How 2020 has Improved VA Home Loans
Since its creation in 1944, through an act by Congress named Servicemen's Readjustment Act, VA home loans have gone through several changes and iterations meant to expand their benefits. Some of the updates include the Veteran Housing Act of 1970, which removed termination limits from VA loans. It also includes the Veterans Housing Benefits Improvement Act of 1978, which expanded benefits for millions of Americans.
The most recent one of these changes was the Bluewater Navy Veterans Act of 2019, which came into effect on January 1st, 2020. The new law, signed on June 25th, 2019, expands benefits to Vietnam War Veterans that suffered from exposure to Agent Orange and other dangerous chemicals during their deployment. The new law covers 14 illnesses and diseases that might be resulting from exposure to the virus.
Additionally, the Bluewater Navy Act made some changes to VA home loan limits and the VA funding fee. In an attempt to improve the already impressive benefits which are offered by the VA.
VA Funding Fee Changes
As of January 1st, 2020, when the Bluewater Navy Veterans Act became law, the VA funding fee was increased for Active Duty servicemembers. Funding fees are a one time charge meant to lower the cost of the VA loan to American taxpayers. The changes made to the VA funding fee include an increase from 0.15% to 0.30% for Active Duty Service Members and a lowering of the funding fee for members of the National Guard and reservists.
Other changes made to the VA funding fee include the ability for active-duty service members, who have earned the Purple Heart, to waive their funding fee. Disabled veterans who were previously exempt from paying the funding fee can keep their exempt status since they were unaffected by the new law. Moreover, these changes to the funding fee will last for at least two years since they became law.
VA Home Loan Limit Changes
The more significant change made to VA loans was the removal of loan limits for eligible applicants, as long it's their only VA loan. The removal of these loan limits allows recipients the opportunity to purchase homes anywhere in the country without having to worry about its cost falling under the loan limit. However, lenders are still required to make sure that the borrower will afford their monthly payments.
Some lenders have even set up their loan limits based on how much they are comfortable lending out for zero money down. One such lender is VA Home Loan Centers, which has a limit of $5million for borrowers who can make their monthly limits.
A few exceptions to the removal of these loans are borrowers who have more than one existing VA loan. These borrowers are still subject to their county's loan limit, which also increased at the beginning of the year, with it going from $484,350 to $510,400 on average. However, some counties offer even higher loan limits depending on their living costs.
Furthermore, the removal of loan limits also extended to Native American Veterans that want to buy or build a home on Federal Trust Land. The new law removed their previous limit of $417,000, with their only limit being their ability to pay and not some arbitrary number agreed upon by the VA.
What are VA Home Loans?
VA Home Loans are home loans guaranteed by the United States government meant for veterans, active-duty service members, and eligible spouses. There are additional property, military service, credit score, and income requirements that are needed to qualify for the VA home loan.
However, once an applicant meets all requirements, they will be able to enjoy some of the best home loan benefits available, including:
$0 Down Payment Requirement.
Lower Monthly Payments.
No Mortgage Premiums.
No Prepayment Penalties.
Also, the loan can be taken out in both 15 and 30-year fixed-rate mortgage options depending on the applicant's ability to make their monthly payments.
The constant updates and changes that VA home loans have gone through since their creation has ensured that they stay the premier government home loan for members of the military. This latest update to the law further enforced the idea that the government stands behind members of the military by easing their path towards homeownership.
Phil Georgiades is the CLS for VA Home Loan Centers, a government-sponsored brokerage specializing in VA home loans. He has been a practicing real estate professional for 22 years. To apply for a VA home loan, click here.