The historic VA loan program is booming.
Three big recent changes to this benefit will likely help keep it that way.
The VA backed more than 1.2 million loans in Fiscal Year 2020, and it’s on pace to break that record figure just a year later. VA loans to purchase homes have increased nine years in a row, with a 10th all but certain.
Legislative updates meant to expand access to the VA loan program are making a difference for Veterans in communities nationwide.
Below, we’ll take a closer look at each of these three key changes:
- New VA loan eligibility for some National Guardsmen
- Elimination of VA Loan Limits for most buyers
- VA Funding Fee updates
Let’s dive a bit deeper.
Expanded Guard Eligibility
Legislation that took effect at the start of this year expanded the home loan benefit to more National Guard members.
Up until this bill became law, National Guard members typically gained VA loan eligibility only after six years of honorable service or after serving at least 90 consecutive days on active duty under Title 10 orders. Guardsmen activated under federal Title 32 orders for state responses like natural disasters were not able to tap into that early access to the benefit.
Now, Guardsmen activated under Title 32 can get VA loan access after serving 90 consecutive days on active duty, provided at least 30 of those days were consecutive. This change is retroactive for all Guardsmen regardless of when they served.
Guard advocates estimate the new law could boost VA loan access for more than 50,000 current and former Guardsmen, including tens of thousands who served on the frontlines of theCOVID-19 pandemic.
Removal of VA Loan Limits
A different piece of legislation ushered in an even bigger change for VA loan program: The VA’s loan limits are no longer in effect for most buyers.
For years, these county-level limits helped determine how much Veterans could borrow before needing to make a down payment. Purchasing above that limit meant the Veteran would need to put down a quarter of the difference between the limit and the home’s purchase price.
Those limits made it tough for some Veterans to compete in the housing market, especially in costlier markets.
Today, the loan limits are no longer a consideration for buyers with their full VA loan entitlement. Qualified Veterans can borrow as much as a lender will give them, all without the need for a down payment. That means a $1 million loan without a down payment is now a reality.
The limits are still a factor for Veterans without their full entitlement.
Funding Fee Equalization
The VA Funding Fee is a mandatory fee that goes directly to the government to help keep the loan program operational. For years, the fee structure varied depending on whether the benefit holder’s service was Regular Military or Guard/Reserve.
Guard and Reserve Veterans paid a higher first-time use fee than Regular Military Veterans. The same legislation that eliminated the loan limits also got rid of this tiered approach.
Today, VA buyers encounter the same fee structure, regardless of the nature of their service.
The current funding fee breakdown looks like this:
- For first-time use, the fee is 2.3%
- For all subsequent uses on purchases and Cash-Out refinances, the fee is 3.6%
- For all VA Streamline refinances, the fee is 0.5%
That percentage is charged against the loan amount and can be paid upfront or financed into your monthly payment.
Stronger Than Ever
The VA loan benefit is helping a new generation of Veterans and service members become homeowners.
Ready to join them?
VA loans come with some big-time benefits, including:
- No down payment
- No mortgage insurance
- Flexible credit requirements
- Low average rates
- Eligibility never expires
- You can use it over and over again
You’ve earned what’s likely the most powerful home financing tool on the market. These recent changes only made it stronger.