The VA Loan is a benefit available to active duty and veterans when they are financing a home. This year, several key changes have made the VA Loan even more useful and beneficial for military families. We met with Bryan Bergjans of Caliber Home Loans to learn how these newest changes will impact families looking to PCS or buy a home in 2020. Bergjans is part of an initiative to educate veterans and industry professionals about this benefit, and in the past year Caliber has educated over 2 million people regarding the VA Home Loan Benefit.
What are some of the recent changes to the VA Loan that veterans should know about?
“The big changes came with the Bluewater Navy Act of 2019 that went into effect January 1st.
First, the Act eliminated the loan limits. In 2019 and prior, you were able to purchase a house with zero down payment up to the FHFA County loan limit. The limit is typically listed county by county, with locations like San Diego, DC and Seattle having significantly higher loan limits due to the average median home price. Well performing school districts are typically associated with higher median home prices that in some markets cause the home price to go well above the FHFA county loan limit. This was a challenge for military families moving into a new market focusing on schools which caused them to make significant down payments. Today because of Bluewater Navy those loan limits have been removed, and families can purchase homes in those specific locations with no down payment as long as the lender approves.
Big win here for our active duty service members who have a strong base pay and housing allowance but not a lot in their TSP or savings to make a large down payment. They can afford a home based on their base pay. Having a large down payment before wasn’t always an option for many families, especially those traveling to higher cost of living coastal areas. It’s great for Military members approaching retirement: now that dream home or forever home is more possible. The military and veteran client will now move up the list of preferred borrowers. No loan limits and guaranteed employment makes the military customer look a lot better in the home purchase arena, unlike before where down payments were a concern.
The second change was the exemption of a funding fee for Purple Heart recipients. Before you were only exempt if you were receiving disability. This is a fee which is a percentage of the overall sale. It’s required by the VA to use the benefit. Before, you had to pay a funding fee based on down payment. When you put a large down payment down it reduced the funding fee. The fee goes up the second time you use your benefit as well and can still be rolled into the loan. Now active duty service members with a Purple Heart will be exempt from the funding fee.
The third change is the opportunity for VA appraisers to leverage third party resources to assist in executing property inspections in high demand and rural areas, which will allow for shorter competitive turn times in line with other loan programs. Previously, due to the limited amount of VA approved appraisers and the demand for appraisals orders the turn times would be somewhat of a challenge, forcing our Military & Veterans to use other loan programs to purchase a home. This change allows appraisers to leverage third parties to help attain information on properties that aren’t easily accessible to keep return times in line. “
Are there any ways VA Loans are adapting to meet the Coronavirus situation?
“The virus environment has created uncertainty. There is no time better than now to be serving in the United States Military, because unlike our civilian counterparts we will not be furloughed. Job security and paycheck certainty are huge during times of national crisis. Service members are the most gainfully employed people in the world right now. This moves military to the top of the customer list if they were not there already. Bottom line, PCS moves are going to happen eventually this is not a matter of ‘if’ but ‘when’.
If anyone is having trouble making payments, especially because of spousal unemployment, all lenders and servicers are on high alert for this situation, so reach out to your mortgage company directly. The sooner you can reach out, the better. Go through your lender first because they can work with you on an individual level and the VA can work as a liaison. The VA has a vested interest in the homes too because the VA is guaranteeing 25% of the home. They have a financial interest in avoiding foreclosure.”
Are there times when a veteran shouldn’t use a VA loan?
“The answer will always be based on your current financial situation. The VA home loan benefit has become more and more recognized, but you should always investigate other options, so you can be confident about how the home loan benefits stack. If you’re a first-time homeowner, you want to pursue the VA loan route. If you’re putting down a substantial down payment or have used your benefit before you need to compare all loan products to explore your options.
Even if you have money to put down and don’t need the VA loan now, there are downstream benefits to the VA Loan. If you ever have trouble making payments, the VA will act as a liaison between you and your servicer and protect you from the lender. Streamlining to a 15-year loan is a much easier process with the VA loan than with other lenders. The VA loan previously had substantially higher rates, but now it is market driven. Over the past 4-5 years, VA rates have been lower than the conventional rates.
If you are buying a second home, vacation home, rental property, or a house for your kids then you have to go with the conventional loans because you will not qualify for the VA loan.”