but may scramble to find inventory (-14%) as current owners happy with their low mortgage rates and pandemic home purchases stay put.”
The reason mortgage lenders offer VA mortgage rates that are lower than the national average is that VA home loan benefits ensure a part of each loan against loss. The rate difference between a VA mortgage and a similar conforming 30-year fixed loan might reach up to 0.25 percentage points.
For anyone purchasing a house in 2024, this could be one of the largest obstacles. However, there is always a way to overcome an obstacle. By broadening your search radius, acting quickly when the correct property becomes available, and putting in a competitive first offer, you may improve your chances of finding a suitable house.
4. No major changes to the VA loan program in 2024
Other than the previously indicated (and restricted to specific borrowers) loan limit increase, we do not anticipate significant modifications to the VA loan program in 2024.
In 2024, there won’t be any changes to the minimal standards for VA loans. In addition to having a respectable credit score, borrowers must make enough money each month to cover their obligations.
Regarding borrower approval, this program offers a good deal of latitude. That means that in 2024, you can get a VA loan without having perfect credit. It’s common for applicants with prior credit difficulties to be eligible for a mortgage loan insured by the VA.
5. It’s still one of the best loan programs available
The VA loan program continues to offer many benefits for those planning to apply for a home loan application in 2024. We’ve written about the unique benefits of this program in the past, including the 100% financing that’s available.
This application has several features that you might find appealing:
- It is possible to purchase a home with no down payment at all.
- It is not necessary to pay for private mortgage insurance.
- The application can be used more than once.
- With less paperwork, you might refinance into another VA loan.
However, there are certain VA loan eligibility criteria that you need to fulfill in order to qualify for a VA mortgage loan application.
The two categories of eligibility for VA home loans are mortgage-based eligibility and service-based eligibility.
Service-based Eligibility
To be accepted and to fulfill the Department of Veterans Affairs minimum service time requirements, home purchasers must present a valid Certificate of Eligibility (COE).
Other documents required to prove your eligibility include a thorough credit report, income and housing information, and identity verification. If further documentation is needed, the regular military typically requires a DD Form 214, and the National Guard and Reserves may require NGB Forms 22 and 23.
Active duty and retired members of all US military branches are eligible depending on service:
- Members of the Reserves
- National Guard
- Army
- Air Force
- Navy
- Marines
- Coast Guard
- Space Force also fulfills the qualifications for qualifying based on service.
Mortgage-based Eligibility
Eligibility requirements for mortgages include:
- Rules of occupancy
- Levels of residual income
- Ratios of debt to income
- Minimum ratings for credit
Once you figure out the eligibility you need to pursue, you need to meet the VA minimum service requirements; these requirements are:
- 90 days in consecutive periods of active duty during a time of conflict
- 181 days of service in the peacetime armed forces
- 6 years of Reserve or National Guard duty
- 90 days under Title 32 instructions that are at least thirty days apart
When it comes to purchasing a house in 2024, veterans and active military personnel should carefully consider the VA financing program. Honestly, no other kind of mortgage program provides such a potent array of advantages.
Minimum VA Loan Requirements for Borrowers in 2024 