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By G. Steven Bray
Starting Jan 1st, Veterans and servicemembers who are entitled to VA loan benefits are eligible for 100% financing regardless of the home’s price. The Blue Water Navy Act, passed by Congress earlier this year, has removed the loan limit for a VA loan.
Previously, federal law tied the maximum guaranty amount for a VA loan to the Freddie Mac conforming loan limit. This meant that in 2019 if a veteran wanted to purchase a home priced greater than the loan limit (just north of $484,000), the Veteran was responsible for 25% of the amount above that limit.
With the change, Veterans with full VA loan entitlement now can borrow the full amount of the purchase price without needing to factor a down payment. However, for Veterans with diminished entitlement, either from having an active loan or a default on a previous VA loan, VA still calculates their remaining entitlement based on the Freddie Mac loan limit.
The Act also changes the VA funding fee. Starting Jan 1st, the no down payment Funding Fee will be 2.3% for first-time use for all Veterans, whether Regular Military, National Guard, or Reserves. This is a slight increase for Regular Military, but a decrease for others. For subsequent VA loans, the Funding Fee rises to 3.6% for all. Congress intended the increase to fund other benefits that are part of the Act.
The Act also provides a new Funding Fee exemption for active duty servicemembers who have been awarded a Purple Heart.