By Eric Gomez, ACE Credit Consulting and Member of CCAR’s REALTOR®/Lender Committee
The Blue Water Navy (BWN) Vietnam Veterans Act of 2019 (PL 116-23) made changes to the VA Home Loan Program that exempt Purple Heart Recipients that are currently serving on active duty from the VA Home Loan funding fee.
NO VA HOME LOAN LIMITS IN 2020.
A NEW LAW WILL INCREASE VA LOAN FUNDING FEES SLIGHTLY AND ELIMINATE LOAN LIMITS – EFFECTIVE JANUARY 1, 2020.
Also, in accordance with the Blue Water Navy Vietnam Veterans Act of 2019, signed into law in June and effective Jan. 1, 2020, VA loan limits will be eliminated and the VA funding fee will increase. Additionally, the new law provides disability benefits to certain Vietnam War veterans and their children.
VA loan limits are the maximum loan amount the Department of Veterans Affairs can guarantee without borrowers making a down payment. VA funding fees are one-time fees borrowers pay in lieu of mortgage insurance to help cover the government’s costs for backing the loans. If a borrower defaults, the VA repays the lender a portion of the loan. The removal of loan limits does not mean unlimited borrowing power without a down payment. Borrowers still need to have sufficient income and meet a lender’s credit requirements to qualify for the loan amount.
- The VA funding fee a borrower pays in 2020 will depend on the down payment amount and if the borrower has had a VA-backed loan before.
- For a borrower who has not had a VA-backed loan before, it is a “first use” loan. The fee* for first use, zero-down loans will be 2.3% of the loan amount in 2020, up from 2.15% for regular military in 2019.
- For a borrower who has had a VA-backed loan before, it is a “subsequent use” loan. The fee* for subsequent use loans will be 3.6% of the loan amount, up from the current 3.3%
*Fees for both loans can be paid upfront or roll the cost into the loan. These fees will stay in place for two years, return to current levels from 2022 to October 2029, and drop further after that.
If you have questions regarding the FHA policy revisions or the Blue Water Navy Vietnam Veterans Act of 2019 and their impact, please contact CCAR’s REALTOR®/Lender Committee at [email protected]