New Bill Brings Better Housing Benefits for Veterans

24 Aug

President Obama stepped up to the plate for our military personnel and veterans this month. The President signed into law the Honoring America’s Veterans and Caring for Camp Lejeune Families Act. A bipartisan bill that unanimously passed through the House and Senate, made specific and much needed changes to the VA loan program, expand Veteran support and also provide extended medical care for veterans and their families who were based in Camp Lejeune in the years the water was contaminated there.

This bill primarily focuses on the extended healthcare for those affected at Camp Lejeune, but I am a Realtor in a heavily military occupied area and prefer to focus on the reform to the 68 year old, VA Loan program.

Here are the changes:

Surviving Spouses
Prior to the bill’s passing, the only way a military widow or widower could receive zero down financing was if their spouse died with a service-connected disability or in the line of duty. Meaning, if their husband or wife died of normal causes, they were not eligible. Today, the VA’s mortgage benefits are now extended to surviving spouses of veterans who had a permanent, service-connected disability for at least a decade before their death.

Occupancy Requirements
Before the bill was made law, if a service member serving abroad were to buy a home, only a spouse could fulfill the occupancy requirement. Those who were married military couples and single-parent service members were powerless to buy homes while deployed.

This has now been repealed, ensuring that active duty members can meet the requirements of a new home purchase through a dependent child of the soldier.

The VA Funding Fee and Disabled Veterans
For every purchase or refinance loan that the VA backs, it applies a fee known as the VA Funding Fee. This fee helps fund the program and makes sure that it’s independent of the Congressional appropriations process.

Prior to the bill, veteran borrowers that had service-connected disabilities didn’t have to pay the fee, which is usually financed directly into the loan. But recently, because of delays with the VA’s medical system, many soon-to-be veterans have had to wait months to get an official disability rating after receiving a pre-discharge exam by the VA.

Meaning, if a disabled veteran tried to buy a home with the VA home loan program before then, they would have to pay the fee, which forces some VA borrowers into larger mortgages than they can afford.

The new policy provides that the VA will waive the fee if a future veteran is eligible to receive compensation for disability, without having the official rating.

VA Loan Limits

When veterans lives in one of the more expensive areas in the country, such as California, Hawaii, or the Eastern Seaboard, they lose some of their purchasing power because of lowered loan limits on VA-backed mortgages. The limits dictate the amount a veteran can borrow without having to make a down payment. Last year, the loan cap was reduced from $729,750 to $625,500. The bill brought the caps back up to last year’s levels, which are set to stand until after 2014.

Adjustable-Rate Mortgages

At the end of this year, adjustable-rate mortgages were no longer going to be offered through the VA loan program. Under the Act, adjustable-rate mortgages and hybrid ARMs will continue to be available through the VA. This is the only change I am not wild about. I still don’t think ARM’s are a good idea for the majority of borrowers.

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