Hike in VA home loan fees could exclude thousands of veterans, study shows

Abbie Bennett
August 20, 2019 - 9:30 am

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Increasing Veterans Affairs home loan fees coupled with rising interest rates could significantly decrease the number of veterans and service members able to use their benefit to buy a home, a new study shows. 

A 1-percent hike in the home loan fee could exclude more than 100,000 first-time buyers from using their VA loan benefit, according to the study from NDP Analytics and Veterans United Home Loans, a VA-approved lender.

Increasing the rates or fees for those loans could have far-reaching economic effects. Up to 365,000 veterans and military families could be "priced out of using their home loan benefit if rates and fees keep rising," according to the study.

In 2016-18, more than 685,000 veterans and service members used their VA home loan benefit. The average loan amount was about $257,077.

Most VA loan recipients are required to pay a funding fee, which is determined by the veteran's type of service, the type of loan, amount of down payment and whether this is the first time the veteran has used the loan. The fee can be anywhere from 1.25 percent for first-time loan users who have a 10 percent or more down payment, to 3.3 percent for other users with no downpayment. 

Veterans are more likely to be employed, have higher median incomes and be married than non-veterans, which means the pursuit of homeownership is often more likely in the veteran community, according to the study. About 76 percent of veterans are homeowners, compared to 62 percent of non-veterans. 

Recent legislation waived VA home loan fees for Purple Heart recipients, saving thousands of veterans thousands of dollars. Disabled veterans already have the fee waived. 

But VA also has wrongly charged thousands of disabled veterans home loan fees totally millions, and many have yet to see their refunds, as Connecting Vets previously reported. 

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Reach Abbie Bennett: abbie@connectingvets.com or @AbbieRBennett.

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