Big Changes to VA Home Loan Guarantee Program

On June 25th a bill eliminating the limit on VA-backed 100% home loans for eligible veterans was unanimously passed and signed into law by President Trump. Previously, the limit for zero down-payment VA home loans was $484,350 in most areas, with exceptions for some high priced counties and states. All but one Florida County had that limit; Monroe County, which encompasses the Florida Keys, had a limit of $529,000. It may not need to be said but, as always, you are only eligible for the loan amount you individually qualify for based on income and credit.

I spoke with Jill Moore, a fantastic Loan Officer with US Bank, this week to find out what this means and if the change has made its way into the real world yet. The short answer is no, all of the information we have at this point indicates a delay. As with many things, the regulations take some time to catch up with the law. We are still in the early days of the changes. It will take a while to make its way through the maze of red tape. The Mortgage Industry is one of the most tightly regulated industries in the US.

As for why this change was made and what it will mean for Veterans… Lawmakers were trying to find a way to raise additional funds to cover disabled veteran health care. An increase to the 2.15% funding fee was floated but the National Association of Realtors pushed back heavily. Lifting the cap on the VA Home Loan Guarantee (the amount of money an eligible person can borrow without having to pay a down payment) is expected to raise the needed funds. By keeping the funding fee at 2.15% but allowing higher loan amounts, the needed money will be raised when higher priced properties are purchased by veterans. It does not negatively affect veterans buying homes below the previous limits like a rate increase would, and allows vets to buy higher priced homes without having a down payment. That fee is typically rolled into the loan amount.

Individual lenders may have their own limits but they are no longer constrained by law as they were before. We will update you when the regulations catch up and we have real world examples of how this could work for our eligible veterans.