The VA home loan has helped nearly 25 million service members become homeowners. Between no down payment and no mortgage insurance, it’s no wonder this mortgage option remains an attractive one for military borrowers and their families. However, with several changes on tap for the new year, will the program continue to be a popular choice for eligible buyers?
Here are four things you must know about the VA loan program increases coming in 2020.
No more loan limits
Starting Jan. 1, borrowers can say goodbye to VA home loan limits. The Blue Water Navy Vietnam Veterans Act of 2019 allows home buyers to borrow more than the current loan limit of $484,3509 in most U.S. counties. This change is expected to be a game-changer for military borrowers who are wanting to stay competitive with conventional buyers in higher-priced markets such as Denver and Seattle.
The combination of no loan limits and no down payment will certainly help a number of service members attain their homeownership goals in 2020. That said, veterans shouldn’t confuse the loan limit removal for unlimited borrowing power. You’ll still need to meet the program’s eligibility requirements and have sufficient income.
Higher funding fees
If you’ve taken advantage of your VA benefits before, you know to account for the funding fee at closing. For borrowers who don’t know, the funding fee varies based on your service history, loan amount, and other factors. It plays a major role in the VA program and ensures future service members can also become homeowners.
The funding fee for first-use borrowers will increase from 2.15% in 2019 to 2.30% in 2020. Those using the VA loan a subsequent time will see funding fees rise from 3.3% to 3.6%. It’s worth mentioning the increase is supposed to help offset health care costs for veterans who are dealing with the effects of Agent Orange exposure during the Vietnam War.