VA Mortgage Loans Change in 2020: Fees Rise, Loan Limits Eliminated
VA home loans are changing in 2020. The Blue Water Navy Vietnam Veterans Act removes the borrowing cap in 2020, which in 2019 is $484,350 in most areas and higher in almost 200 high-cost U.S. counties.
The new borrowing rules are linked to changes made to expand disability benefits to veterans exposed to Agent Orange while serving on ships off the Vietnam coast during the war. Previously, benefits were restricted only to service members who had served in-country or on inland waters. The new rules mean that thousands of more veterans and their families will now benefit by having access to disability benefits.
A VA loan is a mortgage loan that’s issued by private lenders and guaranteed by the United States Department of Veterans Affairs (VA).
A VA home loan allows qualifying veterans to get a mortgage without a down payment. With a down payment of 20% and the average home value in the U.S. approximately $227,000, a VA-backed loan can help buyers save a lot of money. Current rules require homebuyers purchasing a property above the set mortgage limits to pay a down payment of 25% of the difference between the home’s purchase price and the mortgage limit. For example, to buy a property costing $500,000 in an area with the lower limit of $484,350, the down payment would need to be 25% of $15,650 ($3,912.50).
Starting January 1, 2020, VA mortgage loan limits are removed, which will make buying a home easier for many veterans. However, lenders can still impose their own loan limits, and borrowers still must qualify based on the requirements. Therefore, it’s more important than ever for veterans to shop for a mortgage that best suits their circumstances.
Fees for VA Mortgage Loans Increasing
Another major change in January 2020 for VA home loans is that fees are going up.
Changes in VA mortgage fees effective January 1, 2020, include:
The fee for first-use, zero-down loans, will be 2.3% of the loan amount, an increase from 2.15% for regular military in 2019. The fee for subsequent use loans will be 3.6% of the loan amount, an increase from 3.3% in 2019. These fees will stay in place for two years, return to current levels from 2022 to October 2029, then drop even more.
Fees will be the same for regular military, National Guard, and Reservists. Unlike 2019, fees will not be higher for National Guard and Reserve members.
Active-duty service members who received a Purple Heart will be exempt from the funding fee.
The increase in fees and the removal of the loan limit are changes made by the VA and Congress to raise money to offset the cost of the disability benefits for Vietnam veterans and their children. Agent Orange exposure has led to long-term health problems for both veterans and the children that they had after exposure. Illnesses associated with exposure to Agent Orange range from Hodgkin’s disease to non-Hodgkin’s lymphoma to type 2 diabetes.
Moreover, the overall changes to VA mortgage loans in 2020 are expected to be very helpful for veterans, for which we are very grateful.