Effective Jan. 1, a new law expanding Veteran Affairs disability benefits to veterans serving off-shore during the Vietnam War will change VA home loan limitations for all veterans to no longer require down payments for larger home loans.
Under the Blue Water Navy Vietnam Veterans Act of 2019, which was signed into law in June, many veterans who served in the off-shore waters of Vietnam during the Vietnam War and their surviving family members are now eligible for certain VA disability benefits due to exposure to numerous herbicides during their service in the war.
While focused primarily on expanding disability benefits to more than those veterans who served on in-land Vietnam, an additional aspect of the Act was to remove caps placed on veteran home loans.
Prior to this, the VA only guaranteed home loans up to the county conforming loan limits as determined by the Federal Housing Finance Agency. Those limits change every year and are also determined by state, where states with a higher average home cost also reflect higher county limits.
With those limits in place, the lender would require veterans to pay up to a 25% down payment on any amount above the county limit. Beginning with home loans closed on or after Jan. 1, veterans may obtain no-down payment VA-backed home loans in all areas of the country, regardless of house prices.
Typically, the average lender requires a down payment of 20% of a home’s purchase price before providing house seekers with a mortgage. While the VA’s home loans had already removed this for the most part, this will especially be beneficial to veterans seeking access to home loan benefits in higher cost markets, according to the Department of Veteran Affairs Veterans Benefits Administration.
While the VA said they may no longer cap the size of loans a veteran is eligible to receive with no money down, the lender may still issue a cap or deny a loan to a veteran based on other factors.
An additional change will also exempt service members on active duty who have received the Purple Heart from the VA’s funding fee for home loans from loans closed on or after Jan. 1, 2020.
It also removes the loan limit of $80,000 for veterans using their entitlement for a direct loan from VA to build or purchase a home on federal trust land, which the administration said will enhance access to home loan benefits for Native American veterans.
For more information about benefits or filing a claim, call 1-800-749-8387 for the VA’s Veteran Compensation Programs office or visit VA.gov and look under Disability Benefits.