As you prepare to leave the military, you’ll start to notice that there are many benefits for Veterans out there. From money for education to vocational assistance, Veterans can take advantage of many programs and services that can help make post-military life very rewarding and enjoyable. One program that a lot of Veterans don’t take advantage of is the VA Home Loan Program.
What’s the VA Loan?
The VA Home Loan Program, or the VA loan, as its commonly known, is a benefit that allows eligible Veterans to buy, build, repair, modify or refinance a home. For over 75 years, eligible Veterans have been able to take advantage of the benefit that was originally signed into law on June 22, 1944 by President Franklin Delano Roosevelt. Its experienced many changes over the years, but the original intention is still the same, which is to allow America’s Veterans to experience the joys of homeownership. Understand that the VA does not make the loan, as private banking institutions and lenders are still involved from that perspective, but the VA guarantees that loan if you fail or are unable to repay.
So… What’s the Big Deal?
One of the biggest advantages to the VA loan is that eligible Veterans can purchase a home with no down payment. This is huge because other home loan programs require borrowers to put down between 3-5% for home purchases. Another great benefit is that you don’t have to buy private mortgage insurance, which can save you hundreds of dollars per month on your mortgage. Additionally, the VA loan has more relaxed credit requirements and guidelines. The VA loan also consistently offers lower interest rates than other home loan types. Lastly, the VA loan benefit can be reused multiple times. For example, I sold my last home, which effectively paid off that particular VA loan. This allowed me to buy my current home using the VA loan again.
New and Exciting Changes
As you can see, the VA loan is already full of great benefits. However, there is one new update: As of January 1, 2020, there are no more loan limits!
Prior to January 1st, Veterans that wanted to take advantage of no money down VA loans had to abide by county level loan limits. The limit in most counties across the country was $484,350, but some counties had a higher limit. So, if I wanted to buy a home in my current county prior to January that cost $684,350, I would have had to put down $50,000.
Due to the rising cost of home prices in the last few years, Congress passed and the President signed into law the Blue Water Navy Vietnam Veterans Act in June 2019. While this law specifically addresses health issues for Vietnam Veterans, it also eliminates these county loan limits. Veterans can now borrow any amount of money to purchase a home without a down payment, as long as they have their full VA loan benefit entitlement available. This is especially beneficial to Veterans that live in areas where housing costs are significantly higher than the rest of the nation.
The VA loan does have eligibility requirements, which can be found on the VA’s website. One thing to keep in mind is that active-duty service members and Reservists/National Guard service members are also eligible for this benefit. Contact your preferred mortgage lender or bank to get additional assistance pertaining to your situation. Although there is no down payment, you may be subject to an upfront VA Funding Fee, which is based on several factors. However, this can be wrapped into the loan itself if you don’t have the cash on hand. You may be exempt from the funding fee as a result of a service-connected disability or are a Purple Heart recipient. As someone who has personally used the VA loan several times over the past seven years to either buy or refinance homes, I can tell you it’s an invaluable benefit. If homeownership is part of your transition plan, you should definitely consider using the VA loan to make that home purchase. For more information, go to benefits.va.gov/homeloans.