By August 2, 2012 0 Comments Read More →

Congress Passes Big VA Loan Benefits Package

A wide-ranging veterans benefits bill  now awaiting the President’s signature will allow bigger loans for vets in high-cost real estate markets, continue the availability of VA-backed ARMs and improve access to VA mortgages for military families.

Dubbed the “Honoring America’s Veterans and Caring for Camp Lejeune Families Act,” the omnibus measure offers a little something for a lot of veterans. A major focus is the long-awaited health care provision for people who lived or worked at Camp Lejeune, N.C., where drinking water has exhibited unacceptable levels of carcinogens for more than 30 years.

But a handful of housing-related benefits will resonate with prospective VA borrowers. Here’s a breakdown of some of the key provisions and changes:

Surviving Spouses

More surviving spouses will be able to tap into the VA loan program. At present, only spouses of veterans who died in the line of duty or of a service-connected disability can access the guaranty program. This bill would open that to spouses of veterans who had permanent disabilities for at least a decade before their death, which needn’t be classified as service-connected. The VA guaranteed less than 1,300 loans to surviving spouses in FY11.

Funding Fees

The VA exempts borrowers with service-connected disabilities from paying its mandatory funding fee on every purchase and refinance loan. But the by-the-book approach has slighted recent veterans who receive a pre-discharge VA disability exam and go on to wait months for their official disability rating. Borrowers who purchase or refinance a home during that limbo period are charged the funding fee. Under this legislation, any service member eligible to receive compensation from a pre-discharge program will have the VA Funding Fee waived.

Bigger Loans

The higher VA loan limits instituted after 2008 in high-cost counties fell at the close of the VA’s last fiscal year. Those limits will return and stay in place through 2014 and help veterans in some of the most expensive housing markets in the nation avoid a costly down payment. About 140 counties will be affected by the update.

Occupancy Requirements

VA loans are for primary residences and come with occupancy requirements that ensure buyers live in their homes. Currently, the VA only allows spouses to fulfill the requirement if a military member is deployed or otherwise unable to occupy the home. That can prove problematic for single parents and for married military couples. This bill will allow dependent children to fulfill the occupancy requirement.

Adjustable-Rate Mortgages

While they’ve fallen out of favor in recent years, the VA does offer adjustable-rate mortgages (ARMs) and hybrid ARMs. The department’s ability to guaranty these loans was scheduled to end this year, but this measure will make ARMs a permanent part of the program.

Check out some of the other changes in this joint explanatory statement from Congress.


About the author: Chris Birk writes about real estate and the mortgage industry for a host of sites and publications, from Lenderama and Bigger Pockets to the Huffington Post and Motley Fool. A former newspaper and magazine writer, he is also content director for a leading VA lender. Follow him on Google+.

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