If you are planning on using a VA loan to purchase a home this year there are several changes you should know about.

Following the Blue Water Navy Vietnam Veterans Act of 2019, veterans and military service members will enjoy more borrowing power but pay slightly higher fees when applying for VA home loans. The Act was signed into law in June 2019 but took effect Jan 1, 2020.

Navigate these changes to VA loans with a little help from our team. Our REALTORS®highlight everything you need to know about using VA loans in 2020!

No VA Home Loan Limits in 2020

The VA loan limit is the maximum loan amount the Department of Veterans Affairs can guarantee a veteran or military service officer without making a down payment. The loan limit adjustment is a big win for veterans across the nation, especially for those buying in pricier markets. Extending the zero-down purchasing power will save many veterans a lot of cashand help them remain competitive.

However, the elimination of loan limits doesn't signify unlimited borrowing power with no down payment. Veterans will still need to have adequate income and meet their lender's credit demands to qualify for the VA loan amount. And if you still have impending VA loans or have defaulted on a previous loan, the loan limits will still be applicable throughout 2020.

Before this act went into effect, VA loan limits equaled the limits set by the Federal Housing Finance Agency on complying loans. In 2019, the limits were set to $484,350 in a typical US county and slightly higher in high-cost counties.

VA Funding Fees to Increase

VA funding fees are one-time fees that borrowers pay instead ofmortgage insuranceto cover the government's expenditures in backing the loans. In cases where a borrower defaults, the VA will repay the lender a portion of the loan. In 2020, borrowers will pay VA funding fees depending on their down payment amount and whether or not they've had a VA-backed load before.

First-use, zero-down loans will attract a funding fee of 2.3% of the loan amount, up from 2.15% in 2019. But for subsequent use loans, borrowers will pay a fee of 3.6% of the loan amount, up from the previous 3.3%. These VA funding fees will stay in place for two years before returning to their previous levels between 2022 and October 2029 when they're anticipated to drop further.

Other VA Loan Changes

Other than loan limits and funding fees, the Blue Water Navy Vietnam Veterans Act of 2019 made multiple other funding fee changes. Beginning in 2020, the lending fees will be the same for the National Guard, regular military, and reservists. Before 2020, Reservists and National Guard members paid slightly higher fees. Moreover, active-duty service members who have been honored with a Purple Heart are now spared from the VA funding fee effective January 1, 2020.

Need more assistance navigating the changes to VA loans?Contact us today for any inquiry about VA loan rules and how these changes mightaffect your borrowing in 2020.