Posted August 31, 2025

What’s New in VA Home Loans for 2025

As of 2025, the VA home loan program continues evolving—introducing powerful updates and protections aimed at enhancing homeownership opportunities for veterans, active-duty personnel, and surviving spouses. Here’s a rundown of the most critical changes to keep you informed.

1. Permanent Ability to Pay Your Buyer’s Agent

Starting August 10, 2024, the VA began allowing borrowers to directly compensate their real estate buyer-broker—a major shift from previous policies where this was prohibited.

Now, this change has been made permanent under the VA Home Loan Reform Act of 2025 (H.R. 1815), ensuring veterans can participate as equals in competitive markets where buyer-paid commissions are standard 

2. VASP Ends, New Partial Claim Foreclosure Relief Begins

The Veterans Affairs Servicing Purchase (VASP) program launched in May 2024 helped over 17,000 veterans by buying delinquent loans and offering a fixed 2.5% interest rate to prevent foreclosure. However, it officially sunset on May 1, 2025, leaving many veterans vulnerable—with as many as 58,000 potentially impacted.

Enter the VA Home Loan Reform Act of 2025, which introduces a partial‑claim foreclosure prevention option. Under this new five-year program, the VA can cover up to 25% of the unpaid principal (or 30% for loans impacted between March 2020 and May 2025), placing the amount interest-free at the end of the loan term for up to five years. This targeted relief replaces VASP with a more sustainable alternative.

3. Expanded Eligibility and Loan Flexibility

The service time requirement for active-duty service members and reservists has been simplified to just 90 days of active duty or training—an update that broadens access earlier in one's service journey 

Moreover, loan limits have effectively disappeared for veterans with full entitlement. While the conforming loan limit in most areas is now around $806,500 (and up to $1.2 million in high-cost counties), veterans with full entitlement face no cap—though lenders may impose their own limits.

4. Revised Funding Fees

The VA funding fee remains a one-time charge based on loan type, usage, and down payment—but with updated tiers for 2025:

• First-time users with <5% down: 2.15%
• With 5–10% down: 1.5%
• With ≥10% down: 1.25%
• Repeat users without sufficient down payment: 3.3%

Exemptions continue for veterans with service-connected disabilities, Purple Heart recipients, and surviving spouses.

Refinancing through the IRRRL (Interest Rate Reduction Refinance Loan) now carries a much lower funding fee of 0.5%, while cash-out refinances maintain higher rates similar to purchase loans AAFMAA.

5. New Tools for VA Construction Loans

If you're planning to build or renovate, VA construction loans have seen improvements in 2025:

• Builders no longer need a VA-specific registration or ID, meaning more flexibility and options.
• One-Time Close (OTC) construction loans are gaining popularity, combining construction and permanent financing into a single closing—saving you time, cost, and hassle.
• AI-powered underwriting is speeding up approval processes, sometimes completing in 15–20 business days versus the traditional 30–45.
• Loan limits follow the entitlement rules—unlimited with full entitlement, but subject to lender caps if your entitlement is partially used.

6. Market Outlook and Refinancing Trends

Veterans United’s 2025 market outlook forecasts gradual stabilization in mortgage rates, starting around 6.5% and trending toward 6.3% by year-end. Meanwhile, home prices are expected to grow about 3.2%, and seller concessions—like rate buydowns or covered closing costs—may become more common.  

Refinance activity should remain steady, with IRRRLs and cash-out refinances continuing to be attractive options for veterans seeking improved terms or tapping into equity. 

What Veterans Should Do Next

1. Explore foreclosure‑avoidance options early. The new partial claim program offers a structured method to address financial hardship.
2. Use your entitlement wisely. With full entitlement, you may qualify for high-value or construction loans with flexible terms.
3. Shop lenders familiar with VA plus AI-enabled underwriting. This can speed approvals and simplify paperwork.
4. Negotiate real estate agent fees. You can now pay your buyer’s agent directly and competitively.
5. Review refinance paths. IRRRL is especially efficient right now, with lower funding fees.

These updates reflect the VA's commitment to empowering veterans and active-duty families with more protections, flexibility, and homeownership pathways. Stay informed, leverage these benefits, and always consult a VA-savvy lender or counselor to navigate your options effectively.

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