VA Loans and Title Restrictions

Title restrictions are entries on a title deed that prevents the sale or transfer of a property in some way. They can be conditional based on specific occurrences or they can be absolute. They are most often encountered in newer properties that are in some way communal, like a condo or duplex. Some condos have a clause in their paperwork that is called the right of first refusal, this is essentially the condo version of a homeowner’s association, and it gives the association the option to buy or lease your unit before selling the unit is approved for the buyer. In general, the VA will not restrict your rights to sell your home if you decide you need to. The VA does not have an early-exit fee or a prepayment penalty, regardless of how soon you sell your home. The Department of Veterans Affairs will not guarantee a home loan for a property that restricts your ability to freely sell the property. According to the VA, they “may guarantee a loan on which a title restriction limits the sale, lease, or occupancy of the dwelling to persons based on age, including a prohibition against the permanent occupancy of the dwelling by children, provided such restriction complies with applicable Federal law… VA may refuse to approve a property with an age restriction if its operation would work an undue hardship upon the owner in the case of sudden, unforeseen events or be likely to result in an increased risk of loan default.”

Buying a Condo

Condos are good for a single family that does not need as much space. They are cheaper to purchase and usually, the HOA manages the maintenance of the complex. They also can have amenities that make them an attractive option, like pools, a clubhouse, a gym, and more. You can buy a condo with the VA loan, but the process is slightly different than if you were buying a free-standing home. Since condos so often have title restrictions of some kind, if you want to buy a condo, the VA has to approve it first. The VA maintains a list of approved condominium complexes throughout the country to make this easier for you. If the condo you want to buy is not on the list, your lender can submit paperwork to the VA to try to get it added to the list; this is a complicated process. After your lender submits the paperwork, the VA will go through the condo’s documents and policies; it is important to keep in mind that this process can take sometimes. One of the requirements the VA has for a condo is that at least 50 percent of the occupants are the owners, not renters, and that at least 75 percent of the community has to be up to date on their HOA payments. If you are interested in a recently built condo, the VA will not approve it until at least 75 percent of the units have been purchased by others.

VA Home Loan Changes

Guest blog from American Financial Resources* It is a great honor to serve our military men and women, and VA home loans help us make home buying possible for many of these families. If you’ve served in the military, you should be aware of some of the big changes in VA home loans that were ushered in with the new decade. Policy changes enacted as part of the Blue Water Navy Vietnam Veterans Act of 2019** became effective on January 1, 2020. Veterans and active-duty service members may now have more borrowing power, but may also pay higher fees for new VA home loans in 2020. In addition to extending disability benefits to more Vietnam War veterans exposed to Agent Orange, the new law eliminates VA loan limits for borrowers with full entitlement to VA loans. However, the VA funding fee has increased for most borrowers. The exception being active-duty Purple Heart recipients. Members of the Armed Forces serving on active duty who are in receipt of the Purple Heart award are now eligible for the VA funding fee waiver, even if the Purple Heart was awarded during a prior period of military service.  Irrespective of the changes, the benefits of VA home loans remain the same. They have competitive interest rates and can provide 100% financing with no down payment required, among other advantages.    

No More VA Home Loan Limits


Removing the loan limits for new VA home loans is a huge win for veterans and military families for the new year. The elimination of loan limits doesn’t mean unlimited borrowing power. Borrowers will still need to have sufficient income and meet a lender’s credit requirements to qualify for the loan amount. The good news is that veterans stationed in costlier real estate markets can now stretch the zero-down buying power of their benefit. It is important to note that loan limits will still apply to veterans who have one or more active VA loans, or have defaulted on a previous loan. Existing loans will follow the same county guidelines set by the Federal Housing Finance Agency; which in 2020 is $510,400 in a typical county and higher in more expensive housing markets. If a homebuyer is subject to VA loan limits, the lender, like American Financial Resources, will require a down payment if the purchase price is above the loan limit. 

VA Funding Fee Increases for Some


The VA funding fee is a congressionally mandated fee associated with the VA home loan. For the next two years, veterans and service members will see a slight increase of 0.15 to 0.30% in their funding fee, while National Guard and Reserve members will see a slight decrease in their fee. Veterans with service-connected disabilities, some surviving spouses, and other potential borrowers are exempt from the VA loan funding fee and will not be impacted by this change. The VA funding fee paid will depend on the down payment amount and whether this is a first or subsequent VA home loan for the borrower. The fee for first-use, zero-down loans is 2.3% of the loan amount in 2020, up from 2.15% for active-duty military and veterans in 2019. The fee for subsequent use loans will be 3.6% of the loan amount, up from 3.3%. These fee levels will stay in place for two years, return to 2019 levels from 2022 through Sept. 30, 2029, and then drop further after that. Again, active-duty service members who have received a Purple Heart are now exempt from the funding fee.

Benefits of VA Home Loans


While it is important for eligible borrowers to understand the recent changes, veterans and active military should also be clear on the benefits of VA loans. 100% Financing VA loans are one of the only no-money-down options still available. Instead of waiting years to save up for a home, eligible borrowers can move forward with a home purchase, as well as borrow additional funds for renovations on the home, all with zero down payment. Locked-In, Low Interest Rates Since eligible borrowers can purchase or refinance a home, and the cost of repairs or updates, all in a single mortgage loan, a VA loan provides considerable savings when compared with other programs that might require a second mortgage. Fewer Added Costs Eligible borrowers using a VA loan not only enjoy limited closing costs with a single appraisal, but there’s also no mortgage insurance requirement, which could add up to savings on monthly mortgage payments. And, eligible borrowers don’t have to worry about being charged any prepayment penalties if they are able to pay off their mortgage earlier than expected. Continued Support If borrowers are experiencing periods of temporary financial difficulties and are struggling to make mortgage payments, the Department of Veterans Affairs can provide assistance to help them retain their home.  For 75 years, VA home loans have enabled thousands of deserving families to become homeowners. At AFR, we’re proud to provide these benefits to the brave men and women who have served our country and will continue to help many more generations of veterans come home. 

About American Financial Resources, Inc.


American Financial Resources, Inc. (AFR) is the leading FHA 203(k) lender for sponsored originations in the country and an innovator in the construction and renovation lending area, as well as being ranked among the nation’s leading mortgage lenders. AFR utilizes the latest technology and delivers educational resources to mortgage brokers, loan originators and their customers. American Financial Resources, Inc. is an Equal Housing Lender: Lender NMLS 2826 at https://www.nmlsconsumeraccess.org/. For more information, visit https://www.afrwholesale.com/ *Lender NMLS 2826. https://www.nmlsconsumeraccess.org/. American Financial Resources, Inc. (AFR) is a wholesale and correspondent lender. This is not a commitment to lend. All loans subject to credit approval. Guidelines subject to change without prior notice. This information is provided to assist business professionals only and is not an advertisement extended to the consumer as defined by Section 226.2 Regulation Z. Equal Housing Lender. Corporate Headquarters:  9 Sylvan Way, Parsippany, NJ 07054. https://www.afrwholesale.com/ ** https://www.benefits.va.gov/benefits/blue-water-navy.asp