Starting January 1, 2020, a new law will take effect that includes provisions to help active duty military and veterans buy homes.
The homebuying changes are part of the Blue Water Navy Vietnam Veterans Act of 2019, which President Trump signed into law back in June 2019. The act primarily supports veterans who suffer from exposure to Agent Orange while serving on ships off the coast of Vietnam. This group is referred to as “Blue Water” Navy veterans.
Inside the “Blue Water” act, you will also find notable changes to home loan benefits through the VA or Veterans Affairs loan program.
Starting on January 1, veterans who have full entitlement can now obtain a VA loan with no down payment requirements regardless of the loan amount. I repeat: no down payment. Previously, if the loan limit was above the Federal Housing Finance Agency’s conforming loan limits, the veteran had to pay a down payment. Other guidelines are applicable if the veteran has partial entitlement.
A second update involves an increase in the funding fee, a one-time upfront cost on all VA loans paid directly to the Veterans Administration, which reduces some of the taxpayers’ financial burden. You can pay the funding fee in cash as part of closing costs or finance into the loan.
The new funding fee rate for loans with 0-4.99% down payment — for veterans who use their benefits for the first time — will be 2.3% and any subsequent use will be 3.6% (this is .15% and .3% increase from the previous rates).
The funding fees will be the same for regular military, National Guard and reservists. Currently, National Guard and reserve members pay a slightly higher funding fee rate.
Veterans having a service-related disability, or certain surviving spouses may be exempt from the VA loan funding fee. Additionally, if the veteran is a recipient of the Purple Heart and active duty, the person will be exempt from the funding fee.
Also, as a reminder, Virginia Housing Development Authority (VHDA) has a closing cost grant for VA and USDA loans. The grant covers 2% of the purchase price that goes towards closing cost expenses. You have to be a first-time homebuyer (have not a home in the last 3 years) and meet household income limits.
As we head into the new year, keep these homebuying updates close at hand and be ready to act on them if you meet the criteria.
Shikma Rubin is a loan officer at Tidewater Home Funding in Chesapeake (NMLS #1114873). She enjoys the chance to lead workshops and webinars on how to buy a home in 2020. Have mortgage questions? You can reach her at srubin@tidewaterhomefunding.com or 757-490-4726.