Home loans through the Department of Veterans Affairs (VA) are one of the best benefits available to veterans. The program allows veterans to buy a house without a down payment. Purchasing a home without a down payment is something civilians only wish they could do! But now the program is about to get even better with changes in 2020. The new Blue Water Navy Vietnam Veterans Act of 2019 expands VA disability benefits. Veterans who served in ships off the coast of Vietnam, whose soldiers were exposed to the herbicide Agent Orange during the Vietnam War, now get such benefits. The VA made some crucial changes affecting loans for veterans as part of this Act that was signed into law in June 2019 and will be effective January 1, 2020. Keep reading for the highlights of these changes.

Elimination of VA home loan limits

The VA will not lend money to a veteran with a VA home loan. However, the VA is backing the loan and guarantees to the private lender that the veteran in question is a reasonable credit risk. Currently, VA loan limits are the same as those set by the Federal Housing Finance Agency on conforming loans. The limit in 2019 is $484,350 in a typical U.S. county. Of course, there are locations where the threshold is higher, such as in Alaska. Starting on January 1st, when the new law takes effect, the VA will not cap the size of a loan a veteran can get with no money down. The removal of loan limits may save some veterans a lot of money and help them stay competitive with conventional buyers. That said, the elimination of restrictions on loans for veterans doesn’t mean they have unlimited borrowing power without a down payment. With government backing, lenders can offer favorable terms, such as competitive interest rates, and usually, require no down payment. The lender can continue to impose their own in-house maximum loan amounts. Veterans will still need to have sufficient income and meet a lender’s credit requirements to qualify for the loan amount.

An increase in the Funding Fee

The other change that comes with the new law will affect fees for some veterans. VA Funding Fees are one-time fees that borrowers pay in place of mortgage insurance to help defray the government’s costs for backing the loans. If a borrower defaults, the VA repays the lender a portion of the loan. The Funding Fee for a first-time VA-backed home loan will be 2.3% of the loan amount in 2020. That change is up from 2.15% for the regular military in 2019. The fee for subsequent use loans will be 3.6% of the loan amount. This fee is also up from the current 3.3%. The Funding Fee can be paid upfront, or veterans can roll the cost into the loan amount. These rates will stay in place for two years, then return to current levels starting in 2022 until October 2029 when rates could drop further.

Additional changes to the Funding Fee

Currently, National Guard and Reserve members pay slightly higher prices. Beginning in 2020, the costs will be the same for regular military, National Guard and reservists. There will also be a new exception to this fee: the VA is waiving the Funding Fee for active-duty service members who have received a Purple Heart. Veterans receiving any VA disability benefits will continue to be exempt from the Funding Fee. We can help you keep these changes in order Strategic Mortgage is here to help you navigate these new updates. If you are interested in learning more about mortgage loans for veterans, please see the VA’s website or contact us at (541) 275-1148. Get information regarding Oregon VA home loans on our website and visit our Homes for Oregon Heroes page. Strategic Mortgage is also always your go-to home loan guide no matter what you’re trying to do. Contact us today!