VA Home Loan Funding Fees Rise, Limits Disappear in 2020
The VA home loan is one of the most attractive mortgage programs available. There is no down payment, no mortgage insurance, and they’re often easy to obtain. However, with a few changes on the horizon in 2020, will they remain affordable?
Here’s what you need to know about the VA loan program increases coming next year.
VA loan limits eliminated in 2020
First and foremost — the exciting news — you can borrow more money. That’s right. under the Blue Water Navy Vietnam Veterans Act of 2019, the Department of Veterans Affairs can now back loans that exceed the conforming loan limit. This means home buyers who are eligible to receive VA loan financing can borrow above county loan limits without making a down payment. Previously, veterans were limited to spending $484,350 in most places and up to $726,525 in cities with above-average home prices. This is a big win for military borrowers who are looking to purchase a home in higher-priced markets like Denver, Seattle, San Diego, New York City, and many more.
VA funding fee to increase
Next comes the less popular change: an increase in the funding fee. The VA funding fee is a one-time expense that is typically paid at closing. It’s a percentage of your loan, and it varies based on your loan amount, service history, and other factors. It’s a necessary cost because it sustains the VA home lending program and ensures future veterans can receive the same benefit.
The current VA funding fee for first-use borrowers is 2.15% of the loan amount. Starting in 2020, the fee will rise slightly to 2.30%. Subsequent use funding fees will increase from 3.3% to 3.6%.
You may be wondering, “why is this change necessary?” Great question. The increase is intended to help finance health care costs for veterans who are suffering the effects of Agent Orange exposure as a result of their service. Agent Orange was used to clear plants and trees during the Vietnam War. If you served in Vietnam or in or near the Korean Demilitarized Zone (DMZ) during the Vietnam Era—or in certain related jobs—you may have had contact with this herbicide.
VA mortgage requirements
To qualify for a VA home loan, certain service requirements must be met, such as:
90 consecutive days during wartime (unless discharged or separated from a previous qualifying period of active duty service
6 years in the National Guard or Reserves
181 days of service during peacetime
You may also be considered eligible if:
You are an un-remarried spouse of a Veteran who died while in service or from a service-connected disability
You are a spouse of a servicemember missing in action or a prisoner of war
You are a surviving spouse in receipt of Dependency and Indemnity Compensation (DIC) benefits in cases where the Veteran's death was not service-connected
For a full list of VA home loan requirements, visit the Department of Veteran Affairs website.
Why choose a VA home loan?
There aren’t many mortgage options that allow you to buy a home with no money down and no mortgage insurance. Plus, you have access to rates that are lower than FHA and conventional loans.
But that’s not all. There are additional benefits available to you if you experienced a service-connected disability. Vets who are rated at least 10% disabled:
Can be exempt from the VA funding fee
May not need to meet a minimum service requirement
May be eligible to receive Specially Adaptive Housing (SAH) grants for home modifications