There's some important news for veterans looking to buy a home in Albuquerque with a VA loan. There's been a big change to VA home loans this year. The good news is that veterans will have more borrowing power, but there will be higher fees.

This change went into effect on Jan 1 as part of the Blue Water Navy Vietnam Veterans Act of 2019. This act extends disability benefits to more Vietnam War vets that were exposed to Agent Orange. It also eliminates VA loan limits to vets who have full entitlement to VA loans. Yet it does increase the VA funding fee for all borrowers except National Guard and Reserve members. For National Guard and Reserve members, the fee decreases slightly.

These VA funding fees are a one-time fee that's paid by the borrower instead of mortgage insurance. This is done in case the borrower defaults on the loan, then the VA repays the lender a portion of the loan.

Keep in mind that removing the loan limit doesn't mean you can buy a mansion. The loan still needs a down payment and you still have to meet the lender's credit requirements.

The removal of the loan limits only applies to new loans that started after January 1, 2020.

VA funding fee to increase

The VA funding fee is based on your down payment and if you've had a VA loan before. If you haven’t, it’s a “first use” loan, and if you have, it’s a “subsequent use” loan. You can pay the fee upfront or roll the cost into the loan.

The fee for first-use, zero-down loans is 2.3% of the loan amount in 2020, up from 2.15% for active-duty military and veterans in 2019. The fee for subsequent use loans will be 3.6% of the loan amount, up from 3.3%. These fees will stay in place for two years, return to 2019 levels from 2022 through Sept. 30, 2029, and then drop further after that.

There are other changes made to VA loans due to the new act. Starting in 2020, the fees will be the same for the main branches, National Guard and reservists. Currently, National Guard and Reserve members pay slightly higher fees.

In addition, active-duty service members who have received a Purple Heart are now exempt from the funding fee.

Shopping for a VA loan

You will find that VA loans are not offered by all lenders. And lenders that do offer them vary in their level of experience with them. Sandi Pressley and her team can help you find the right VA lender for your home purchase in Albuquerque.

Join us twice a week on our blog for more real estate advice and great reasons to buy a home in Albuquerque and the surrounding area. Follow us on Facebook for the latest Albuquerque real estate updates. Looking for the perfect home for sale in Albuquerque? Our easy-to-use home search tool can help you start the process. Contact us today to help you buy or sell your next home in Albuquerque.

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