VA home loan cap limit will be removed

VA home loans are one of the best benefits available to veterans. The program allows honorably discharged veterans to buy a house without a down payment, something civilians only wish they could do. But now the program is about to get even better. A new law expanding VA disability benefits to more veterans who were exposed to the herbicide Agent Orange during the Vietnam War will change home loan limits for all veterans.

Currently, VA limits the price of a home you can buy without a down payment to $484,350 for most of the country. This amount is based on limits set by the Federal Housing Administration (FHA) and changes every year. There are several locations in the country where this limit is higher, mostly in urban areas, as well as Alaska and Hawaii. But, for most of the country, if you currently want to buy a house that costs more than the FHA limit, you can’t use a VA home loan without having to pay a down payment, and that down payment usually has to be enough to bring the purchase price down to the FHA limit.

Starting Jan. 1, 2020, when the new law takes effect, the VA will not cap the size of a loan a veteran can get, paving the way for veterans to buy higher-value homes. Of course, the lender may still issue a cap and deny a large loan. But the denial won’t be due to VA home loan rules. A VA home loan is not the VA lending you money. Instead, the Department of Veterans Affairs “guarantees” to a lender that you, as a veteran, are a good credit risk. That guarantee allows you to get a home loan without having to make a down payment.

The other change that comes with the new law will affect fees for some veterans. VA charges most veterans a “funding fee” when a VA loan is issued. Veterans receiving any VA disability benefits are exempt from the funding fee. The funding fee for an active-duty veteran purchasing a home will increase from 2.15 percent of the purchase price to 2.35 percent of the price on Jan. 1, 2021. (There are different funding fees depending on the kind of loan and the situation of the borrower.)

The VA and Congress hope the increased money coming in from a combination of the increased funding fee and the eliminated loan limits will be enough to cover the disability benefits of the Vietnam veterans and their children who suffer long-term health problems due to Agent Orange exposure. That remains to be seen. However, for many veterans looking to get a new home loan, especially those in high-cost areas, the process has become easier.

For Internet assistance, go to your local county library. For questions concerning veterans benefits and to obtain needed forms call Georgia Henry, Avery County Veterans Service Office, at (828) 733-8211. Comments can be emailed to Jim Sramek at averycountydav@gmail.com.

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