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H.R. 1627 Improves VA Loans

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New law makes VA loans available to more surviving spouses, disabled vets and single parents, and VA loan limits return to $729,750 to over $1,000,000 for high-cost areas.

On August 6, 2012 President Obama signed The Honoring America’s Veterans and Caring for Camp Lejeune Families Act (H.R. 1627). The new law addresses some of the problems veterans have been facing recently including medical conditions caused by contaminated water used by families stationed at Camp Lejeune, North Carolina. The signed legislation also makes certain veterans benefits, like VA loans, more readily available.

The 5 Major VA Loan Changes*

1. Increased Eligibility for Surviving Spouses

Previously, surviving spouses became eligible for VA loans only if widowed by veterans who died on duty or from a service-connected disability. Now, a spouse who survives a veteran who dies of any cause may be eligible for VA home loan benefits as long as the veteran was a) continuously rated totally disabled for a period of time specified by the new law, and b) was eligible for VA disability compensation at the time of death.

2. More “Doable” Occupancy for Single Parents & Couples Serving Overseas

All VA borrowers must meet owner-occupancy requirements to qualify for the government-backed mortgage program. The new law makes it possible for single parents or married couples serving active duty away from home to satisfy the occupancy rule by having a dependent child with legal guardian or attorney-in-fact live in a house financed with a VA loan until the veteran is able to occupy the property.

3. ARMs and Hybrid ARMs Remain An Option

An Adjustable Rate Mortgage or ARM has traditionally been a great way for borrowers to enjoy an initial interest rate below the going average. The loans are especially beneficial to homeowners not planning on staying long, such as frequently reassigned military members. A previous law had VA ARMs and hybrid ARMs set to expire at the end of 2012. The two remain an option of the home loan program backed by the U.S. Department of Veterans Affairs. Qualified VA borrowers can continue to get these adjustable interest loans from VA-approved lenders that offer them.

4. Funding Fee Waiver Now Based on Pre-Discharge Disability Exam

Almost all borrowers pay a funding fee when taking out a VA loan. Traditionally, veterans with an official disability rating are given a waiver. The official rating can take a while after a pre-discharge disability examination is given. Veterans in limbo and closing on VA loans would have to pay the funding fee, then apply for a refund later when the official rating is given. Under the new law, a veteran may qualify for a funding fee waiver based on a qualifying pre-discharge disability rating or memorandum rating.

5. VA Loan Limits in High-Cost Areas Go Back Up

As a result of the Veterans Benefits Improvement Act of 2008 signed by President Bush, VA loan limits were raised in certain high-cost areas. But, Congress did not extend the higher limits for 2012, which resulted in a decrease to a top limit of $625,500, even in expensive military towns like Prince William, Virginia. The H.R. 1627 law carries over the extension of the higher limits, up to over $1,000,000 for pricier areas, through 2014.

For more information on VA loan changes, please go to the U.S. Department of Veteran Affairs or contact an approved lender.

*This article contains only a brief summary of HR 1627 and changes pertaining to the Department of Veterans Affairs VA Home Loan Guaranty Program. For specific details regarding the new law, please click here.

Veterans First is a trade name of Wintrust Mortgage, a division of Barrington Bank & Trust Company, N.A., a Wintrust Community Bank. I NMLS# 449042 I Equal Housing Lender

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