This feature originally appeared in the June issue of MReport.
VA loans are a valuable earned benefit for service members, veterans, and eligible surviving spouses. Issued by banks and mortgage lenders, with the U.S. Department of Veterans Affairs (VA) guaranteeing a portion of the loan, VA loans provide advantages including:
• No down payment requirement
• No private mortgage insurance (PMI) requirement
• Lower interest rates compared to other loan products
• Flexible credit underwriting
The VA loan program is now better than before with the passing of the Blue Water Navy Vietnam Veterans Act of 2019 (Blue Water Navy), and with it came a lot of changes for Military and Veterans that they may not know about. First and foremost, as a Navy veteran, I am thankful that this act carries with it benefits to those Navy Vietnam veterans who this was specifically written for. The Blue Water Navy Vietnam Veterans Act of 2019, which became law on June 27, 2019, addresses the expansion of VA disability benefits for Agent Orange exposure to those who served in ships off the coast of Vietnam during the war.
This law went into effect as of January 1, 2020, and brought with it a host of other benefits that would change the landscape of the VA Home Loan benefit as we know it. The new law exempts Purple Heart Recipients currently serving on active duty form the VA Home Loan Funding Fee.
In 2019, you couldn’t receive exemption status unless you were receiving VA Disability, and as it stands today, we have a lot of active duty still serving who got injured in combat and received Purple Hearts that would have had to wait until discharge to be exempt, this was the right move and a welcomed change.
Prior to Blue Water Navy, the VA Home Loan Benefit provided entitled military veterans an opportunity to purchase a home up to but not limited to the Federal Housing Finance Agency (FHFA) conforming loan limits with zero down payment, for this example, to buy a home in St Louis, Missouri, a qualified Veteran or Military member could purchase with no down payment up to the conforming loan limit which in 2019 was $484,350.00.
This formula would have been used across the country as every county in America has a loan limit established with FHFA. Now, this sounds great, and it has been a great benefit no doubt, but what about the high-cost areas? What about folks who live in the coastal regions where housing prices have skyrocketed over the last five, 10, or 15 years?
These people would have to bring in sizable down payments in a market like today where the supply is low, most options are now new construction and the prices are extremely high. So, our military members were forced to rent, or even worse settle for substandard housing options (we won’t get into those). Today, VA Guaranteed Home Loans no longer are “subject” to the FHFA conforming loan limits. Military veterans who have full entitlement will now be able to obtain a no down payment home loan in all areas of the United States up to the amounts mortgage lenders allow. First time funding fee for an active-duty veteran will increase from 2.15% of the purchase price to 2.35% of the purchase price. The Blue Water Navy welcomes the following changes in 2020:
• No cap on the size of loan a veteran can get with no money down.
• Purple Heart recipients still on active duty will no longer be subject to funding fees.
• The “no loan limit” is a game-changer across the board, having a positive impact on our active-duty military and veteran communities. Think about this, these people can purchase their dream homes, in their dream locations across the U.S. without having to worry about a substantial down payment, which would have otherwise not allowed them to buy, that is remarkable and long overdue.
The VA Home Loan is the best performing loan in the mortgage playbook, every servicer would like to have these types of loans in their portfolios because they have very low default and foreclosure rates. This is a testament to the people, the folks who get VA Loans live by core values, such as honor, courage, and commitment. This is a benefit program first and foremost and that’s what makes it so special, not everyone is entitled to it. The people who get to use this program have all raised their right hands and said they are willing to give it all for our freedom. This change was long overdue and an exciting new chapter for our men and women in the Military & Veteran home buyers.