What To Know About Changes To VA Loans

Most home buyers apply for traditional mortgage loans, however if you're a veteran, your best option could be to apply for a mortgage loan through the Veteran's Administration loan program. Lender requirements that are guaranteed by the Department of Veteran's Affairs under the Truth in Lending Act, are updated periodically.

Although newer laws aren't likely to affect many buyers applying for VA home loans, first-time and experienced buyers should be aware of the changes, and understand what they could mean to you before applying for a VA loan.

Qualified Mortgages

A relatively new type of loan known as a Qualified Mortgage, is overseen by the Consumer Financial Protection Bureau. Although some buyers are uncertain about the terms of these loans, many lenders have been lending mortgage funds to buyers for about a year, prior to the time the changes had taken effect.

Generally, the new QM's pertain more to buyers who are applying for conventional mortgage loans, so despite the inaccurate information, borrowers should apply for a VA home loan if they're qualified.

Lowering Risks of Foreclosure

The Ability to Repay and Qualified Mortgages operate under rules designed to prevent defaults and foreclosures. Lenders look at your debt to income ratio to determine if you have the necessary assets to finance a home.

Qualified Mortgages can't include any high risk factors. The Veteran's Administration loan program operates by guidelines similar to what is already in place for Qualified Mortgages, decreasing the risk of default.

How Buyers Will Be Affected

The VA loan program is designed to ensure that buyers can afford a mortgage within their budget. The program makes it easier for veterans to purchase a home since the terms of a VA loan have fewer restrictions than a conventional loan, and the interest rate is lower, making them more affordable.

The Qualified Mortgage requirements cause some concern for veterans and their families, but the new rules shouldn't have any major consequences for homebuyers seeking VA loans.

VA Loan Limits

Limits for buyers seeking VA home loans won't be affected too much by the changes. The limit for VA loans in most areas of the country is $417,000. However, this can be affected by the county or state you live in. The cost of living in some areas is higher than in others.

Therefore, some exceptions to the rule may be made. Buyers who are applying for VA home loans will also not have to pay a higher funding fee than in the past. The average funding fee is about 3 percent and will remain the same, at least for now.

If you qualify to purchase a home under the VA loan program, talk to your lender before applying to get all your questions answered. It may sound a bit overwhelming, but explained in simple terms, the process is easy to understand.