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The VA home loan has helped nearly 25 million service members become homeowners. Between no down payment and no mortgage insurance, it’s no wonder this mortgage option remains an attractive one for military borrowers and their families. However, with several changes on tap for the new year, will the program continue to be a popular choice for eligible buyers?
Here are four things you must know about the VA loan program increases coming in 2020.
No more loan limits
Starting Jan. 1, borrowers can say goodbye to VA home loan limits. The Blue Water Navy Vietnam Veterans Act of 2019 allows home buyers to borrow more than the current loan limit of $484,3509 in most U.S. counties. This change is expected to be a game-changer for military borrowers who are wanting to stay competitive with conventional buyers in higher-priced markets such as Denver and Seattle.
The combination of no loan limits and no down payment will certainly help a number of service members attain their homeownership goals in 2020. That said, veterans shouldn’t confuse the loan limit removal for unlimited borrowing power. You’ll still need to meet the program’s eligibility requirements and have sufficient income.
Higher funding fees
If you’ve taken advantage of your VA benefits before, you know to account for the funding fee at closing. For borrowers who don’t know, the funding fee varies based on your service history, loan amount, and other factors. It plays a major role in the VA program and ensures future service members can also become homeowners.
The funding fee for first-use borrowers will increase from 2.15% in 2019 to 2.30% in 2020. Those using the VA loan a subsequent time will see funding fees rise from 3.3% to 3.6%. It’s worth mentioning the increase is supposed to help offset health care costs for veterans who are dealing with the effects of Agent Orange exposure during the Vietnam War.
Certain eligibility requirements remain in place
We touched on this earlier in the article but it’s worth going into more detail. Even without loan limits and the aforementioned no-down buying power, borrowers must still meet several service requirements to qualify for a VA home loan. They include:
90 consecutive days during wartime, unless discharged from a previous qualifying period of active duty service
181 of continuous active duty during peacetime
Six credible years in the National Guard or Selected Reserve
You may also be eligible for a VA loan if:
You are an un-remarried spouse of a veteran who died in service or from a service-connected disability
You are a spouse of a service member missing in action or a prisoner of war
You are a surviving spouse in receipt of Dependency and Indemnity Compensation (DIC) benefits in cases where the veteran’s death was not service-connected
Visit the Department of Veteran Affairs website for a full list of VA home loan requirements.
Changes to the Blue Water Navy Vietnam Veterans Act
We have good news for National Guard members and reservists. Starting in 2020, these borrowers will pay the same funding fee as active-duty service personnel. Currently, members of these groups pay slightly higher fees when using the VA loan. One more thing related to the Blue Water Navy Vietnam Veterans Act — active-duty members who have received a Purple Heart will be exempt from the funding fee starting Jan. 1.
What a VA home loan can do for you and your family
Now that we’ve discussed the VA loan program increases, let’s take a step back and look at what this mortgage option can be used to do. Here are some of the advantages of a VA home loan:
No down payment or mortgage insurance for qualified borrowers
Low interest rates
No prepayment penalties
Closing costs can be shared with or absorbed by the seller
Refinancing up to 100% of your home’s value
As you can see, there’s a lot to like about a VA home loan. Whether you’re wanting to purchase your dream home before funding fees go up in 2020 or you’re just curious about your eligibility, you need a dependable lender by your side. Contact a salary-based mortgage consultant at American Financing to learn more about the VA loan program.
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