2020 saw big changes to the VA Loan Program. The short of it: veterans will have more borrowing power but will also pay slightly higher fees.
The changes came 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 at the same time increasing the VA funding fee, which took effect on January 1, 2020.
All in all, there are many advantages to having the ability to utilize a VA loan…
More Buying Power
In 2019, VA loans were 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 in this country and the states of Hawaii and Alaska can allow higher loan limits, the FHFA cap applies to the vast majority of VA loans.
There are several changes to the VA funding fee with the new law. The funding fee you pay in 2020 depends on if and how much money you put down, 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%. Also, Purple Heart recipients still on active duty will no longer be subject to the funding fee.
While you’ll pay a slightly higher fee, with the borrowing limit eliminated, veterans will now have even more borrowing power – especially when it comes to buying a more expensive home.
No Down Payment Required
By far, the biggest advantage to a VA loan is that there is no required minimum down payment. The government realizes that military service members face personal and financial challenges that the ordinary civilian usually doesn’t experience. Therefore, the guidelines allow for 0% down on the purchase of a home for veterans. This does not mean that the loan is “free,” but the advantage of not having a down payment is certainly a tremendous plus that other borrowers rarely enjoy.
No Mortgage Insurance Required
Another benefit to the VA Loan is that it doesn’t require you to take out mortgage insurance. Conventional loans require that individuals pay monthly mortgage insurance if their down payment is less than 20%. But with a VA loan, the Department of Veterans Affairs guarantees a portion of the loan in case of default. This provides a huge advantage to recipients because they don’t incur the additional cost of mortgage insurance with their monthly payments.
Competitive Interest Rates
It’s important to understand that although the Department of Veterans Affairs oversees the guidelines for VA loans, they do not set the interest rates themselves, nor do they service the loans in any way. By working with Guardian Mortgage, you stand firm on our long history of excellence in residential mortgages and our commitment to competitive rates and outstanding service. We’ve been serving generations of homebuyers since 1965. Let us help guide you every step of the way.
Guardian Mortgage Rewards our Heroes
You may be eligible for the Guardian Mortgage Hero Saver Plus program, which provides a lender credit toward closing costs for qualified recipients. It’s a program you won’t find anywhere else. We’re proud to honor the sacrifices you make to create a better world for your community and all Americans.
If you remember nothing else from this article, please know that you should contact a Guardian Mortgage Loan Originator to see if you meet the guidelines for this special financing not available to the general public. It is our honor to serve you with a program that provides such substantial benefits. These are the highlights, but there are many other benefits, like flexible underwriting, we can discuss with you. You have served us, now let Guardian Mortgage serve you. After all, you have more than earned it!