VA Loan Changes in 2020

The VA Loan is arguably one of the greatest benefits for veterans, reservists, and active duty personnel. And in 2020, it became even better (with maybe one small exception)!

The changes come about as part of The Blue Water Navy Vietnam Veterans Act of 2019. Specifically, the three biggest changes to the VA Loan in 2020 are:

The upper VA Loan limit is removed starting January 1, 2020 provided that the veteran has full VA Loan entitlement.

Purple Heart recipients, whether active duty or veterans, are exempt from paying the VA Funding Fee.

The VA Funding Fee is increased from 2.15% to 2.30% for first-time users of the VA Loan who are non-exempt and is increased from 3.30% to 3.60% for subsequent users of the VA Loan who are non-exempt.

Let's take a deeper look at these new changes!

1. Upper VA Loan Limit is Removed.

Prior to 2020, the limits for the VA Loan followed the same limits as set by the Federal Housing Administration. A buyer could use a VA Loan to purchase a home higher in price than the loan limit, but the buyer had to pay 25% of the difference between the purchase price and the upper loan limit as a downpayment of sorts.

Now, a buyer can purchase a home at any price point without this restriction of the upper loan limit. However, the buyer must have 1) his or her full VA Loan Entitlement (meaning that the buyer does not have any other VA Loans at the time of application) and 2) qualify under the lender's requirements for whom the buyer applies.

If a buyer does not have his or her full VA Loan entitlement, the Federal Housing Administration's loan limits do apply, and as before, the buyer must pay 25% of the difference as a downpayment.

2. Purple Heart recipients are exempt from paying the VA Funding Fee.

Previously, only veterans who were receiving VA disability compensation were exempt from paying the VA Funding Fee.

However, The Blue Water Act now adds Purple Heart recipients to those who are exempt from paying the VA Funding Fee. This is good news for active duty Purple Heart recipients and rewards them for their great sacrifice while they continue to serve.

3. VA Funding Fee Increases

Part of the purpose of The Blue Water Act is to expand VA disability benefits for Agent Orange exposure to those who served in ships off the coast of Vietnam during the Vietnam War. This includes almost 90,000 veterans.

As a result, and to pay for these expanded benefits, The Blue Water Act increases the VA Funding Fee from 2.15% to 2.30% for first-time users of the VA Loan who are non-exempt and from 3.30% to 3.60% for subsequent users of the VA Loan who are non-exempt.

While this change may not be welcome by some, it is important to remember that the VA Funding Fee can be rolled into the life of the loan. Also, veterans receiving any level of disability compensation are still exempt from paying the VA Funding Fee.

So what do you think of these new changes? Will the removal of the upper VA loan limit help you as home prices continue to rise?

ABOUT THE AUTHOR:

Rob Hastings is a top-producing real estate agent in Jacksonville, Florida and helps buyers, sellers, and investors of homes and property throughout all of Northeast Florida. He works with his wife Nancy as a husband-and wife-team with Keller Williams Realty Atlantic Partners. When not helping his clients navigate the real estate process, Rob enjoys working on old Corvettes and playing music (guitar and piano). A U.S. Naval Academy graduate and former Naval Officer, he also loves boating and simply spending time on the water.