Acclimating to New Changes

Last year was an interesting year; with the COVID-19 pandemic and the presidential election, everything seemed slightly different. However, not everything that happened last year was negative, with the previous year bringing some significant updates to VA home loans, which have since significantly increased their usage. According to recent data, the use of VA loans increased by 11.4% from 2019 to 2020, bringing a total of more than 1.2 million loans guaranteed in one year due to these changes.

Signed into law on June 25, 2019, by the U.S. President, the Bluewater Navy Act has brought some significant changes to the VA loan program. The White House passed the act intending to compensate Vietnam War Veterans who got exposed to harmful chemicals during their deployment. The law also changed two significant parts of the VA loan program by changing the VA loan funding fee and the VA’s loan limits.

Changes to the Funding Fee

The VA funding fee, a one-time payment that VA loan applicants have to pay on their loan, was temporarily changed. The change made it so that Active Duty Service Members pay an increased funding fee of 0.30%, which previously was at 0.15%. Members of the National Guard and members of the reserves, on the other hand, are now paying a lower amount on their funding fees. However, these changes are temporary and are said to last for at least the next two years.

Active Duty Service Members who have a purple heart can have their funding fee removed as long as they close their home while in an active-duty status. Also, veterans with disabilities who were already exempt from paying the funding fee did not see any changes to their funding fee payment requirements.

Removal of the VA Home Loan Limit Previously, borrowers who applied for a VA loan had to deal with VA county loan limits, which varied per county. That is no longer the case as the VA completely removed these loan limit requirements for first-time VA home loan borrowers. Therefore, VA home loan recipients now have the opportunity to live in more affluent communities, previously unaffordable due to the VA loan limits.

Applicants who already have a VA loan and want to take out a second one are still subject to their county VA loan limit, which on average, as of 2021, has a limit of $548,250, which can vary per county.

It is important to note that although the loan limit removal allows lenders to lend out more, it does not mean that lenders won’t limit how much you can borrow. Since loans are given out by lenders and not the VA, there can still be limits set for how much you can borrow. Currently, VA Home Loan Centers has a loan limit of $5,000,000 for first-time VA loan borrowers.

Native American Veterans who apply for a VA home loan and plan to purchase a home on Federal Trust Land no longer have to deal with loan limit requirements.

What is a VA Home Loan?

Often touted as one of the best government-guaranteed home loans available, VA home loans offer several significant benefits. These include no down payment requirements, no mortgage premiums, low-interest rates, low monthly payments, and fixed mortgages, which last anywhere between 15 to 30 years.

Also, the U.S. Government guarantees these loans, giving lenders protection if borrowers cannot afford to make their monthly mortgage payments and end up defaulting. Hence, lenders are more lenient with their application requirements and are willing to work with applicants with a low credit score.

Conclusion

The signing of the Bluewater Navy Act has brought changes to the VA home loan program. These changes increased the amount of housing opportunities for our brave men and women in uniform. The law improves an already excellent government loan program by empowering borrowers with the removal of VA loan limits.

Phil Georgiades is the Certified Leasing Specialist for VA Home Loan Centers, a government-sponsored brokerage specializing in VA Home Loans. He has also been a real estate professional for 22 years. To apply for a VA loan, call us at (877) 432-5626.

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