Starting January 1, 2020, the Blue Water Navy Vietnam Veterans Act of 2019 will go into effect, expanding VA disability benefits to veterans who served in ships off the coast of Vietnam during the Vietnam War and were exposed to the herbicide Agent Orange. This expansion will change home loan limits for all veterans.
I understand new disability benefits, but how does this affect home loans?
The funding for these new benefits, which will be available to approximately 90,000 veterans, will come from revenue generated by removing some restrictions on VA home loan limits, allowing qualified buyers to buy higher priced homes with no down payment.
The Federal Housing Administration (FHA) adjusts the rate annually, but currently, the VA limits the price of a home without down payment to $484,350 in most of the country. Some areas, such as California, Alaska, and Hawaii, where real estate prices are higher, allow for higher loan limits. Currently, if you wanted to buy a home priced above the limit, you would be responsible for putting down 25% of the difference between the limit and the home price.
(Ex. $550,000 purchase price – $484,350 FHA loan limit = $65,650 difference x 25% = $16,412.50 down)
What about funding fees?
The VA charges most veterans a funding fee when a loan is issued. Veterans receiving VA disability benefits are exempt from the funding fee, and starting January 1, Purple Heart recipients still on active duty will be exempt, too. For everyone else, there will be a slight increase in the fee:
| Current Funding Fee |
New Funding Fee
|
|
| First-Time Users | 2.15% | 2.30% |
| Subsequent Use | 3.30% | 3.60% |
| 5% Down Payment | 1.50% | 1.65% |
| 10% Down Payment | 1.25% | 1.40% |
The bottom line:
The goal is for the increase in loan limit and funding fee to generate enough revenue to cover these new disability benefits. So, it looks like 2020 will see an increase in home buying potential for all veterans.