New Law Amends the USC to Eliminate VA Loan Limit

July 3, 2019
Last updated:
March 22, 2022
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Not long ago, the Blue Water Navy Vietnam Veterans Act was signed into law. This act contains a number of provisions and amendments. The law makes a couple of important changes to VA loans; these changes have generated quite a bit of chatter among lenders in the VA loan industry.

The goal of the changes was to increase access to homeownership for veterans. However, the lawmakers wanted to be careful that increased participation in the VA loan program wouldn’t come with significant costs to veterans in other areas.

Ultimately, the law was able to crafted in such a way that veterans will not see a big jump in their loan fee rates. The highlight of the law is the elimination of the VA loan limit which previously put a cap on the amount eligible to be borrowed by those participating in the program.

In this post, we will give quick discussions on the two major changes made to the VA loan program by way of this new law. We will go over the specific places that these changes are found within the new law and give a detailed description of precisely what they encompass. These amendments to the U.S. Code will hopefully enable more veterans to access the VA loan program and attain the American dream of homeownership.

To recap, we will cover:

  • The amendment which removes the loan limit on VA loans
  • The adjustments to the VA loan fee rates

The New Law Eliminates the VA Conforming Loan Limit

The elimination of the VA loan limit is found in Sec. 6, paragraph (a) of the new law. This section amends Section 3703(a)(1) of title 38 of the U.S. Code.

Now, those participating in the VA loan program will not be subject to a cap on loan amounts. VA loan borrowers can now borrow in excess of what would normally considered to be the loan limit without any down payment. That’s one of the biggest perks of VA loans.

Prospective borrowers will still be assessed according to the usual factors which determined loan worthiness, such as credit scores and employment history. Again, the purpose of this amendment is to expand access to the VA loan program.

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The New Law Makes Adjustments to VA Loan Fee Rates

The adjustments to the VA loan fee rates is found in paragraph (b) of Sec. 6. This paragraph amends Section 3729(b)(2) of title 38 of the U.S. Code. This paragraph replaces the old loan fee table with a new one.

In an early version of this law, the loan fee rates for non-disabled veterans would have increased from 0.35% to 0.5%. This proposal was scrapped, however, as a consequence of lobbying efforts from numerous groups in the housing industry.

The final version of the law excludes this particular increase in fees for non-disabled veterans. But, the final law does make some increases to VA loan fees. These increases were necessary as a means to finance other, non-housing related benefits available to veterans.

At first, lobbyists were completely against any increase to VA loan fees whatsoever; this attitude relaxed a bit after the conforming loan limit cap was removed. Lobbyists insisted that VA loan fees should be based on the credit risk associated with a given loan, not on what other types of benefits may be available to veterans.

Ultimately, most lobbyists supported this final version of the bill which includes relatively small fee increases and the loan limit cap removal.

Again, these are just the changes in the law which directly affect the VA loan industry. The primary purpose of the law was to provide disability benefits to veterans affected by a particular illness contracted in the Vietnam War. These changes to the VA loan program were added both as a means to expand homeownership and also compensate for these additional healthcare benefits.

Clearly, these changes to the VA loan program made by the Blue Water Navy Vietnam Veteran’s Act are quite significant. Prospective users of the VA loan program will want to check the loan fee table provided by this law to determine precisely what rates they will likely face.

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Reach Out to Sammamish Mortgage to Learn More

To learn more about VA loans, reach out to Sammamish Mortgage today. Sammamish Mortgage has been servicing the Pacific Northwest region since 1992, including Washington, Oregon, Idaho, and Colorado. We are a family-owned mortgage company with a team of highly experienced, knowledge mortgage professionals offering several mortgage programs with flexible qualification criteria. Get in touch with us today to learn more.

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