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For more than 75 years, veterans and their families have depended on VA loans to some extent. Its purpose has always been to help the people who serve and sacrifice to protect the U.S. from harm. It helps by ensuring they have the joy of homeownership. To date, it has worked well with more than 8 million loans being given out in the last two decades alone. This number will very likely continue to increase this year, thanks to a renewed look and a revamping of old VA loan limits and down payment options. At First Savings Mortgage, we are excited to be able to help spread the word on all the major changes to VA home loans in the coming year.
2020 Major Changes to VA Home Loan Options
In the past, those who wanted to purchase above the "county's limits" would have been required to provide a down payment. Odd considering that the program is designed to be $0 down. With the new update, the county or state cannot impose the limits that require Veterans to make a down payment. This is because there is a new "maximum loan limit" that goes up to $1,500,000 across the country. It is very helpful for veterans who live in more costly housing market areas.
Another big bonus for even younger veterans is that in 2020, the requirements for getting a loan through the VA has lessened as well. Now, you can potentially get a loan with:
- No Down Payment
- No Mortgage Insurance
- The Lowest Average Fixed Interest
- and More Forgiving Credit Guidelines
There are also changes coming into play regarding VA Funding Fees. This has increased slightly for most buyers, but does come with a few perks. For instance:
- There is now an exception for Purple Heart recipients who are on active duty.
- Active duty, National Guard and Reserves, now have the same fee structure as others.
- Veterans who receive compensation for service-connected disabilities can avoid VA Funding Fees completely.
What Do the Changes Mean for You?
VA Funding Fees can be paid upfront or you may have the option to roll its cost into the loan itself. You can see the actual breakdown, but what it amounts to is:
- First Use/Zero Down Loans will need to pay 2.3% of the loan amount in fees. This is up from 2.15% in 2019. (If you can provide a down payment of 5-9%, your fee average will be closer to 1.65%. If you pay 10% or more as a down payment, your fees can be as little as 1.4%.)
- Subsequent Use Loans are now 3.6%. This also increased slightly from 2019 and 3.3%.
- Cash-Out Refinance Loans are the same as those for a purchase loan.
- Interest Rate Reduction Loans is 0.5% for both first-time and subsequent use.
Fee levels are in place for two years. In 2022, your loan fee amount will be decreased to the rate for 2019. On September 30, 2029, the fees will drop further. The goal is to make it more affordable for veterans and active duty servicemen and women to have a home in the coming years.
The exception to these changes and how they may impact you will depend on your current situation. For instance, if you currently have a loan that you are still paying for, you will still need to deal with county loan limits. The only way to avoid this is to pay off the current loan or sell the property. If you owe money for a previous home, you may still be subject to the county loan limit for your new home loan.
Do You Qualify for New VA Loans?
You can request a COE to help you decide if you are eligible to purchase a home using VA home loans. However, most people opt to have help with the process. It allows them to gain an understanding of new rules, regulations, and more. This is where we come in. If you are interested in making 2020 the year you claim the American Dream of homeownership for yourself, we are here to help.
At First Savings Mortgage, we understand that it isn't always easy to figure out what you can and cannot do with your VA loan. If you are hoping to make this year your year, you can contact us. Our loan officers will be happy to help guide you.
Please note, by refinancing your existing loan, your total finance charges may be higher over the life of the loan.