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Guardian's Guide To... 11/14/2019 11:49:51 AM

Changes to VA Loan Program

Big changes are coming in 2020 to the VA Loan Program. The short of it: veterans will have more borrowing power but will also pay slightly higher fees.

The changes come from a law passed in 2019; the Blue Water Navy Vietnam Veterans Act. The law was passed to provide disability benefits to certain Vietnam veterans and their dependents. But it also did away with VA Loan limits while increasing the VA funding fee, which take effect on Jan. 1 2020. 

Currently in 2019, VA loans are capped at $484,350. This limit matches the Federal Housing Finance Agency’s (FHFA) limits for Conforming Loans, set annually based on market specific home value changes. While some urban areas, Hawaii, and Alaska, can have higher limits, this limit applies to the vast majority of VA loans. 

VA loans have always given veterans more power when it comes to buying a home because they don’t require a down payment. And they still don’t require a down payment. However, with the borrowing limit eliminated, veterans will now have even more borrowing power. Especially when it comes to buying a more expensive home.

There are several changes to the VA funding fee with the new law. The funding fee you pay in 2020 depends on if you put money down and how much; plus whether it’s your first VA-backed loan or not. If it’s a first-use, zero-down loan, your funding fee will be 2.3%, up from 2.15%. For subsequent use loans (meaning, this is your second or third VA-backed loan), the fee increases from 3.3% to 3.6%. 

Starting Jan. 1, Purple Heart recipients still on active duty will no longer be subject to the funding fee.

With these changes taking place soon, you might be wondering whether you should apply for a VA loan now or wait for the new rules in 2020. The answers to that question truly depends on your own situation.

If you’re wanting a more expensive home then waiting for the loan limit to go away in 2020 is your best bet. But you’ll also pay that higher funding fee. On the other hand if you don’t need the loan limit changed, applying for a VA loan now would save on the higher funding fee later. 

Overall, next year’s changes are a big win for veterans. You’ll enjoy more borrowing power and will continue to have access to zero-down mortgages through the VA. Our team at Guardian is always ready to answer all of your questions and get you started on purchasing a new home with your VA-backed loan.

Resources referenced: https://www.military.com/money/va-loans/new-law-allows-you-get-bigger-va-home-loan-without-down-payment.html  and https://www.nerdwallet.com/blog/mortgages/va-home-loan-limit-and-funding-fee-changes-2020/

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