2026 VA Home Loan Update: What Veterans Need to Know

Thanks to everyone who attended the session—especially April for the great questions. This post breaks down the most important VA home loan updates from 2025 and what could be coming in 2026.

All of these updates come from official VA Circulars, which are public revisions to the VA Lenders Handbook. Not every change immediately shows up in the handbook itself—sometimes updates live only in circulars—so staying informed matters. https://www.benefits.va.gov/homeloans/resources_circulars.asp

Let’s dive in.

1. 2025 FHFA Loan Limit Increases (And Why They Matter)

Every November/December, the Federal Housing Finance Agency (FHFA) announces new county loan limits. These primarily affect conventional loans—but they also impact VA loans in specific situations.

Key Takeaways:

• Baseline 2026 loan limit: $832,750

• High-cost counties: Up to $1,299,000

• VA typically matches FHFA loan limits shortly after they’re announced.

Important Clarification:

Loan limits do NOT matter if:

• It’s your first VA loan

• It’s your only active VA loan

Since 2019, if you have full entitlement and only one VA loan at a time, there is technically no loan limit. Your buying power is based on income and qualification—not county caps.

Loan limits only matter if:

• You’re keeping your current VA-financed property

• You’re buying another home with the remaining (partial) entitlement

That’s where the county cap becomes relevant.

Bigger Picture Perspective

When I started in 2017, the limits were nearly half of what they are today. They’ve essentially doubled in under a decade.

That means veterans gain:

• Equity in their homes

• Increased entitlement buying power over time

Two forms of leverage working in your favor.

2. VA Builder ID No Longer Required

For VA custom construction loans, builders are no longer required to obtain a VA Builder ID.

Previously:

• Builders had to be approved by the VA

• And also approved by lenders

Now:

• Only lender approval is required

It’s not a massive change, but it removes redundancy and simplifies the process slightly.

3. Reserve Requirement Changes (Big Update)

This one flew under the radar—there was no formal announcement. We learned it through actual underwriting scenarios.

Previous Rule:

If you owned investment property (or were converting your home into one), you needed:

• 3 months of reserves

New Update:

Reserves now depend on how rental income is used.

Scenario A: Using Rental Income From Tax Returns

If we use rental income to increase buying power:

• 3 months reserves required

Scenario B: Only Offsetting Mortgage Payment

If we’re simply offsetting your existing mortgage with market rent estimates (not using tax return profit):

• No reserves required

Example:

• Current mortgage: $1,500

• Market rent: $1,750

• We can offset up to $1,500

• We cannot use the extra $250 as income

• No reserves required in this case

This gives veterans significantly more flexibility when purchasing another home.

Purchase of a Multifamily Requirement:

• Multifamily purchases require 6 months reserves no matter what.

Retirement Accounts:

• Only about 60% of retirement balances can count toward reserves (due to taxes and penalties).

Important note: Just because reserves aren’t required doesn’t mean you shouldn’t have them. That’s a strategic conversation we always have.

4. Real Estate Commissions & Temporary Variance

There was national concern about VA buyers being able to pay buyer-agent commissions in 2024.

Here’s the reality:

Nothing dramatic changed.

VA buyers can now:

• Pay some or all of their buyer-agent commission

• Use it as a competitive strategy in multiple-offer situations

In markets like Washington State, we already navigated this years ago.

What Lenders Are Doing Now

Because this is a temporary variance:

• We are requesting Buyer Broker Service Agreements (BBSAs)

• We must verify the veteran has enough funds to cover commissions if they are paying them

It’s simply about: Cash to close qualification.

No re-pulling credit. No re-qualifying from scratch. Just verifying assets.

Best practice for agents: Submit the BBSA with the contract upfront.

5. Potential 2026 Legislation: Veterans Benefits Expansion Act

There is a proposed bill titled:

Sherry, Brill, and Eric Edmondson Veterans Benefits Expansion Act of 2025

Its purpose:

• Increase monthly disability compensation

• Improve benefits for surviving spouses

However, to fund these increases, it proposes:

Proposed Changes:

• VA funding fee exemption only for veterans rated 70% or higher

• Subsequent use funding fee increase from 3.3% to 4.3%

Current Status:

As of the latest update, the bill was voted down. It may be revised and reintroduced.

What Would the Funding Fee Increase Actually Mean?

Example on a $400,000 home:

Current 3.3% funding fee:

• Loan amount: $413,200

At 4.3%,

• Loan amount: $417,200

• ~ $4,000 more financed than the current 3.3%

Payment impact:

• Roughly $24 per month difference

  
  

On higher-priced homes, yes—it increases. But relative to:

• No down payment

• No mortgage insurance

• Easier qualification standards

The VA loan still remains extremely competitive.

The Tradeoff

The proposal also includes:

• ~$833/month increase in disability compensation (in some scenarios)

• Additional COLA adjustments

If monthly income increases outweigh the additional funding fee cost, the math may balance in favor of the veteran.

The controversial part? The 70% threshold for funding fee exemption.

Personally, I think 70% is aggressive. Perhaps 30–50% would strike a better balance.

But this conversation isn’t over yet.

Final Thoughts

Here’s what matters most:

• Loan limits continue to increase

• Reserve requirements are more flexible in certain scenarios

• Commission rules improve competitiveness

• Legislative changes are being debated

• The VA loan remains one of the strongest mortgage products available

I’ve built my career specializing in VA loans. Out of 600+ loans I’ve done nationally, fewer than 10 were non-VA.

That focus allows us to stay ahead of changes like these and protect veterans from surprises.

The VA loan isn’t perfect. But compared to other programs, it’s still incredibly powerful.

If you want to stay updated on changes like this, I’ll continue doing these monthly sessions and incorporating them into the VA House Hacker Program.

As always—if you have questions about entitlement, funding fees, reserves, or strategy—reach out!

We’ll run the numbers and make the math make sense.