Military Allowances Guide

military benefits

What are military allowances? These are different types of payment than your base pay, proficiency pay, hazardous duty pay, or others. An allowance typically meets a specific need or anticipates a certain need.

They may be needed to offset the cost of relocating to a new assignment, to help make family separations more affordable, or to offset the cost of buying food in a location where military mess halls or other options just aren’t available.

Military allowances such as BAS and the military housing allowance known as BAH are tax-exempt which makes them an important part of any military member’s budget. Many allowances are traditionally tax exempt. A new allowance created in the 21st century may be subject to federal taxes thanks to alterations in federal law for all allowances created after 1986; if a new allowance were created tomorrow it may be taxed unlike many of the others listed here.

To draw military allowances, you must either be authorized by your chain of command or you must apply (in certain cases) through your base finance office. Some allowances are “predetermined” meaning they have already been authorized for any new troops headed to the duty station. In other cases, individual determinations may be made based on a servicemember’s financial situation, the nature/location of the new duty assignment, and other factors.

There are multiple types of military allowances. They include, but may not be limited to:

  • Cost of Living Allowance
  • Basic Allowance For Housing (BAH)
  • Basic Allowance For Subsistence (BAS)
  • Clothing allowance
  • Dislocation Allowance
  • Family Separation Allowance

Cost Of Living Allowance

The Cost Of Living Allowance, also known as COLA, is offered to those who serve overseas. This benefit varies depending on location, is tax-exempt, and is meant to offset the higher cost of living at an overseas location.

The philosophy behind COLA is that it is meant to help “equalize purchasing power” for those assigned to a more expensive duty station including those in Alaska and Hawaii. COLA is calculated by comparing the prices of goods and services at the duty location, “with average prices for equivalent goods and services” within the continental United States.

There is a taxable stateside COLA known as CONUS COLA (CONUS is an acronym for the Continental United States) designed “to help offset higher prices in the highest cost locations” in the United States exceeding the typical costs of other U.S. assignments by eight percent or higher. This allowance is taxable because it was created after 1985 (see above). You must be authorized for COLA or CONUS COLA but in most cases, your eligibility for it is already known once you have your PCS orders in hand.

Military Clothing Allowance

The Military Clothing Allowance is offered as an offset for required uniform purchases that can include the service member’s initial uniform purchases in basic training, replacements for those purchases, plus clothing maintenance or repair.

The initial clothing allowance is paid when you enter basic training when you first report for active duty, and after completing a prescribed number of training periods as a member of a Reserve Component. Payment levels vary depending on a number of variables.

Cash Clothing Replacement Allowance And Extra Clothing Allowance

These two allowances are paid depending on the circumstances. The Clothing Replacement allowance is offered each year on the servicemember’s “anniversary month”. This money is meant to be used to replace uniforms as they age out of serviceability through normal wear and tear.

The Extra Clothing Allowance is more situational, it is paid only in cases where additional uniforms or civilian clothing might be needed for military duty. Your command may make the determination that you are entitled to this allowance, and it is not paid automatically.

Basic Allowance For Housing (BAH) And The Overseas Housing Allowance (OHA)

There are two types of tax-exempt military housing allowances. One is paid to those serving in the United States, the other is paid to those serving at overseas locations.

BAH is paid to those with military duty in the United States. OHA is paid to those who are assigned overseas and who do not live in government housing.

BAH rates are determined on an annual basis. These rates are set based on current economic factors, housing market data, and other variables.

Overseas Housing Allowances are paid to military members assigned overseas who won’t be living in on-base or government housing. You may or may not have all costs associated with living off base overseas covered via OHA. It’s not safe to assume this allowance will fully cover your expenses.

Pay rates for both OHA and BAH vary based on duty location, your rank, and any cost of living adjustments made for the new year. You can get information about the OHA or BAH rates for a new duty assignment by contacting the military finance office at that post or installation. Be sure to ask about the rates as they may be payable in the year you are PCSing in and don’t forget to factor in the timing of any military promotion that may make you eligible for more BAH or OHA.

Basic Allowance For Subsistence

The Basic Allowance for Subsistence, informally known as a Subsistence Allowance or BAS is a tax-exempt military allowance that can help offset the cost of a service member’s meals. BAS is offered when the federal government determines that an assignment or duty location warrants the allowance due to a variety of factors which can include the availability of kitchen facilities for service members to use, the cost of food or food-related expenses for the service member, and whether or not other food options are available.

BAS Is For The Servicemember

Family members (spouses included) do not qualify for BAS. The rate of payment is determined annually and is based on the USDA Food Cost Index. The rate of payment is based on whether the applicant is an officer or enlisted member.

All enlisted ranks earn the same BAS. The same is true for officers. No matter whether you are a “slick sleeve” Airman Basic or a Senior Master Sergeant, in 2022 the enlisted BAS rate was in the $400 range. Officers were paid just shy of $300 a month by comparison no matter if they are a Second Lieutenant or a full Colonel. These numbers are provided here as an example only; they are subject to change year to year based on a variety of factors.

How much can you expect from BAS? The rates in 2022 included an enlisted BAS rate in the $400 range. Officers were paid just shy of $300 a month for all ranks.

BAS II

BAS II is essentially BAS at double the normal rate and may be paid to enlisted members at a permanent duty station who must live in single/unaccompanied government quarters or at an assignment that does not have “adequate food storage or preparation facilities” according to the DoD. That can include situations where a chow hall is not an option or the government cannot provide alternative meal options.

This type of BAS requires additional authorization before it can be approved for troops to use at a given assignment. This is typically decided as a group policy for a duty location rather than making individual policy decisions for specific soldiers, airmen, etc.

Dislocation Allowance

You may draw a Dislocation Allowance (DLA) when it is time to relocate because of a permanent change of station or PCS. This allowance is meant to “partially reimburse” troops who must:

  • Make a permanent change of station move
  • Make a change of housing ordered by the federal government
  • Relocate due to an evacuation or similar event

DLA is meant to cover relocation costs not paid for through other allowances. It will typically NOT cover the full cost of a PCS move.

It’s good to know that members of the National Guard and Reserve do not qualify for DLA when coming onto active duty or departing active duty.

There is one exception–if you are placed on active duty for more than 20 weeks and are given PCS allowances AND you move your dependents from your home to a new permanent duty station you may qualify for DLA. Payment of DLA is not automatic and you must be approved to draw it.

Family Separation Allowance

Married service members who are given orders to an “unaccompanied” duty station where dependents cannot travel may qualify for a Family Separation Allowance. In 2022, this could pay up to $250 per month but numbers are always subject to change and the 2022 amount is listed as a reference only. Your experience may vary.

The Family Separation Allowance is paid from the day of departure from the home station and ends the day prior to returning to the home station.

It should be noted that this allowance is only paid in cases where the servicemember has been ordered to take an unaccompanied assignment. Those who volunteer to do so are not authorized to get the Family Separation Allowance.

The allowance is not automatic and must be applied for via completion and submission of DD Form 1561, Statement to Substantiate Payment of Family Separation Allowance. Contact your unit orderly room or base finance office to get assistance filling out this form or learning more about the Family Separation Allowance benefit.

Family Supplemental Subsistence Allowance

In some cases, Family Separation Allowance funds aren’t quite enough. In those cases, this need-based allowance may be authorized based on household income level and household size. This allowance is only offered for those serving outside the United States or its territories. This benefit is not automatic and must be applied for using DD Form 2857. Contact your base finance office or unit orderly room if you need help determining if this program is right for you.

 

VA Home Loan Guide

The VA loan benefit is designed to help qualifying active duty, Reserve, National Guard, veterans, and surviving spouses build, buy, renovate, or refinance a home. There are many options you can explore with a VA home loan and the Department of Veterans Affairs offers other housing assistance that can help you become or remain a homeowner.

READ MORE: VA Home Loan Basics

What Is a VA Mortgage?

A VA home loan is one that is guaranteed by the Department of Veterans Affairs. The VA loan guarantee reduces the risk for a lender to offer you credit, and because the government promises the lender to repay a certain percentage of the loan if you default, the lender can offer more flexible credit qualifying guidelines.

The VA itself does not loan money directly, except to those who qualify for the VA Native American Direct Loan. Instead, borrowers must shop around for a participating VA lender who has met VA requirements and has the VA’s approval to originate and close VA mortgages.

There are several government-backed mortgage loan programs. The FHA Loan program and the USDA loan program are two of the other options offered; because of the government guarantee, these loans may be easier to qualify for.

The difference with a VA home loan? No VA down payment requirements or mortgage insurance requirements in typical cases. There is also no penalty for early payoff of the loan when you decide it’s time to refinance or you decide to pay off the note ahead of schedule.

READ MORE: How to Apply for a VA Mortgage

What You Can Purchase with a VA Mortgage

VA home loans are typically used to purchase property types including, but not necessarily limited to the following:

  • Suburban homes
  • Mobile homes
  • Manufactured homes
  • Modular homes
  • Farm residences
  • Multi-unit residential properties up to four units
  • Townhouses
  • Duplexes
  • Condo units

READ MORE: Buying a Condo Unit with a VA Mortgage

VA loans are not allowed for investment properties. Occupancy is required for all VA purchase loans and in the case of farm residences, the non-residential value of the property is not considered for appraisal and loan amount determination.

VA loans for mobile homes and manufactured housing require that the home be affixed to a permanent foundation that meets federal guidelines and lender requirements as well as state/local building code. The home may not start out on a permanent foundation but must be secured to one as a condition of loan approval.

READ MORE: VA Home Loans for Mobile Homes and Manufactured Housing

VA Mortgage Loan Options

VA Loan options include purchase loans, cash-out refinance loans, the VA Interest Rate Reduction Refinance Loan also known as a VA IRRRL, and VA Native American Direct Loans. You can use a VA purchase loan to buy existing construction, build a home from the ground up, or to buy a fixer-upper you plan to renovate.

The No Down Payment Option

Around 90% of all VA loans are zero-down mortgages. However, there is an advantage to making a down payment; the VA Loan Funding Fee can be lower if you make a down payment of up to 10%. Making a down payment on a VA mortgage also reduces the principal balance of the loan, making a less expensive transaction overall.

You may not have a zero-down option if the price of the home exceeds the appraised value of the property and you choose to buy it anyway. You may also need to make a down payment if you buy a home with less than 100% VA loan entitlement (see below) and your loan exceeds the county loan limit for the area you are buying in.

READ MORE: Why You Should Consider a Down Payment On an FHA Mortgage

No VA Loan Limits for Qualifying Borrowers

If you have never used your VA loan benefit before, or have paid off your first VA loan (and applied for restoration of your entitlement), you do not have a VA loan limit on loans or refis in excess of $144,000. Those who do not have full VA loan entitlement are subject to VA loan limits.

The VA official site says borrowers may be required to make a down payment on a VA loan in cases where full VA loan entitlement is not available and the loan amount is over $144,000. You may find lenders typically require VA loan entitlement and/or a down payment that covers at least 25% of the total loan amount.

READ MORE: VA Loan Limits

VA Loan Credit Score Requirements

The Department of Veterans Affairs does not set or enforce credit score guidelines for VA loan products. This is left up to the participating lender. Typically you should expect FICO score requirements in the mid-600s for loan approval for more competitive interest rates and terms, but borrowers with lower credit scores may still have a chance at VA loan approval if there are compensating factors.

These can include making a down payment and having cash reserves you can use to show the lender you can truly afford the monthly payments you commit to with your VA mortgage.

READ MORE: What Credit Score Do I Need for a VA Mortgage?

VA Purchase Loan

VA loans can be used to purchase a variety of properties including condo units, farm residences, townhouses, houses with up to four living units, and more. The common factor among all these options? The house you buy with your VA mortgage must be your primary residence. Occupancy is a condition of loan approval.

You can build a new home, purchase existing construction, or buy a fixer-upper. Features of the VA Purchase Loan program include, but may not be limited to the following:

  • Competitive terms and interest rates thanks to the government guarantee to the lender.
  • You can borrow up to the Fannie Mae/Freddie Mac conforming loan limit with no money down. If you want to apply for a loan that is higher than this limit you may be required to make a down payment. There are nuances in this area which we will address below.
  • VA mortgages have no VA-required Private Mortgage Insurance or PMI.
  • VA loans have certain costs the lender is required to pay and which cannot be passed onto you.
  • VA loans have restrictions that prevent the lender from charging more than the actual cost of services such as pulling credit reports, survey fees, etc. The lender is also not allowed to charge you twice for the same service rendered.
  •  VA loans allow a servicemember and spouse to apply together for the loan, but VA loans do not allow other family members to use this benefit.
  • In most cases, you will apply through a VA lender. Those applying through the VA Native American Direct Loan program will get a mortgage loan directly through the VA.

READ MORE: VA Loan Questions and Answers

VA Cash-Out Refinancing

VA Cash-Out Refinance loans can be used to refinance any mortgage, current or delinquent, whether VA or non-VA. Cash-Out Refinance loans require a new appraisal, a new credit check, and the borrower must certify they intend to use the home as their primary residence. You cannot refinance investment properties with this VA loan option.

When refinancing with a VA mortgage, it is important to remember that VA loan rules do not allow you to skip a payment as part of the refinance transaction. That means that the final month’s payment on the original loan must be paid whether before the refi transaction or as part of it. Skipped payments are never permitted with VA mortgages.

READ MORE: What to Know About VA Home Loan Refinancing

Cash-Out Refinancing allows you to apply for a larger loan than the amount you currently owe and take the remainder in cash at closing once the original loan and other costs have been settled. This is the only type of VA loan that allows unrestricted cash back. All others are limited to the specific loan purpose for which they are intended (purchase, construction, etc.)

READ MORE: VA Cash-Out Refinancing Loans: Good or Bad Idea?

VA Interest Rate Reduction Refinance Loans (VA IRRRL)

The VA IRRRL, also known as VA Streamline Refinancing, offers the ability to refinance an existing VA mortgage. This type of refinance offers no cash back at closing time and must typically result in a benefit for the borrower such as a lower mortgage payment, a lower interest rate, or getting out of an adjustable rate mortgage into a fixed-rate loan.

VA IRRRLs do not permit cash at closing time, and no skipped mortgage payments are allowed. The benefit of this refinance option? There is no VA-required credit check or appraisal needed. Your lender may require one or both, but doesn’t have to according to VA loan rules.

READ MORE: What Is a VA Streamline Refinance?

VA Native American Direct Loans

VA Native American Direct Loans (NADL) are offered, as the name implies, directly from the VA and not from a participating lender. These loans cannot be offered to all VA applicants, only to qualifying Native Americans or those married to one. All NADLs must meet the following requirements:

  • You must intend to occupy the home purchased with a NADL and;
  • Your tribal government has a Memorandum of Understanding (MOU) with the Department of Veterans Affairs and;
  • You have a VA Certificate of Eligibility

All applicants must meet credit requirements and other typical mortgage loan guidelines.

READ MORE: VA Native American Direct Loans

VA Loan Eligibility

Your ability to apply for a VA loan depends on how long you have served. Typically those in uniform today have to serve 90 days or more on active duty before they can apply for a VA COE.

The clock on those 90 days will not start ticking until the basic training and career field training phase of a new recruit’s first term of service has ended and the service member is serving at their first duty station.

The full criteria for those who served on or after August 2nd, 1990 to the present day must meet one of the below:

  • 24 continuous months of military service OR;
  • The full period (at least 90 days) for which you were called or ordered to active duty OR;
  • At least 90 days if you were discharged for hardship, a reduction in force, or for convenience of the government OR;
  • Less than 90 days if you were discharged for a service-connected disability.

VA loan eligibility requirements for those who served before August 2nd, 1990 vary depending on the service era. The dates and details vary depending on the service era; learn what specific requirements are needed for your era of service or contact the VA directly for more information.

Some may be eligible for a VA mortgage even if they have not met time time-in-service requirements, or who have not served as an active duty, Guard, or Reserve member, and are not surviving spouses. These are typically those who have worked in the “Unformed Services” of federal agencies like the Public Health Service.

READ MORE: VA Loan Eligibility Exceptions

The VA Loan Certificate Of Eligibility

To start the VA home loan process, you must be eligible to apply for a VA Certificate of Eligibility (COE). You can request help from the lender to obtain this document, or you can apply online at VA.gov to get one. You also have options to apply by mail or in person.

Applying online, you can use eBenefits or the VA Web LGY portal if you are asking your lender to help you. You  can also apply by mail using a VA Request for a Certificate of Eligibility (VA Form 26-1880) and mail it to the address listed on the form. This is the slowest way to obtain a COE.

As mentioned above, the VA loan program is for Guard and Reserve members, too. Minimum service requirements apply to both, as we’ll examine below.

READ MORE: The VA Loan Certificate of Eligibility

VA Loan Eligibility for National Guard members

If you joined any time after August 2, 1990, you must serve 90 days of active duty service. If you served during any other area besides the present Gulf War era from August 2, 1990, to the present day, eligibility depends on the following requirements:

  • 90 days or more of non-training active-duty service, or
  • 90 days or more of active-duty service including at least 30 consecutive days (your DD214 must show 32 USC sections 316, 502, 503, 504, or 505 activations), or
  • Six years in the National Guard, and you received an Honorable discharge or
  • Six years in the National Guard and placed on the retired list

VA Loan Eligibility for Reserve Members

Those serving today typically must have 90 days of service. You may also have six years in the Selected Reserve and one of the following must apply:

  • You have an Honorable discharge or
  • You were placed on the retired list, or
  • You were transferred to the Standby Reserve or
  • You were transferred to an element of the Ready Reserve other than the Selected Reserve or
  • You continue to serve in the Selected Reserve

Applying for a VA COE in these cases is the same procedure as for active duty and veterans. You can ask the lender to help you get your COE, or you can apply online at VA.gov.

You can apply online using eBenefits, or the VA Web LGY portal if you are asking your lender to help you. Apply by mail using a VA Request for a Certificate of Eligibility (VA Form 26-1880) and mail it to the address listed on the form.

Read More: Who Qualifies For A VA Loan?

VA Loans for Surviving Spouses

Surviving spouses of military members who have died may be eligible for the VA home loan benefit. One of the following must apply:

  • Veteran is missing in action, or
  • Veteran is a prisoner of war (POW), or
  • Veteran died while in service or from a service-connected disability and you didn’t remarry, or
  • Veteran died while in service or from a service-connected disability and you didn’t remarry before you were 57 years old or before December 16, 2003, or
  • Veteran had been totally disabled and then died (conditions may apply)

According to VA.gov, a surviving spouse who remarried before December 16, 2003, and on or after their 57th birthday, “must have applied no later than December 15, 2004, to establish home loan eligibility.”

The VA states it will deny applications after December 15, 2004 from surviving spouses who remarried before December 16, 2003.

To apply for a VA Certificate of Eligibility as a surviving spouse, you will need to provide the veteran’s proof of service and discharge papers where applicable. You will also need a death certificate.

There are two basic circumstances a surviving spouse applies under. One is when you are receiving the VA benefit known as Dependency & Indemnity Compensation (DIC). If you currently receive this benefit, fill out a VA Request for Determination of Loan Guaranty Eligibility—Unmarried Surviving Spouses (VA Form 26-1817) and submit it to the Department of Veterans Affairs using the address listed on the form.

If you do not receive DIC, you will need to apply for it. Send the VA the following paperwork:

  • A completed Application for DIC, Death Pension and/or Accrued Benefits (VA Form 21P-534EZ), and
  • A copy of your marriage license, and
  • The Veteran’s death certificate

You can also get assistance from a participating lender to obtain your COE.

READ MORE: VA Dependency and Indemnity Compensation

The VA Loan Funding Fee

The VA loan funding fee is a standard cost of getting a VA loan. This fee is used to relieve the taxpayer burden of the VA loan program and is typically a percentage of the loan between 1% and 3.6% depending on the transaction.

The VA loan funding fee is a closing cost and may be paid in cash at closing or included in the loan amount. You must pay the fee in full, no partial payments in cash are allowed. Some borrowers are exempt from the VA loan funding fee. The VA official site says this is true for those who are:

  • Receiving or being eligible to receive VA compensation for a service-connected disability, or
  • The surviving spouse of a Veteran who died in service or from a service-connected disability, or who was totally disabled, and you’re receiving Dependency and Indemnity Compensation (DIC), or
  • A service member with a “proposed” or “memorandum” rating, before the loan closing date, saying you’re eligible to get compensation because of a pre-discharge claim, or
  • A service member on active duty who before or on the loan closing date provides evidence of having received the Purple Heart.

Some may be eligible for a refund of the VA funding fee–if you are not awarded a VA disability rating in time to have the fee waived you can apply for a refund once the VA has officially given you the award letter. Call your VA regional loan center at 877-827-3702 if you believe you are entitled to a refund.

VA Housing Grants

The Department of Veterans Affairs offers housing grants to veterans with qualifying disabilities. These grants are used to modify a home to make it more accessible and adaptable; there are grants for permanent residences as well as temporary ones.

VA Specially Adapted Housing Grants (SAH)

The VA SAH is meant to help you buy, build, or change a permanent home. You may qualify for this grant, offered for up to $101,754 in fiscal year 2022. That figure is provided as an example only, successive years may feature different funding. These grants are approved for those with a qualifying service-connected disability such as:

  • The loss (or loss of use) of more than one limb
  • The loss (or loss of use) of a lower leg along with lasting effects of an organic disease or injury
  • Blindness in both eyes (20/200 or less)
  • Qualifying severe burns
  • The loss (or loss of use) of one foot or leg after September 11, 2001 requiring braces, crutches, canes, or use of a wheelchair

A limited number of qualifying applicants are approved for a grant based on the loss of one extremity after September 11, 2001.

VA Special Home Adaptation Grant (SHA)

The VA SHA grant is intended to help buy, build, or change a permanent home. These grants, offered for $20,387 in 2022 (future grants may feature different funding amounts) for those with qualifying service-connected injuries:

  • The loss or loss of use of both hands
  • Certain severe burns
  • Certain respiratory or breathing injuries

Once awarded, the grant funds are there to be used as needed. If you do not use the full grant you can save the remainder for future improvements.

VA Temporary Residence Adaptation Grant (TRA)

A TRA is meant to make a home you temporarily live in more accessible. To use a TRA grant you do not need to own the property you live in, but you must qualify for one of the two grant programs listed above. The amount of TRA funding you receive will depend on which program you are approved for:

  • If you qualify for an SAH grant (see above) you may qualify for $40,983 (in FY 2022);
  • If you qualify for an SHA grant (see above) you may qualify for up to $7,318 (in FY 2022)

You can apply for all of these grant options via the eBenefits portal.

Things to Know About VA Loans

VA mortgages require credit qualification the way any major line of credit does. Being eligible for a VA mortgage does not equal loan approval. You can be eligible to apply for the loan but ineligible for loan approval if your credit does not meet participating lender requirements.

READ MORE: What You Need to Know About Credit Scores and VA Loans

VA loan rules are not the only guidelines for VA mortgages; other federal laws, state laws, lender requirements, and other factors may also play a part. Borrowers should know that it is not possible to apply for a larger VA loan than is needed to purchase the house with the goal of getting cash back at closing time.

VA loans, like most government-backed mortgages, do not allow unrestricted cash back at closing time except in the form of a refund for money paid up front and later financed into the loan.

If you need assistance with a VA loan, you can contact a VA Regional Loan Center for assistance. Be advised that at press time, these centers are closed to the public. The VA official site directs VA borrowers or applicants to contact a VA Home Loan Representative by calling 1-877-827-3702 during normal business hours.

 

 

VA Loan Eligibility Exceptions

The VA mortgage benefit is one of the most important military benefits you can qualify for outside of the GI Bill. But did you know that some who did not serve in the Army, Navy, Air Force, Space Force, Marine Corps, or Coast Guard could still qualify?

VA home loans typically require a minimum amount of time in uniform to qualify for the VA loan program. VA loan rules say that in typical cases, those serving today must meet a minimum 90-day active duty requirement and for those who joined in earlier service eras the requirement varies. But for some these rules don’t apply at all.

Some may be able to apply for a VA loan Certificate of Eligibility if they didn’t serve the full required time, and some may be able to get eligibility without having enlisted or getting a commission at all. This may be due to accepting a seat in a military academy, becoming a uniformed officer of the Public Health Service, or other options as we’ll explain below.

VA Loan Eligibility Exceptions For Military Members

You may still qualify for the VA loan program if you didn’t meet the time-in-service requirements if one of the following applies to you:

  • You received a hardship discharge
  • You were discharged at the convenience of the government after serving at least 20 months of a 2-year enlistment
  • You accepted an early out after serving 21 months of a 2-year enlistment
  • You were part of a Reduction in Force (RIF)
  • You have “certain medical conditions”
  • You have a service-connected disability

Some applicants are ineligible because of the nature of their military discharges. If you have an Other Than Honorable, Bad Conduct, or Dishonorable Discharge, you may have recourse by applying for a military discharge upgrade.

Contact the VA directly to learn how to initiate this process, but be advised that you are not eligible to apply for a VA loan until after the upgrade process is complete and the change is reflected on your official records.

Qualifying For A VA Loan In Other Ways

The VA advises those who served as a member in “certain organizations” that VA loan eligibility may be possible. Which organizations? They include but are not limited to:

  • Public Health Service officers
  • Cadets at the United States Military, Air Force, or Coast Guard Academy
  • Midshipmen at the United States Naval Academy
  • Officers of the National Oceanic & Atmospheric Administration (NOAA)
  • Qualifying merchant seaman during World War II

Note that in most cases, those eligible for a VA loan are either military or military adjacent. Midshipmen and Cadets are soon-to-be uniformed service members, and NOAA and the Public Health Service are among eight federal uniformed service programs.

The VA official site provides little detail about applying for a VA Certificate of Eligibility in such cases. It’s best to contact the VA directly at their toll-free number 1-800-827-1000 to discuss your needs and learn how to apply. You can also contact any VA Regional office near you.

Using A VA Loan

The procedure for using VA loan benefits once they are officially yours (by obtaining a VA Certificate of Eligibility or COE) is exactly the same in most respects. You will be required to credit qualify for the loan, you will be required to pay a VA loan funding fee unless you are exempt by virtue of receiving or being eligible to receive VA compensation for service-connected medical issues.

VA loans typically feature no down payment, no VA-required mortgage insurance, and there is no penalty for early payoff of the loan. You will be expected to pay your mortgage on schedule, and the participating lender must work with you to save your home if you get into trouble on your VA mortgage.

Like other VA loan applicants, those who apply for a VA COE are not permitted to transfer it to a dependent child or other relatives. The VA loan benefit is non-transferable. A surviving spouse of a military member who died as the result of active duty may qualify for a VA mortgage loan, but that is the only exception offered.

VA loans have a zero-down option which is applicable to all regardless of how you may qualify for the mortgage. But making a down payment can help offset the amount of your VA loan funding fee depending on how much you choose to put down. For some, this may not be a major concern, but if your goal is to save more money over the lifetime of the loan, a VA loan down payment may be a wise choice.

 

VA Loans: Why Credit Scores Matter

Credit scores are one “pillar” of VA loan approval, and combined with your loan repayment record and your history of income and employment, this information tells the lender a great deal about you as a potential credit risk.

But the credit score issue can be confusing for many. One of the most important things to know about VA home loans is that the Department of Veterans Affairs does not tell its participating lenders how to establish credit score requirements for VA home loan approval. There is no standardized or central VA loan standard FICO score “sweet spot” for loan approval.

Does that mean your credit scores do not matter and that the lender will not use them to qualify you for the loan?

No, it does not mean you won’t need acceptable FICO scores. The VA simply requires the lender to use FICO score requirements that are customary for the type of home loan you seek. Your credit scores will be a very important part of the loan approval process and not just for getting to “yes” on the loan.

What Are FICO Scores?

FICO stands for “Fair Isaac Corporation” and that company was instrumental in developing what we now use as a credit scoring model.

That scoring is, according to the Consumer Financial Protection Bureau, based on information submitted to and collected by credit reporting agencies. There are several ways to compute a credit score, but many lenders still use FICO scores as well as the information in your credit reports to determine your acceptability as a credit risk.

Credit scores are not the only factors used to determine your suitability for a home loan but they are a very important part of that equation.

What Is A “Good” Credit Score?

One of the big-three credit reporting agencies, Equifax, describes “good credit” scores as being in the 670 to 739 range. If you have credit scores below this range, you should NOT count yourself out of the running for a home loan, but you should know that lower credit scores could result in being offered less competitive terms and higher interest rates on your home loan.

Here is a list of credit score ranges you should know:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Excellent: 800-850

What FICO Scores Are Needed To Buy A Home?

One major lender, Rocket Mortgage, has credit requirements that may be fairly typical of a home loan lender; your experience may vary but according to Rocket Mortgage guidelines it’s possible to qualify for a conventional mortgage with FICO scores 620 or better. The same lender says on paper it may be possible to qualify for a government-backed loan such as an FHA or VA mortgage with FICO scores at 580 or better. However, these minimums may not qualify for the lowest rates or best terms. FICO scores in the mid-600s may be closer to ideal for a VA loan.

Shop Around

Credit scores always matter when it comes to VA home loans, but not all lenders have the same requirements and you may find a VA lender willing to work with your circumstances where others might not.

It always pays to shop around for a home loan for this reason and while you are looking for the right lender it is a good idea to explore your options as a first-time home buyer where applicable including the availability of any local down payment assistance programs that could help offset the cost of a more expensive mortgage if your credit scores don’t qualify for the best rates.

How Do I Improve My Credit Scores?

There are three factors to consider when trying to raise credit scores so you can qualify for a better interest rate and a cheaper VA mortgage. One is time. You will need to take at least 12 months to work on your history of on-time payments (a year or more of consistent on-time payments may go a long way toward improving your scores). You will need to lower your credit card balances over this 12-month period, too.

Can I Pay Someone Else To Repair My Credit?

You can, but you are essentially paying a third party to do things you can do yourself for free. And remember that no company can remove accurate negative credit information from your report. Anyone who promises you they can do so is not telling you the whole story and you should never pay a third party promising it can remove accurate data from your credit reports.

Your Credit Scores And VA Home Loan Approval

As mentioned above, lower credit scores aren’t necessarily a deal-breaker when it comes to buying a home but you should expect to pay more for the loan. This may include being offered a higher interest rate to offset the risk of the mortgage. You may be able to get your lender to agree to approve your loan application even with lower FICO scores if you have the ability to make a down payment or have large cash reserves.

Credit scores are important for any type of major credit application. Just because you are eligible to apply for a VA mortgage does not mean you will be approved for one; the lender must review your credit qualifications to make sure you are a good risk and that is in spite of the government guarantee on the loan.

The government promises to repay a portion of the VA loan should you default, but it does not promise to repay the whole thing.

What To Know About VA Home Loan Refinancing

There are important things to know about refinancing a home loan using a VA mortgage. The first thing to know is that not all VA loan options can be used to refinance a non-VA loan but there are options for those who do want to refinance a non-VA mortgage.

Not all refinance loans feature cash back to the borrower at closing time, and while some refi options allow you to refinance a delinquent loan, you won’t be permitted to skip a mortgage payment during the refinance.

VA Refinance Options

All VA refinance loan rules are found in the VA Lender’s Handbook, VA Pamphlet 26-7. There are VA Interest Rate Reduction Refinance Loans (see below), VA Cash-Out Refinance loans, and “Other refinance loans” as described in the Handbook.

VA Interest Rate Reduction Refinance Loans (VA IRRRL)

A VA IRRRL, also known as a VA Streamline Refinance, is described in VA Pamphlet 2y6-7 as, “…a loan made to refinance an existing VA-guaranteed loan, generally at a lower interest rate than the existing VA loan, and with lower principal and interest payments than the existing VA loan.”

VA IRRRLs are unique; they have no VA-required credit check or appraisal. You may find a lender is willing to underwrite these loans without one or both. But if you add too much to the loan amount and raise your monthly mortgage payment by too much, the lender may choose to require a credit check after all. Discuss this option with your loan officer to know what the conditions are in such cases.

Non-VA Mortgages?

VA IRRRLs can’t be used to refinance a conventional loan, an FHA mortgage, or any other non-VA home loan. You cannot get cash back at closing time except in the form of a refund, and the borrower will pay closing costs on the loan.

VA IRRRLs are typically required to provide a tangible benefit to the borrower in the form of a lower monthly payment, or a lower interest rate. The interest rate on these loans IS permitted to be higher than the current mortgage if the borrower is refinancing out of an adjustable-rate mortgage into a fixed-rate loan.

This is because typically the fixed interest rate will be a bit higher than an introductory rate or one that has had few rate adjustments in the meantime.

VA Cash-Out Refinancing

VA Cash-Out Refinancing is a VA-guaranteed loan that can refinance any loan on the home. What should you know about VA Cash-Out Refi options? They can be used to refinance a current or delinquent home loan, meaning you can catch up on any missed payments and get a fresh start with a new mortgage.

VA Cash-Out options are unique compared to FHA Cash-Out Refinancing (another government-backed refinance loan option) because VA cash-out transactions can be approved for up to 100% of the appraised value of the home. The FHA equivalent restricts cash out to 80% of the value.

What else should you know about VA Cash-Out refinance loans? They cannot be used to skip a mortgage payment. Your loan must be brought current by the new mortgage and all payments must be made. No government-backed mortgage loan program allows you to skip payments when refinancing.

VA Funding Fee Required

You will be responsible for paying a VA loan funding fee for a Cash-Out loan, and you have the option of financing the VA loan funding fee in full if you don’t mind the extra amount added to the mortgage. Remember the issues mentioned above related to adding too much to the loan amount?

Financing the funding fee may not be enough to warrant a credit check for a VA IRRRL, but if you finance the funding fee AND apply for a VA Energy Efficient Mortgage (VA EEM) package that adds extra loan funds for approved upgrades? A credit check may be in your future depending on circumstances. Discuss this with your loan officer to learn what the current requirements may be.

Refinancing With A VA Energy Efficient Mortgage Package (VA EEM)

A VA Energy Efficient Mortgage is not a separate home loan program, but rather an add-on to a VA purchase or refinance loan that adds extra loan money (above and beyond the approved loan amount for the appraised value of the home) for approved energy-saving upgrades.

A VA EEM can be a big help if you are buying an older home that needs some improvements. It can also potentially raise your monthly mortgage payment, especially if you add other items to the loan amount. For example, are you thinking about financing the VA loan funding fee? As mentioned above that could change the equation for your monthly payments.

VA EEMs are available for most VA loan transactions, you can get one when you purchase a new home or refinance a home, and you can even apply for one in conjunction with a construction loan to build a house on your own land. Doing so in those cases frees up more money for the other features of the construction project, but you will need to use an energy consultant to help plan and purchase the extra features you’ll include with EEM funds.

EEM funds cannot be used without restrictions. You won’t be able to get a check from your loan officer to use however you see fit. The lender may require you to use escrow to make your payments for labor and materials, and borrowers must stick to the approved project they and the lender agree upon. If you need unrestricted cash back at closing time, you will need to apply for a VA Cash-Out Refinance loan. Some projects are not possible with an EEM loan but your lender will have a list of approved uses for these loan funds.

Other Refinancing Loans

There is a section of VA Pamphlet 26-7 titled, Other Refinancing Loans. This is a very short portion of the rulebook and lists the following as other VA refi options to consider:

  • Refinancing construction loans
  • Refinancing installment land sale contracts
  • Refinances of loans assumed by veterans “at interest rates higher than that for the proposed refinance.”

There are very few additional details in this particular section of the VA rules, but VA refinance loans for these purposes “may not exceed the lesser of: the VA reasonable value plus the VA funding fee, or the sum of the outstanding balance of the loan to be refinanced plus allowable closing costs (including the funding fee) and discounts.”

The last line in the rulebook about these refi loans says that a VA Energy Efficient Mortgage package (see above) can be added to these refinance loans, too.

Talk to a participating VA loan officer about these additional options. Some may not apply unless you are building a home using a VA Construction Loan, and your options may be determined in part by state law, lender standards, and other variables. Don’t assume any VA loan product is unavailable to you without discussing your plans with a lender. You may have options to buy or refinance you didn’t realize you had.

 

Who Qualifies For A VA Home Loan?

Do you need to know about VA home loan eligibility requirements? Most who serve on active duty today are required to serve 90 continuous days on active duty before they can apply for a VA Certificate of Eligibility for a VA home loan. But what about members of the National Guard or the Reserve? What about veterans who retired or separated from active duty service years ago? Here is a list of the qualifying service eras and information on eligibility for qualifying surviving spouses.

VA Loan Eligibility For Veterans: Gulf War Era Veterans August 2, 1990, to Present Day

To qualify for the VA home loan program you must have served:

  • At least 24 continuous months, or
  • The full period of 90 days or more for which you were called or ordered to active duty, or
  • At least 90 days of service if discharged for a hardship, or a reduction in force, or
  • Less than 90 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: September 8, 1980, to August 1, 1990

To qualify for a VA mortgage as an enlisted member during this service era you must have served on active duty:

  • At least 24 continuous months, or
  • The full period (at least 181 days) for which you were called to active duty, or
  • At least 181 days if you were discharged for a hardship, or a reduction in force, or
  • Less than 181 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: May 8, 1975, to September 7, 1980

You meet the minimum active-duty service requirement if you served for:

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: August 5 1964 to May 7, 1975

The minimum active-duty service requirement if you served in this era includes:

  • At least 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: February 1, 1955, to August 4, 1964

The VA loan program’s minimum active-duty service requirement for this era includes active service for:

  • At least 181 total days, or
  • Less than 181 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: June 27, 1950, to January 31, 1955

You meet the VA Loan program’s minimum active-duty service requirement if you served for:

  • At least 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: July 26, 1947, to June 26, 1950

The minimum active-duty service requirement in this service era includes:

  • At least 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

VA Loan Eligibility For Veterans: September 16, 1940, to July 256, 1947

The minimum active-duty service requirement for the VA home loan program for this service area includes:

  • At least 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

VA Loan Eligibility For National Guard members

The minimum active-duty service requirements depend on when you joined. If you joined any time after August 2, 1990, you must serve 90 days of active duty service. If you served during any other area besides the present Gulf War era (August 2, 1990, to the present day) you must meet the following requirements:

  • 90 days or more of non-training active-duty service, or
  • 90 days or more of active-duty service including at least 30 consecutive days (your DD214 must show 32 USC sections 316, 502, 503, 504, or 505 activations), or
  • Six years in the National Guard, and you received an Honorable discharge or
  • Six years in the National Guard and placed on the retired list

VA Loan Eligibility For Reserve Members

Like members of the National Guard, if you serve today (anytime after August 2, 1990) you must have 90 days of service. You may also have six years in the Selected Reserve and one of the following must apply:

  • You have an Honorable discharge or
  • You were placed on the retired list, or
  • You were transferred to the Standby Reserve or
  • You were transferred to an element of the Ready Reserve other than the Selected Reserve or
  • You continue to serve in the Selected Reserve

VA Loan Eligibility For Those Who Do Not Meet Minimum Service Requirements?

Were you given a military discharge for one of the reasons below? You may still be able to request the VA loan benefit. Much depends on your circumstances:

  • Hardship
  • The convenience of the government (after serving 20 months of a two-year enlistment)
  • Early out (after serving 21 months of a two-year enlistment) 
  • Reduction in force
  • Certain medical conditions
  • A service-connected disability

VA Loan Eligibility For Surviving Spouses

You may be eligible for the VA home loan program if you are the surviving spouse of a veteran who has died, is missing, or declared a prisoner of war. If this applies to you, contact the Department of Veterans Affairs directly at 1-800-827-1000 to discuss your circumstances and how to apply.

The rules for surviving spouses are unique and you should get help from the VA and from your participating lender to start the process. In general, surviving spouses may qualify if one of the following applies:

  • The veteran is declared missing in action
  • The veteran is a prisoner of war
  • The veteran died while in service or from a service-connected disability and the surviving spouse did not remarry
  • The veteran died while in service or from a service-connected disability and you didn’t remarry before you were 57 years old or before December 16, 2003, or
  • The veteran had been totally disabled and then died (not necessarily service-connected)

Others Who May Qualify For A VA Mortgage

There are other Americans who may qualify for a VA home loan. They include anyone who served in the military of a government “allied with the United States” during World War Two, plus members of “certain organizations” according to the VA official site. They include:

  • Public Health Service officers
  • Cadets at the United States Military, Air Force, or Coast Guard Academy
  • Midshipmen at the United States Naval Academy
  • Officers of the National Oceanic & Atmospheric Administration
  • World War Two-era Merchant seamen

Contact the Department of Veterans Affairs for more information on how to apply for VA loan benefits if any of the above applies to you. A participating lender can help you obtain a VA Certificate of Eligibility to help you get started on your VA loan journey.

 

VA Home Loans Vs. Other Mortgage Options

The VA home loan is an important military benefit. The ability to apply for a mortgage with no down payment and no VA-required mortgage insurance premiums are two major financial incentives to choose a VA mortgage. But how do VA loans compare with other types of mortgage loans?

When comparing government loan programs such as VA, FHA, and USDA, certain features are common. A low or no-down payment option (depending on the loan program) could help new borrowers save more upfront on the loan than some conventional equivalents. But some alternatives to the VA home loan may cost more because of costs like mortgage insurance premiums.

VA Mortgages Versus USDA Home Loans

The similarities between these two programs are important. Both feature zero-down home loan options, and both are government-backed mortgages with potentially lower interest rates than some conventional equivalents. With two government loan programs offering no-money-down options, why doesn’t everyone consider a USDA loan? There’s no military service requirement for USDA which on the surface seems to make it far more accessible.

But USDA loans are typically approved for low-to-moderate-income borrowers and offered to those who meet household income limits (unlike VA and FHA mortgages, you can actually earn too much to qualify for a USDA home loan.

USDA loan guidelines include certain exceptions to household income limits (depending on a number of variables) if you purchase property in a targeted area. Like VA mortgages, USDA loans require occupancy; unlike VA mortgages, you may be limited in your ability to rent out unused living units in your home depending on the nature of your USDA loan.

Rules For Occupancy, Rentals

VA loans have no restrictions on you renting out an unused unit on the property you buy with the VA mortgage. But you must be an owner-occupier in typical cases. VA loan rules for refinancing these properties may vary when it comes to occupancy. Ask a participating lender about these rental issues and what the terms of your legally binding purchase contract commit you to.

USDA loans come with many of the same options as VA mortgages; you can apply for a home loan to buy new construction or existing construction homes. Both programs allow you to consider housing options like condo units, planned unit developments or PUDs, You can also purchase a modular or manufactured home using a VA or USDA mortgage.

Loan Fees

FHA loans don’t feature an exact equivalent of the VA Loan Funding Fee, but you will be expected to pay an FHA loan origination fee and an Up-Front Mortgage Insurance Premium. Unlike VA mortgages, FHA loans do not require you to apply for a Certificate of Eligibility, but you will be required to verify a minimum amount of time as an employed person. Two years is typical, but your lender will tell you what the specific requirements are.

 

Get a free, no-obligation consultation regarding your VA Loan!

 

VA Mortgages Versus FHA Home Loans

FHA loans, like VA mortgages, are government-backed home loans with potentially lower interest rates than some conventional equivalents. FHA loans do not have a zero-down option, which puts them at a big disadvantage compared to the VA loan program.

To qualify for an FHA mortgage you will be required to make a minimum 3.5% down payment and unlike VA loans you are required to carry mortgage insurance for either 11 years or the lifetime of the FHA home loan, depending on your loan-to-value ratio and other factors. VA mortgages have no VA-required mortgage insurance guidelines.

Both VA and FHA mortgages allow you to apply for an add-on to the loan called an Energy-Efficient Mortgage or EEM package. This provides extra loan funds for approved upgrades and improvements that create a more energy-efficient home. For both VA and FHA mortgages, you may be required to hire an energy consultant, and the loan funds can only be used for their intended purpose, no unrestricted cash back to the borrower is allowed with VA or FHA EEMs.

Occupancy Rules And Property Types

VA and FHA loans are similar in many ways including occupancy requirements. You will be required to use the home you buy with an FHA mortgage as your primary residence. Both VA and FHA mortgages allow the purchase of properties with one to four living units. You can buy condo units, townhomes, duplexes, multi-unit homes, and even farm residences (the residence only, not a farm business) with VA and FHA loans.

VA and FHA loans both allow you to purchase mobile homes, manufactured housing, or modular homes. Both programs have specific requirements for these homes including the need for a permanent foundation. No property can be purchased with VA or FHA loans that do not meet the foundation requirement, and you cannot purchase something like an RV or houseboat that cannot be legally classified as real property.

VA Loans Compared To Conventional Mortgages

Up to this point, we’ve compared government loan programs to each other. But how does the VA loan program match up to conventional mortgages? For starters, there is no single boilerplate conventional mortgage, so a broad comparison can be helpful but you will need to know the terms and conditions of a specific conventional loan for a more accurate comparison.

For example, did you know that many conventional lenders will offer home loans without an occupancy requirement? That’s not true of FHA, USDA, or even VA mortgages. You can get a conventional loan for a residence or an investment property. The investment option is not available with a VA mortgage.

There is generally no such thing as a no-money-down conventional mortgage; in order to avoid having to pay a mortgage insurance premium, you are typically required to pay 20% down or more. That 20% rule is one reason why some have a misconception that you are required to pay 20% down on a conventional loan. It’s not required UNLESS you don’t want mortgage insurance.

Zero-Down Conventional Home Loans?

There is one circumstance where you could have an option for a zero-down conventional mortgage; if you are looking for a construction loan to build a home instead of buying an existing property you may be able to use land equity in place of a down payment. Naturally, this applies to those building a home on land they already own, not land they must purchase in conjunction with the mortgage.

VA loans are different from conventional mortgages in some important ways. There is something called the VA Loan Escape Clause, which requires lenders and sellers to abide by rules about the valuation of the home. If the appraised value comes in lower than the sale price the borrower can walk away from the deal without penalty. That includes earnest money–you cannot be required to forfeit earnest money on a VA mortgage in such cases.

Other Issues

Another difference; VA loans do not allow a penalty for early payoff of the loan or for paying more than your monthly mortgage payment minimum. You cannot be charged simply for paying off early, which makes refinancing your mortgage cheaper. It also protects you from a potentially larger final payment when the time comes.

Conventional loan fees and charges will vary greatly; VA mortgages allow certain lender fees to be passed on to the borrower. Unlike some conventional loans, there are VA guidelines about such fees. Some can never be charged to the borrower, and the way certain fees are charged is also regulated under the VA home loan program. Your participating VA lender cannot charge you more than the actual cost of pulling your credit report, for example. You cannot be charged for the lender’s legal counsel, and you cannot be charged duplicate fees for a single service.

When comparing loan options, it’s important to ask many questions. Don’t commit to a loan you do not fully understand, and don’t use a lender who seems evasive or won’t answer direct questions.

 

>> Get a free, no-obligation consultation regarding your VA Loan!  Get started today!

 

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How to Use a VA Mortgage

The VA Home Loan program is one of the most popular non-medical military benefits you can use. Only the GI Bill rivals the VA loan program in terms of its visibility and usefulness, but some of the VA loan program’s options aren’t as well-understood.

For example, did you know that when you are approved for a VA mortgage you have the option to refinance the loan later with a Streamline Refinance? These refi loans feature no VA-required credit check or appraisal and typically must result in a benefit to the borrower like a lower mortgage payment.

The no-credit-check option for such loans is a very important one, and many borrowers aren’t even aware of this option when they request a VA Certificate of Eligibility to get started. What other features of the VA Home Loan program could help you along the way?

How to Use a VA Mortgage: Build a Home

Some borrowers don’t realize you can use a VA loan to buy existing homes or use a VA mortgage to build a home from the ground up. VA Pamphlet 26-7, the VA Lender’s Handbook,  has a section in Chapter Three that states VA loans can be used to “purchase or construct” a residence you want to use as your home.

You can use your VA loan to build the home, but you can also use part of the loan to purchase the land the home is built upon. You also have the option of using your VA loan benefits to build on land you already own. What you cannot do is buy “unimproved land” with a VA mortgage without plans to build upon it. VA mortgages cannot be used to purchase land alone.

You can use a VA mortgage to build a home with up to four living units plus one “business unit” according to Chapter Three; more units may be possible in cases where two or more veterans are using their VA loan benefits together in a “joint loan”. Ask your loan officer about this option if you need to consider it.

 

Get a free, no-obligation consultation regarding your VA Loan!

How to Use a VA Mortgage: Buy A Mobile Home Or Manufactured Home

VA mortgages include options for manufactured homes, modular housing, and mobile homes. In all cases, the housing must be mounted on an approved foundation in its final disposition. That is a condition of loan approval and no property is eligible for a VA mortgage unless it can be classified legally as real estate. That is true even if the property is not taxed as such.

A home without a permanent foundation does not qualify for a VA mortgage. In cases where a modular or manufactured home is purchased and delivered, it must be fixed to an approved foundation according to a time frame you and the lender agree upon (or one that is imposed by lender standards).

Recreational vehicles (RVs) and houseboats cannot be placed on permanent foundations, so they do not count as eligible properties you can buy with a VA mortgage.

How to Use a VA Mortgage: Buy A Condo, Townhome, Or Duplex

You can buy a condo unit with a VA mortgage. You can also buy a townhome or duplex. All three property types fall into those generally approved for a VA loan but each property type must meet VA standards. For example, if you buy a condo unit your condo owner’s association agreement cannot restrict you from freely selling or transferring the property anytime you wish. Some condo owner association bylaws may include something called the Right of First Refusal, which means the condo association gets to approve or veto the sale of an individual unit.

VA loan rules do not permit your ability to sell or transfer your home to anyone you wish, so any such clause would have to be struck from your legally binding agreement in order to qualify for a VA home loan.

How to Use a VA Loan: Refinance An Existing Mortgage

Not all VA borrowers are first-time borrowers. Do you already own property? Do you need to refinance that mortgage? VA mortgages are government-backed loans which may mean lower interest rates if you refinance using one (depending on circumstances).

You can use a VA Cash-Out Refinance for any type of non-VA mortgages such as an FHA or conventional loan. Lender standards may apply but in general, you may find credit standards and interest rates on government-backed loans more competitive than some conventional equivalents.

There is also the option to refinance an existing VA mortgage; borrowers can apply for a Streamline Refinance (see above) or VA Cash-Out Refinances but with VA Cash-Out Refinance loans a credit check and appraisal are always required.

How to Use a VA Loan: Buy And Improve A Home At The Same Time

The VA Lender’s Handbook, Chapter Three, says VA mortgages can be used to simultaneously buy and improve a house. There may be multiple ways of doing this but one option that is popular among VA borrowers?

The VA Energy-Efficient Mortgage add-on allows extra loan funds for your VA purchase or a VA refinance loan. These extra funds are used specifically to add energy-saving upgrades to the home. These upgrades must be approved and you may be required to hire an energy consultant as part of the process.

What You Need to Know About Using A VA Mortgage

VA loans are not available from all lenders; only participating VA lenders are authorized to approve loans under this program. Furthermore, not all VA lenders offer all VA loan products so shopping around for the right financial institution is key. A number of variables including the nature of the local housing market, supply and demand, and lender willingness all contribute to the decisions to offer certain VA loan options like condo loans or mobile home loans.

Using a VA mortgage means the option to get a zero-down payment mortgage, which is a big advantage for borrowers who need to save more money upfront on the loan. But no-money-down isn’t always the right choice, especially for borrowers who have a priority of saving money over the full duration of the loan term.

5% Down VA Loans?

In those cases, making a 5% or 10% down payment makes sense because it lowers the VA Loan Funding Fee you must pay as part of the costs of the loan. Not all borrowers have to pay the VA loan funding fee. If you receive or are eligible to receive VA compensation for service-connected medical issues, you may apply for a waiver of the VA Loan Funding Fee.

The waiver is not automatic and you must have your VA rating in your official VA medical records in order to claim the waiver. If you apply for a VA loan and you do not have a VA decision on a disability rating you may apply for the waiver once the VA has formally listed your rating in your records.

Appraisal vs. Asking Price

Some borrowers may have to make a down payment if they are buying a house that appraises lower than the asking price. You can’t be forced to buy a home with a VA loan under such conditions thanks to something called the VA Loan Escape Clause. But if you choose to buy the home even though it sells higher than the asking price, you would be required to pay the difference between the appraised value and sale price in cash at closing time.

And finally, you should know that your VA loan benefit can be used together with a legally married spouse, but you cannot transfer your VA loan benefit to others the way you are allowed to under the Post 9/11 GI Bill with those benefits. You can apply for a VA loan with a non-VA borrower but the VA loan guarantee only applies to the veteran borrower’s portion of the loan. The non-veteran, non-spouse applicant has no VA loan benefits to use.

 

>> Get a free, no-obligation consultation regarding your VA Loan!  Get started today!

 

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VA Home Loan Rule Changes

When was the last time you explored your VA loan options? If it’s been a while, some aspects of the program may be quite different for you. In 2020, there were alterations made to the VA home loan benefit thanks to legislation known as the Blue Water Navy Vietnam Veterans Act of 2019.

Some of these are major changes, others affect small-but-important groups of veterans. If you haven’t explored your VA home loan benefits in a while the following changes may be new to you.

VA Loan Funding Fee Changes

Some adjustments to the VA Loan Funding Fee were made to create parity between active duty, Guard, and Reserve fees. At one time the VA Loan Funding Fee varied depending on whether you were on active duty or in the Guard/Reserve.

Under the current rules, the VA loan funding fee is charged based on the amount of any downpayment you choose to make and that fee is currently the same for first-time use no matter if you are on active duty or not.

Another change made to the VA Loan Funding Fee rules allows Purple Heart recipients to apply for a waiver of the VA loan funding fee. This must be done while the service member is on active duty.

VA loan funding fees aren’t charged across the board. Any VA borrower who received or is entitled to receive VA compensation for service-connected medical issues can apply to have the fee waived.

However, this waiver is not automatic and if the VA has not made a final determination at the time you apply for the VA loan you may be required to pay the VA loan funding fee and apply for a refund once the VA has updated your files with its disability rating decision. This refund is not automatic and you will be required to submit supporting documentation to be approved.

No VA Loan Limit For Those With 100% VA Loan Entitlement

If you looked at your VA loan options prior to 2020, your loan choices would have been informed by the VA loan limits in your county for that calendar year. If you look at your VA loan options now and have either never used your VA loan benefit or have had your entitlement restored to 100%, you have NO VA LOAN LIMIT.

You will negotiate the loan amount with a participating VA lender. You can get a zero-down VA home loan even in high-cost markets and technically you may qualify for a zero-down VA Jumbo Loan if you meet lender standards for that larger mortgage.

The lack of a VA loan limit does not mean there are no restrictions on the loan. As the Department of Veterans Affairs reminds us, “…borrowers seeking to use their VA home loan guaranty benefit still must qualify for a loan, based on credit and income requirements set forth by VA.”

Your participating VA lender will review your credit scores, repayment history, income, and other criteria to see if you qualify for the loan and use your FICO scores to determine the interest rate.

No Loan Limit on VA Native American Direct Loans

In general, the Department of Veterans Affairs does not lend money directly to VA borrowers. Instead, the VA relies on a network of participating VA lenders who operate with the approval of the VA.

The one exception is the VA Native American Direct Loan program which at one time featured a loan limit of $80 thousand for those who were interested in and entitled to build or buy a home on Federal Trust lands. The Blue Water Navy Vietnam Veterans Act removes this loan limit.

There are approximately 100 tribes that have a memorandum of understanding with the federal government that enables this program; contact the Department of Veterans Affairs directly to learn if you may apply.

 

 

 

VA Loans, Down Payments, and Gift Funds

You may not be required to make a down payment for a VA home loan, but some borrowers choose to do so to lower the amount of the VA loan funding fee and get a lower starting balance on the mortgage. In such cases, a borrower might seek some kind of down payment help to offset the upfront cost. Can a VA borrower accept gift funds from a family member, friend, or employer to help the borrower purchase a home? In general, down payment gifts are common in mortgage loan transactions, but they tend to be heavily regulated.

Why? In most cases, it has to do with a requirement that home loan gift funds not come from third parties with a financial stake in the outcome of the loan. Such gift funds also cannot come from unapproved sources like payday loans.

Down Payment Gift Funds

There are two general “classes” of gift funds for mortgage transactions. One type of gift is the money that a friend or family member might provide to help offset closing costs or the downpayment. This money must be properly sourced; no payday loans, credit card cash advances, or pink slip loans can be used to obtain the gift funds. We’ll discuss that in more detail below.

The other “class” of gift funds is the kind you might be able to obtain from a state or local program. Most states offer downpayment and closing cost assistance programs for low-to-moderate-income applicants who meet program guidelines.

Downpayment help from these agencies may be forgivable, or it may be offered as a loan that is only repaid under certain conditions like selling the home before the loan term expires. But there may be borrower qualifications such as a household income cap or requirements that you buy a property in a “targeted area”.

Not all downpayment assistance programs have such restrictions but many do. It will be important to know what it takes to qualify and under what circumstances you might be required to repay such assistance.

Down Payment Gift Letters Are Required From Your Donor

Your lender will require a “gift letter” from the gift giver certifying the gift is not a loan in disguise; they must declare in writing in a legally binding document that the gift funds came from acceptable sources such as money saved over time, cashed-in investments or bonds, or other sources that do not involve non-collateralized loans or money that cannot be properly sourced by the lender.

Additionally, some lenders may require such gift funds to be “seasoned” or left in a bank account for a minimum period of time such as three months. This requirement may vary depending on the lender.

Contents Of The Gift Letter

VA loan rules require the gift letter mentioned above to contain the following elements:

  • The donor’s full name and contact information
  • The donor’s relationship with the VA borrower
  • The dollar amount of the gift
  • A donor statement that no repayment is expected

Does the Department of Veterans Affairs permit these gifts for a VA loan? The answer is technically yes, but the funds must meet VA loan program guidelines found in VA Pamphlet 26-7, Chapter Four.

VA Loan Rules For Down Payment Assistance And Gift Funds

As mentioned above, VA Pamphlet 26-7, Chapter Four is the source for guidance about gift funds and down payment help. The first thing you’ll notice about this portion of the VA loan rulebook is that there is a consistent requirement to document the funds, when they are deposited, and the status of that money once it is transferred.

The other rule that plays a big role in how gift funds can be used involves where this money comes from. We already discussed rules about payday loan funds and other non-collateralized loans, but the VA also has strict rules about who can offer these gifts. You are not permitted to provide gift funds for a VA loan if you have any association with the loan as a third party:

  • Builders
  • Developers
  • Real estate agents
  • “Any other interested party” to the VA loan

You may not be permitted to provide gift funds if you have an association with any of the above or the lender determines you are otherwise financially affected by the outcome of the transaction.

When gift funds are being provided the lender is required under VA loan rules to “verify that sufficient funds to cover the gift have been transferred to the borrower’s account”, or that the money will be received at closing time.

When the transfer is made the lender needs proof that the deposit was sent (a copy of the check or transfer receipt) and that it was received (a copy of the deposit record for the gift money).

 

VA Home Loans Fact & Fiction

What do you need to know about VA mortgages before applying for one? Sometimes half the battle is knowing the facts and ignoring the myths and half-truths.

VA Loan Facts: Many Housing Types Are Possible

You can use a VA loan to buy, refinance, or renovate a suburban home, condo unit, mobile home or manufactured home, or even a duplex or multi-unit property. You can also buy a farm residence with a VA mortgage, but you cannot use a VA loan to buy a farm BUSINESS. A VA loan can be approved for residential property that is taxable as real estate, which means that RVs and houseboats don’t qualify. Nor does a mobile or manufactured home that won’t be placed on a permanent foundation.

VA loan rules do allow borrowers to consider a mixed-use or mixed zoning property as long as it is primarily residential and the non-residential use of the home does not interfere with it being a home.

It may be tougher to get VA loan approval for residential homes that don’t have any comparables on the housing market. You may not find a lender willing to offer home loans for tiny houses or other “fad architecture” properties. The age of the property may or may not be a factor in some cases; VA loans can be used for existing construction or new construction but an appraisal is required and the home’s “remaining economic life” may be a factor in loan approval.

VA Loan Fiction: Loan Limits

If you have 100% of your VA loan entitlement you do NOT have a VA loan limit the way conventional mortgages and FHA home loans do. That does not mean you can borrow any amount you want, you will need to discuss your purchase with a VA loan officer to determine what the upper limit of the mortgage will be in your case. Remember that you cannot apply for more home loan than you need with the expectation of getting cash back at closing time. VA loans like other residential mortgages, generally do not permit this except in the form of refunds for money paid upfront.

If you do not have 100% VA loan entitlement, you will be subject to a VA loan limit as established per county in each zip code.

 

Get a free, no-obligation consultation regarding your VA Loan!

 

VA Loan Facts: Loan Entitlement

If you pay off a VA loan, you can apply for a one-time restoration of your VA loan entitlement without selling the home you purchased with your previous VA mortgage. If you refinance a VA loan with a VA Cash-Out Refinance, you have your loan entitlement restored because you paid the original loan off in full as part of the refinance process. If you are still paying on a VA mortgage but have remaining entitlement, you can use that amount for a new VA mortgage but keep in mind that the new loan will require occupancy as a condition of loan approval.

VA Loan Facts: Occupancy Rules Can Be Satisfied With Family Members

VA loans, like most government-backed home loan programs, require occupancy. The VA loan program recognizes that military borrowers are subject to deployments, permanent change of station moves, and other circumstances that may take them away from the home for extended periods of time. A spouse or dependent child who meets VA requirements can occupy the home in the borrower’s place to fully meet the VA occupancy requirement. VA loans don’t penalize the borrower for being deployed or reassigned.

VA Loan Facts: No Down Payment

While it IS true that VA home loans do not typically require a down payment, you could be required to make one of you choose to buy a home that has a sale price higher than the appraised value. Some borrowers may be asked to consider a down payment as a compensating factor for lower FICO scores, but that is a lender standards issue and not a VA home loan rule.

VA Loan Fiction: Mortgage Insurance

Conventional loans require private mortgage insurance. FHA mortgages have a mortgage insurance premium. VA loans, on the other hand, do not require either one. Remember that mortgage insurance is not the same as homeowner’s insurance or hazard insurance. Some people assume a typical mortgage might require you to put 20% down, but this is true of conventional loans where the borrower wants to avoid paying mortgage insurance.

VA Loan Facts: You Can Refinance A Non-VA Loan With A VA Cash-Out Refinance

Non-VA mortgages can indeed be refinanced using a VA Cash-Out Refinance loan. Non-VA loans cannot be refinanced with a VA Streamline Refinance loan which is intended for existing VA mortgages only and must result in a tangible benefit to the borrower.

VA Loan Fiction: You Can Buy Investment Property With A VA Loan

VA loans cannot be approved for Air b-n-b operations, bed-and-breakfasts, sorority or fraternity houses, vacation homes, second homes, time shares, or other properties you don’t intend to use as your home address. You cannot purchase a business with a VA mortgage, nor can you buy a non-residential property. There is a very easy way to understand VA loan rules for occupancy. If you do not intend to live in the property you buy with a VA purchase loan, you won’t be approved for the VA mortgage. Occupancy is a requirement to buy a home with a VA mortgage.

VA Home Loan Facts About Loan Eligibility

It is true that VA loans have different eligibility requirements depending on when you joined. Most people serving today on active duty as new recruits will need 90 continuous days of military service before applying for a VA Certificate of Eligibility or VA COE.

You can apply for your VA COE through the VA eBenefits portal, you can also get your loan officer to help you. But if you apply via your loan officer, don’t expect to get your Certificate if you apply before your minimum time in uniform has passed.

That may seem fairly obvious to some, but it’s easy to forget that for new troops serving on active duty today, 90 days of continuous service does not start counting down while in boot camp or advanced training such as Advanced Individual Training.

VA Loan Facts: Counting Down To VA Loan Eligibility

Your eligibility starts when you have graduated from the training phase and move into your first active duty assignment. For some troops, this may be a few weeks or months, but for some who require advanced training such as at the Defense Language Institute, the wait could be longer.

Your eligibility for the VA loan benefit is NOT the same as loan approval. One of the myths about VA home loans you should know is directly associated with this–when you get your VA Certificate of Eligibility you have not yet been approved for a mortgage. All applicants must credit-qualify.

VA Loan Fiction: There Are No Credit Scores Needed To Qualify

It is true that the VA does not specify a credit score range for loan approval but that does not mean there are no credit score standards. Those will be up to your lender to set. FICO scores may play a part in whether or not you get the most competitive interest rate which is an important aspect of the true overall cost of your mortgage.

VA Loan Fiction: VA Loan Interest Rates

The VA does not tell the lender what rates to set for its mortgage loans. Interest rates are a very important aspect of your VA home loan, and while your FICO scores may be used by the lender to establish what rates you may qualify for, the VA official policy is that the agency does not set mortgage rates in any way except to require them to be reasonable when compared to similar loans that are not VA mortgages.

Interest rates play a big part in the terms of your loan and lender requirements are not identical between all financial institutions. It pays to shop around for the best rates and it pays to find a participating lender who is willing to work with your FICO scores and other financials.

VA Loan Fact: VA Loans Cannot Be Used By Other Family Members

Some newcomers to the VA home loan program learn they may apply for a VA mortgage with a spouse even if the spouse is non-military. And while it is true that this type of VA loan is processed by the VA without regard to the spouse’s military affiliation, the spouse cannot apply for a VA mortgage on their own if they are not entitled to the VA loan benefit.

There IS an exception. Surviving spouses who meet VA loan criteria may apply for a VA loan, but they must apply according to VA rules and in general VA loan rules at press time state the spouse is only eligible for a new VA loan if they have not remarried. Certain exceptions may apply, you will need to speak to a VA loan representative to learn what the specific requirements are at that time.

VA loans are, generally speaking, only for the military member or veteran to use. You cannot transfer VA loan benefits to a dependent like you can with the GI Bill, and while a dependent child may be allowed to occupy the home in your place to satisfy the occupancy requirement, that same child cannot use your VA loan benefit.

 

>> Get a free, no-obligation consultation regarding your VA Loan!  Get started today!

 

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Questions and Answers About VA Home Loans

The VA home loan benefit is one of the most popular military benefits you can use. The GI Bill and VA disability benefits may compete for the most commonly used, but VA home loans are likely the best-known (and least understood) of the three.

VA home loans are available for those who have served enough qualifying time as a full-time active duty military member, a member of the National Guard or Reserve, and certain members of the Public Health Service and the National Oceanic and Atmospheric Administration.

Each one of these categories may have its own unique time-in-service requirements and serving in the Guard or Reserve may require minimum full-time active duty service time that is not part of training.

In addition to the active-duty requirement for members of the Guard and Reserve, these applicants generally must have served six years minimum as Reservists or Guard members.

What do you need to know about VA home loans to get started? The most basic level of information you’ll need as a new VA borrower is connected to your eligibility for the loan program, which is only possible after serving a minimum amount of time in uniform.

How Long Do I Have To Serve On Active Duty To Qualify For A VA Home Loan?

The question above assumes you automatically qualify for a VA mortgage once you have served enough time. That is not true. You qualify to APPLY for a VA home loan once you have served the minimum, your loan approval will depend on your FICO scores, employment history, and other typical home loan qualifying financials.

How long do you have to serve to become eligible to apply? That will vary depending on when you joined as well as the nature of your military service. In general, those on active duty today have to serve 90 consecutive days of active military duty to become eligible.

Once you do become eligible your VA loan benefits are NOT automatic, you will need to apply for a VA Certificate of Eligibility in order to start the VA home loan process. Not sure how to do that? You can get the help of a participating VA loan officer to get the paperwork started, or you can use the VA online portal eBenefits to do it yourself.

What Is The Minimum FICO Score For VA Loan Approval?

Unlike other government-backed mortgages such as FHA home loans, VA mortgages have no VA-specified FICO score minimums. That is left up to the lender to determine and you’ll want to shop around for a VA lender who can work with your circumstances. Home loans in general may require FICO scores in the mid-600s for the most competitive rates and terms.

Does The VA Set Interest Rates On VA Mortgages?

No. The Department of Veterans Affairs does not set or regulate interest rates on VA loans, except to generally require that rates for these mortgages are “reasonable and customary” compared to similar home loans from the FHA, USDA, conventional mortgages, etc. from the same lender in the same housing market.

Can I Buy A Second Home With A VA Mortgage?

There is no rule saying you cannot own other property when you apply for a VA loan but there IS a rule saying you must intend to occupy the home purchased with a VA mortgage as your primary residence. You will certify this in writing in a legally binding document.

Can I Buy An Investment Property With A VA Home Loan?

If by “investment property” you mean, “a home I don’t intend to live in personally”, the answer is no, this is not permitted.

Is It Possible to Rent Out The Unused Living Units In The Home I Currently Live In?

VA loan rules permit you to rent out any unused units in the home you bought with a VA mortgage. As long as you occupy the home while paying on your VA purchase loan, you won’t be in violation of the VA loan occupancy requirements found in VA Pamphlet 26-7, the VA Lender’s Handbook.

Is It Possible To Buy A Farm Home With A VA Mortgage?

It’s possible to buy a farm home, but not a farming business with a VA mortgage. You’ll learn that the VA appraisal process for these properties only counts the residential value of the property and does not take into account any commercial use, outbuildings, equipment, or other farm business items. In short, the VA loan is for you to purchase a home and you cannot buy a business with one.

Can I Borrow More Than I Need For The Home And Take The Excess Cash At Closing Time?

No. VA loans, like most home loans, don’t allow you to apply for more home loan than is required to purchase the property, pay any included closing costs, etc. The only cash back to the borrower at closing time for VA purchase loans is generally restricted to refunds.

You may find a limit of $500 back at closing time is typical but this may vary due to state law, lender standards, or other issues. VA home loans are strict about the no-cash-out purchase loan rules, it’s smart to know your responsibilities and your rights before you apply.

Will All Of My Income Qualify For The Loan?

Not all the money you earn is countable for the purpose of approving your mortgage. It’s true your loan officer’s job is to make sure you can reasonably afford the loan but there are requirements for your income to be countable for that purpose. One of them is that the income must be likely to continue, and another is that the income must be stable and reliable.

That may rule out side hustle-type income such as selling items on eBay or Etsy, and it definitely will not include housing stipends from the GI Bill since these too have a built-in expiration and will not continue.

Active duty military housing allowances, on the other hand, do count toward your income for loan approval purposes.

How Much Can I Borrow With A VA Mortgage?

Now more than ever, this is an issue you may need to negotiate with your loan officer. That’s partly because those who have 100% of their VA home loan entitlement are eligible to apply for a VA mortgage with no VA loan limit imposed. This is a change from the previous VA home loan policy which did observe a per-county VA loan limit.

This “no loan limit” option is not available to all VA loan applicants–only those who have 100% VA loan entitlement to use for the transaction. Those with less than 100% VA loan entitlement must observe VA loan limits by county the same as any other government-backed mortgage program.

Can My Spouse Or Children Use My VA Home Loan Benefit?

Those who qualify for a VA home loan can apply with a spouse. The spouse alone cannot apply unless they are a surviving spouse of a military member who died as a result of military service. The same rules generally apply for refinance loans though a VA Streamline Refinance may be possible for a surviving spouse if they were part of a VA purchase loan prior to the service member’s death.

Surviving spouses have different application procedures than other applicants. It may be helpful to contact the VA directly or discuss your circumstances with a participating VA lender to learn what your current options are and how to prepare to apply.

Before talking to a lender or representative, it may be a good idea to gather all documents you are likely to need including the servicemember’s proof of service, report of discharge, service records, death certificate, and any other documentation to establish an identity for the purpose of applying for a VA Certificate of Eligibility.

 

 

What to Know About the DoD Savings Deposit Program

The DoD Savings Deposit Program is a great way to save money!

If you are getting ready for a deployment, or already on one, you should know about the SDP or the DoD’s Savings Deposit Program. This program was established to give service members the opportunity to invest their money while on deployment. Here is what you should know about the SDP.

Who qualifies for the SDP?

Service members who are serving in a designated combat zone, those receiving hostile fire or imminent danger pay while serving in a QHDA (Qualified Hazardous Duty Area), or those serving in a designated direct support area of a combat zone all qualify for the SDP.

Service members also need to be serving in these areas for at least 30 consecutive days or at least 1 day for each 3 consecutive months in order to qualify for the program.

When can you start depositing money?

Your initial deposit will be limited to the amount that you have earned beginning with the first day after the first 30 consecutive days. This was changed from an earlier rule where you could start depositing money right away.

How much can you contribute to the SDP?

The maximum amount that you can contribute each month is the combined total of all your military pay, accrued and paid during the 30 days immediately preceding the date of the deposit. You can get an exception by getting written approval from your commanding officer if you were unable to make a deposit because of a mission or limited finance office support.

The total you can contribute to the SDP is between $5 and $10,000. The money has to be from your un-allotted current pay and allowances. You can not use any money from travel allowances, advanced pay, or money you have saved from before you deployed. You also can not go over $10,000.

The interest will compound monthly and is paid quarterly at a rate of 10%. Again, only up to $10,000.

How do you make deposits to your SDP?

You can make deposits via payroll allotment, your Eagle Cash Card, cash, or personal check. Allotments can be set up by visiting your servicing branch of service administrative or finance office. You can also change the amount along the way if need be. The allotment will end if requested or after you have departed the combat zone.

Army, Navy, and Air Force allotments won’t actually stop when you hit that $10,000 maximum. You will need to stop the allotment on your own. With the Marines, the allotment does stop when you hit the $10,000.

If you are going to be paying with the Eagle Cash Card, cash, or personal check, you can do so at any Military Finance Office.

How do you withdraw the money?

The money will be automatically withdrawn for you 120 days after you leave the combat zone. After you return, you will also continue to draw interest for up to 90 days. While you can request to receive the money before the 120 days, you probably want to leave the money there if you can because you would also lose out on that interest.

You can’t withdraw the money before you return from your deployment, however, there are exceptions. Once you reach a $10,000 balance, or you can request an emergency withdrawal. With that, you would need to have approval from your commanding officer. They would need to believe that your health and welfare of you or your dependents would be jeopardized if the withdrawal can’t be granted.

As you can see, the DoD Savings Deposit Program is a good way to save money during a deployment. Taking advantage of this program and making deposits while you are away is good for your finances and you will be glad that you did so.

Please visit the DoD Savings Deposit Program page for more information.

 

VA Loans Versus FHA Mortgages: Which Is Better?

Which is better, an FHA mortgage or a VA home loan? Some may be confused by this article’s headline. If you have access to a no-money-down VA mortgage with no mortgage insurance requirement, why would you consider an FHA mortgage loan instead? FHA loans, after all, have down payments and mortgage insurance requirements. VA home loans typically require neither, though in some cases a borrower may want to consider a down payment to get the benefit of a lower VA loan funding fee.

There are a few good reasons to compare VA and FHA mortgages side-by-side. One is to get an idea of the similarities and differences of the two programs, but another good reason is to know your options if, for some reason (see below) you aren’t able to use your VA loan benefits, or want to save them for another time.

Reasons to Consider an FHA Mortgage

There are a few reasons why some veterans and even currently serving military members might look to an FHA mortgage instead of trying to use their VA home loan benefits. The ability to get a zero-down loan is an important one and some wish to hold that option until they find their “forever home”.

Some Might Not Qualify For A VA Loan As Soon As Others

Basic eligibility for a VA loan is an important part of the discussion. Some join the military already interested in owning a home, and if a family was in the process of house hunting before VA loan eligibility is established, it may be necessary to find a different low-down-payment mortgage instead.

What some readers are thinking here? “Why on earth would you join the military in the middle of buying a house? Won’t you just get reassigned somewhere else and have to leave your new home empty?”

The answer to that question would be more of a “yes”, but it leaves out members of the National Guard and Reservists.

When these people become eligible for their VA home loan benefit, it may come after a longer waiting period than those on active duty. So there are situations where people in uniform simply don’t have the ability to wait out that time-in-service commitment and need to purchase a home. Enter the FHA loan program as one option.

Another reason some potential VA loan borrowers might choose an FHA mortgage? They have already used their current VA loan entitlement but have not paid off the loan in full or sold the home. Those who want to purchase a primary residence in such cases may do well to consider the FHA loan option because VA and FHA mortgages have a few traits in common, as we’ll discuss below.

VA Loans and FHA Mortgages: Similarities

VA and FHA mortgages are both government-backed home loans, which means the government is offering a guarantee to the lender to pay a portion of the home loan off if the borrower defaults on the mortgage. That means less risk for the lender and the ability to offer more forgiving credit qualifying requirements for the mortgage.

Both VA and FHA loans feature no penalty for early payoff of the mortgage. VA and FHA home loans offer the ability to refinance later with no VA or FHA required a credit check or appraisal into what’s known as a Streamline Refinance. These refi loans offer no cash back to the borrower but do typically result in a benefit to the borrower such as a lower interest rate, the ability to get out of an adjustable-rate mortgage into a fixed-rate loan, and/or lower monthly payments.

VA and FHA loans for purchases typically feature no cash back to the borrower except in the form of a refund for things paid for up front but later financed into the loan.

Both VA and FHA mortgages also feature an escape clause that allows the borrower to walk away from the mortgage with no penalty if the appraised value of the property is lower than the asking price.

FHA mortgages and VA loans both are guided not by VA and FHA loan guidelines, but also by state law, lender standards, and changes in federal law. When it comes to lender standards, there are some things your lender cannot do with a VA or FHA mortgage.

One of those is to charge the borrower for the lender’s operating costs like hiring an attorney (for the lender to use). Your lender cannot charge you excessive fees that aren’t considered “reasonable and customary” for that housing market.

VA Mortgages Versus FHA Home Loans: Differences

FHA loans differ from VA mortgages in many ways. The first of those differences? Credit score requirements. VA loans have no government-specified FICO score standards and it will be up to the lender to set those.

FHA mortgages have an FHA minimum FICO score range for the lowest down payment. FICO scores at 580 or better technically qualify for a 3.5% downpayment. Those with FICO scores between 500 and 579 technically qualify for an FHA mortgage but with a 10% down payment.

Lender standards will also apply, FICO score requirements may be higher depending on the lender.

Down Payments

Then there is the down payment requirement. FHA mortgages require a minimum borrower investment of 3.5% whereas VA mortgages have no down payment requirement in typical cases. There are exceptions for situations where the purchase price exceeds the appraised value of the home.Mortgage Insurance

FHA mortgages differ from VA loans when it comes to mortgage insurance. There is no VA requirement for mortgage insurance premiums on VA home loans, but FHA mortgages will require you to pay an Up Front Mortgage Insurance Premium and a monthly payment that’s part of your mortgage. This is paid for either 11 years or the lifetime of the loan depending on your loan term and other variables.

VA mortgages allow seller concessions to help the borrower pay for closing costs, but those concessions are capped at an amount lower than the FHA.

Which Is Better, VA Mortgages or FHA Home Loans?

It’s not hard to spot the advantages of a VA mortgage over an FHA home loan. The zero-down payment option alone makes the VA loan program an important benefit. The lack of mortgage insurance is another factor. The fact that you can get a VA mortgage without a down payment OR an up-front mortgage insurance premium to deal with makes it the best option if it is available to you.

But if you don’t yet qualify or don’t want to use your VA loan benefits just yet, the FHA home loan option may be worth exploring. In general, you’ll find articles from government sources such as the Consumer Financial Protection Bureau that encourage borrowers to explore both government-backed home loans and conventional mortgages because borrowers with higher credit scores may find conventional loans easier to qualify for and more affordable overall.

But there are trade-offs. With a conventional loan, you will deal with both a down payment and a mortgage insurance requirement if your down payment is lower than 20%. The loan may cost less overall but you may wind up paying more up front. And FHA loans provide an advantage in those upfront costs. If your goal is to save more out of pocket and pay less monthly, the FHA option may be worth exploring as a VA mortgage loan alternative.

You can talk to a participating VA and/or FHA lender (some offer both) to get side-by-side comparisons of loan options, terms, conditions, and costs. You’ll want to decide what your loan priorities are; do you want to save more out of pocket at the front end of the mortgage or do you want to save money over the entire term of the loan?

Those are important choices to make and will definitely have an effect on your decision-making. VA home loans and FHA mortgages are both important government programs but your specific circumstances will dictate which one winds up being best for you.

 

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What You Need to Know About VA Loan Closing Costs

If you want to use your VA home loan benefits to purchase a home, there are many expenses to budget and save for, including closing costs. In general, VA borrowers may have an easier time saving for these expenses because the no-down-payment option means the cash you would have saved for the down payment can be used for loan expenses instead.

There are reasons why VA borrowers might wish to save for a down payment anyway. If you choose to do so or are required to put cash upfront (sometimes due to the appraised value of the home being lower than the asking price and the buyer wants the home anyway) you’ll earn a lower VA Loan Funding Fee (depending on how much you put down).

Borrowers who do not make a down payment and are not exempt from the VA Loan Funding Fee because they receive or are eligible to receive VA compensation for service-connected medical issues have to pay the VA loan funding fee in full.

VA Loan Closing Costs

What follows are general closing costs for VA home loans. This is not an exhaustive list. No two lenders may be exactly alike and the true picture of your closing costs will come from the lender once specifics such as the interest rate, down payment (where applicable), and any seller concessions that might apply are established. Closing costs include but may not be limited to:

  • VA Funding Fee (see above)
  • Loan origination fee
  • Interest rate discount points
  • Credit report fee
  • VA appraisal fee
  • Hazard insurance
  • Real estate taxes

These are the VA loan fees discussed in VA documents such as the VA Lender’s Handbook, VA Pamphlet 26-7. Some closing costs for home loans are permitted to be included in the mortgage. That means you are still paying closing costs, just not out-of-pocket. You will pay interest on the amount you are permitted to add to the loan for the approved expenses.

Loan Origination Fees

These are fees charged by the lender as part of issuing the loan. This fee is not required by the Department of Veterans Affairs but is considered a standard part of most mortgage lending procedures.

The VA does restrict certain costs from being included in the origination fee; the basic structure of the VA home loan rules in this area are designed to prevent lenders from charging a borrower twice for the same services rendered (once for the service and once in the origination fee), and it also limits the charges to those which are considered “reasonable and customary” in that housing market.

In other words, the lender cannot inflate the costs of the loan by charging you twice, nor can it charge the borrower for things the lender would pay for anyway such as the lender’s own legal counsel. Borrowers who want to hire a lawyer for their own purposes (to review the sales contract, for example, to make sure it is borrower-friendly) must pay for this out of pocket, but you are not required to pay for the lender’s counsel.

Discount Points

Home loan discount points are a way to pay upfront to reduce the interest rate on the mortgage. Generally, this is not a great move for borrowers who don’t plan to keep the home long-term. If you know you will sell a starter home in a few years, discount points may not help you save. If you plan to keep the property for most or all of the loan term, discount points may be an option to consider if your goal is to save money over the lifetime of the mortgage.

Credit Report Fees

Typically, borrowers must be charged the actual fee for services rendered. Lenders are not permitted to inflate this expense.

VA Appraisal Fee

The most important thing to remember about the VA appraisal fee is that you are paying for a service. You are not paying for an outcome. Even if you disagree with the determination made by the VA appraiser, you are obligated to pay the appraiser for the labor as agreed upon. Borrowers do NOT have the option of not paying the appraiser just because the results aren’t to their liking.

Hazard Insurance

This is a tricky issue because hazard insurance refers to a very specific type of policy that dictates under what conditions an insurance claim may be accepted. Hazard insurance is not homeowner’s insurance, which protects the contents of your property and the property itself depending on the terms of the insurance agreement.

Hazard insurance is also not mortgage insurance. VA loans do not require mortgage insurance, unlike other government-backed mortgages like FHA loans.

Hazard insurance is required when there is a specific need; a home is located in a 100-year flood plain, in an area known for mudslides or forest fires, etc. What you need to know about all insurance as it relates to hazard insurance is that unless your policy specifically covers something like flooding, you do not have protection.

Flooding is different from what insurance policies commonly refer to as water damage. Flooding is often referred to as “rising water”, and is not included as standard coverage in a homeowner’s insurance package. You have to specifically seek out flood insurance or coverages like it.

And flood insurance is not a catch-all type policy, either. For example, a mudslide may not be covered unless there is specific language that says your home is protected against such incidents by the policy.

Real Estate Taxes

Be advised that your lender may require you to open an escrow account to deal with property taxes. You will need to discuss the need for escrow, how it works, and what your obligations are in association with it–your loan officer will be able to explain that financial institution’s policies and practices. Failure to pay real estate taxes is a serious issue, it’s important to be well-read on this aspect of buying and owning a home.

Cash To Close

You may be expected to make a payment on closing day to cover your closing expenses, and if you are getting seller concessions such as seller help with these costs, you and the seller may be required to document the source of these funds in writing. Be sure to ask the lender about this as sourcing is a very important issue.

If you are choosing to make a down payment, the same sourcing concerns apply. Your lender basically wants to know you are not paying these expenses with credit card cash advances, payday loans, or pink slip loans.

Cash to close and/or down payments that cannot be sourced as required by the lender may not be accepted. This is an issue that surprises some house hunters when they learn about it. It’s a good idea to anticipate this issue as early as possible to avoid complications later on down the line.

Buying a home for the first time or buying again after many years means catching up on details and requirements for the loan, and those requirements may vary depending on the nature of your home loan. Did you know you can get help with purchasing a home with advice on how to prepare?

The Federal Housing Administration and the Department of Housing and Urban Development have a free referral option–call 1-800-CALL FHA and ask to be referred to a local HUD-approved housing counselor who may be able to help you during the planning stages of your mortgage.

 

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What Current Military Members Applying For a VA Mortgage Need to Know

Ever wonder what a loan officer is really looking for when you apply for a VA home loan? There are some very obvious issues including FICO scores, loan repayment history, and credit utilization. You can read about those issues on a VA loan website or blog. But what about the things people don’t talk so much about?

For example, you may wonder what specific VA credit score requirements are for loan approval, but the VA Lender’s Handbook, VA Pamphlet 26-7, does not specify credit score ranges. It leaves that up to the lender. That is a reason to shop around for a VA lender all by itself.

For currently serving military members there are some important details that sometimes get lost in the shuffle, but you’ll soon discover that certain documents and information are crucial for getting your VA mortgage approved.

Your main concerns as someone still serving and interested in using your VA mortgage benefits will include being able to show you have enough time remaining in your current contract or are reenlisting. Or retiring. The paperwork you’ll need depends greatly on your anticipated status in uniform within the next year or so. Soon-to-be military retirees will have a paperwork burden far different than a member of the National Guard or Reserve component.

VA loan rules may not be the only guidelines that apply to your loan. State law, changes in federal programs, or even changes in the VA loan program itself may affect any or all of these requirements in the future.

Your Military Service Commitment

Believe it or not, this can be a factor in VA home loan approval. Veterans and military retirees don’t have to worry about this once they are back in the civilian world, but if you are still serving at the time you apply for the VA mortgage, you will find this is definitely a factor.

Why? Because in order to approve a VA mortgage, your loan officer has to determine the nature of your current employment, how long you have been working there, and whether or not that employment is likely to continue.

If you are a service member in good standing and have plans to apply for a VA mortgage, the time remaining on your military service commitment counts. VA loan rules instruct participating lenders to ensure applicants have more than 12 months remaining before they are due to retire or separate.

Documentation Required

For all VA loans, military members must provide a Leave and Earnings Statement, preferably the most recent, but one that is not more than 120 days old from the date of closing the deal. This time frame is longer for construction loans–you have 180 days if you are having a home built on your own lot using a VA construction loan. You’ll also need to show documentation that officially reports your military service commitment.

If you apply for a VA mortgage with less than 12 months remaining on your current commission or enlistment, the lender will require one of the following:

Proof of:

  • re-enlistment or otherwise extending the enlistment beyond the 12 month period
  • a civilian job offer
  • eligibility for military retirement pay

Not all applicants may be able to provide the documentation listed above, In such cases the lender may require “a statement from the servicemember that he/she intends to re-enlist or extend his/her period of active-duty service to a date beyond the 12-month period”.

Borrowers who choose this option must also provide a written statement from the applicant’s command support staff “confirming that the servicemember is eligible to re-enlist or extend his/her active-duty service as indicated”.

There is also the option of providing the participating VA lender with documentation” of other unusual strong positive underwriting factors” including a 10% down payment, six months of cash reserves, and/or “evidence of strong ties to the community coupled with a non-military spouse’s income so high that only minimal income from the active-duty servicemember is needed to qualify”.

First-Term Military Members And VA Mortgages

If you are a first-term military member (those on their very first enlistment) and are wondering about your ability to qualify for the loan itself (not the basic eligibility for the VA loan program), be aware that VA loan rules generally require you to have a minimum of 12 months of employment on the books in order to be considered for VA loan approval.

This may not affect older service members who have plenty of employment history, but first-term soldiers, airmen, sailors, Marines, Coast Guard members and Space Force Guardians should know this VA loan rule in the VA Lender’s Handbook:

“Generally, employment less than 12 months is not considered stable and reliable. However, the lender may consider the employment stable and reliable if the facts and documentation warrant such a conclusion.”

VA loan rules instruct the lender to, “Determine whether the borrower’s past employment, training, and/or education equipped him or her with particular skills that relate directly to the duties of their current position.”

Military Income

When applying for a VA loan, the lender needs to review your income. For civilian workers, there is a whole different set of issues related to pay and employment.

For example, if you are a civilian and you are paid as a contractor or earn commissions, VA loan rules require you to have earned that type of income for a minimum period of time. Lender standards will also apply in this area. If you switch from being a salaried employee to being a contractor, that type of work also requires a minimum amount of time on the job with that type of earnings before your income may be counted.

But when you serve, your basic pay is your qualifying income in addition to any benefits the lender and VA loan rules find acceptable. Military allowances and benefits may be accepted as income if they are likely to continue, which is why your housing allowance (BAH) is acceptable as income for VA loan approval. The same goes for your annual military clothing allowance and certain other benefits.

One type of benefit you cannot use to qualify for a VA loan? GI Bill housing stipends — they have a limited duration and are not likely to continue.

Guard and Reserve Income

VA Pamphlet 26-7, Chapter Four tells the lender, “If an activated Reserves/National Guard member applies for a loan, they must present orders indicating their current active duty tour is not to exceed 12 months.” That’s the start of the slightly different application process for these applicants.

Guard and Reserve pay is a tricky issue when it comes to qualifying for a VA mortgage. In general, the lender wants to know how much you earn from civilian employment and won’t necessarily use Guard/Reserve pay for those who are activated for full-time as qualifying income.

An example is given to lenders in the VA Lender’s Handbook, in Chapter Four:

  • The VA loan applicant has full-time civilian employment with $3,000 per month income.
  • The borrower’s current income from the Guard Reserves $3,500 per month because of the activation (with orders for 12 months)
  • Chapter Four tells the lender, “Since the borrower’s full-time civilian employment is only $3,000 per month, the $3,000 should be used to qualify the borrower.”

RELATED:  VA Loan Eligibility Expanded for National Guard

Non-Military Income For Military Members

VA loans also consider non-military employment as income if the income meets VA standards. That may generally mean part-time employment in the traditional manner, but would not necessarily include options like selling goods on eBay or Etsy as a maker, artist, or reseller. In all cases the lender won’t be able to simply take your word for it when it comes to this type of earning, employment verification will be needed. Be prepared to submit employer contact information and turn over pay stubs or other proof of employment and income from the part-time job.

 

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Avoiding Foreclosure on a VA Mortgage

If you have a VA mortgage and experience financial issues that make it hard to keep up with your mortgage payments, you are not alone. The good news is that the sooner you act, the more options you may have to keep your home and avoid foreclosure. What should a VA borrower do in tough financial times to avoid defaulting on their mortgage?

Get Help from the Department of Veterans Affairs

Some borrowers don’t realize they have financial counseling options through the VA, and those options apply regardless of the type of mortgage you have. You can have a VA loan or a non-VA mortgage and get assistance from a VA counselor. Financial advice and homeowner counseling can be a big help in the early stages of financial difficulty.

Why? Because you’ll need to know what your rights and responsibilities are in advance. Don’t let a missed payment happen before you reach out to get more information and help. You’ll be glad you didn’t wait.

If you have a VA loan, you can contact the VA to ask for the help of a VA loan technician. If your mortgage falls past due longer than 60 days, you will have a VA loan technician automatically assigned to you. Be advised, this is one of the VERY FEW times you will have something done for you automatically in this process. Be proactive and don’t assume any help with your home loan aside from the technician being assigned to your case as automatic.

Get assigned a VA loan technician by calling the Department of Veterans Affairs at 877-827-3702. You can also email the VA for this type of help at LGYLANational.VBACO@va.gov. You will need to include your name and address as it is displayed on your home loan documentation.

Contact Your Loan Servicer

It’s crucial to contact your loan servicer as soon as you experience the financial difficulty that could later interfere with your mortgage payments. The longer you wait, the fewer your options may be. Your lender can work with you to make arrangements before you miss a single payment, though some foreclosure avoidance options are only available at certain stages of the problem. Your lender cannot help you if you do not contact them to make arrangements.  You may be offered a loan forbearance, a loan modification, or other options that can help you keep your home.

Beware of Scams

When you reach out to your lender for help, keep in mind that you should never sidestep your loan servicer for any reason. A common foreclosure avoidance scam involves convincing the homeowner to make payments to someone other than your lender, or to make arrangements about the loan without notifying the lender. These are all scams, never fall for this trick. Sidestepping the lender is not how foreclosure avoidance works. The same rules are true if someone asks you to, as a foreclosure avoidance measure, sign the title of your home over to someone else.

Never ever do this.

Timeline to Foreclosure

How long until your home is foreclosed upon? Your loan servicer must generally contact you a little over a month after your first missed VA loan payment or your first incomplete VA mortgage payment.

45 days later, if you are still delinquent, the lender is required to continue to try contacting you for loan modification or other foreclosure avoidance options. After 120 days, the lender has the option to start foreclosure but is not required to if you have already started working with them to save your investment. At 120 days delinquent, the lender cannot foreclosure on you if you are in the process of being evaluated for a loan modification or other foreclosure avoidance measures.

The longer you wait to get assistance, the fewer your options may be. And keep in mind that the longer the delinquency period goes on, the more unforgiving the process may be. A good example? The foreclosure process may be initiated anew if you miss payments under any foreclosure avoidance program

VA Loan Foreclosure Avoidance Measures Your Lender May Offer You

According to the Department of Veterans Affairs, there are some basic ways to avoid foreclosure. They include, but may not be limited to:

  • A VA Loan Repayment plan for those who have already missed payments. The repayment plan allows you to resume monthly payments at a higher amount to cover those that were missed. This is one reason we urge people to act as soon as possible on their VA loans if those payments are in jeopardy. Wouldn’t  you rather pay extra to cover just one missed payment instead of more?
  • A VA Loan “special forbearance allows you extra time to make up the missed payments in full.
  •  VA Loan modification may be an option; this works by adding the missed payments to the total loan balance and readjusting the loan term.
  • Selling the home to avoid foreclosure may be an option.
  • A VA Loan short sale is an option for those who owe more than the home is worth. With the lender’s participation you may be allowed to sell the property for less than you owe with the lender accepting the total amount of the sale as full payment of the mortgage. A VA loan short sale could result in a loss of future VA loan benefits, ask your lender or contact the Department of Veterans Affairs to learn more about when this may apply.
  • Deed in lieu of foreclosure is the one time you should consider signing the deed of your home to someone else, but in this case it is ONLY the loan servicer who should receive the deed. Do NOT sign the deed to your home over to a third party. Discuss this option with your loan servicer as it may result in a reduced VA loan benefit or loss of your VA loan benefit in the future.

What Happens If Your VA Mortgage Goes Into Foreclosure?

Much depends on when your VA home loan is closed, but in general, you should know that a VA loan foreclosure results in a debt to the government that you may be required to repay. If your VA mortgage closed before January 1, 1990, you are required to pay back the full amount that the government paid to satisfy the lender. This is typically not the full amount of the loan.

For VA mortgages that closed on or after 1 January 1990, you’ll be required to pay your loan back if the VA finds evidence of fraud, purchasing in bad faith, or misrepresentation.

What’s Next?

If you are in trouble financially and worry about your ability to make your VA mortgage payments, contact your loan servicer before missing a single payment. Ask the lender about foreclosure prevention options such as loan forbearance, loan modification, or other adjustments. The sooner you act, the more options you have but don’t fall prey to scammers who ask you to sidestep your lender, sign the deed of your home over to a third party, or make payments to someone other than the bank.

If you are currently serving, remember that financial responsibility issues extend to VA loans–it’s not just about proper use and payment of your government-issued travel card and maintaining adequate financial support of your family (where applicable).

If you need to pass a security clearance review or obtain a new clearance, home loan issues may be included in that review. Get help early to avoid your VA mortgage loan from becoming a stumbling block to your military career. It’s better to be able to report that you had some financial difficulty but resolved the issue because you were proactive than to admit that you didn’t seek assistance in a timely manner to prevent the issue from becoming a bigger liability.

 

 

 

Considerations For Using Your VA Loan Benefits as a Veteran

If you have never used your VA home loan benefits and are planning to retire or separate from the military, there are some issues to consider. For example, if you are not retiring, but separating from the military, buying a home may be more complicated if you don’t have a job lined up at loan application time. This is not a problem in all cases, but for some applicants, it is a factor to consider.

Why? VA loan rules have minimum employment and income guidelines. Not necessarily a dollar amount, but instead minimum time on the job may be required depending on the nature of the employment and other variables. And what about the applicant who has separated but is still searching for work?

Your lender will need income to verify for the loan and if your job hunt winds up taking longer than you anticipate, that might be a complicating factor when it comes to loan approval. It’s smart to consider talking to a loan officer long before you actually decide to retire or separate if you want to buy a home after becoming a civilian again.

Your lender may have requirements to certify how much time you have remaining in your current enlistment or commission; the lender may not be able to approve a home loan without a minimum service commitment or evidence that you have accepted a job that will begin after you retire or separate.

Applying For a VA Loan as a Veteran

Getting a VA loan as a retired or separated military member involves some different requirements than for those on active duty. One example? Retired and separated applicants will be required to show proof of discharge by providing the lender with a copy of DD Form 214 or the Guard/Reserve equivalent. You will need to provide this along with a VA Certificate of Eligibility.

 

Get a free, no-obligation consultation regarding your VA Loan!

 

Veterans (as opposed to those currently serving) may have VA-rated disability ratings awarded after retirement or separation. Any veteran who receives or is eligible to receive VA compensation for service-connected medical issues may apply for a waiver of the VA loan funding fee, which can amount to a savings of thousands of dollars.

The waiver is not automatic and must be applied for. It is not available until you have been formally awarded a VA disability rating, and your lender may require you to pay the VA loan funding fee if the VA hasn’t made a decision at application time. The good news is that you can apply for the funding fee refund once your VA rating is official. The refund, like the waived fee itself, is not automatic and must be applied for.

VA Loan Considerations

Your future plans can play an important part in the decision-making process for a home loan. Some might want to own a home and go to college using their GI Bill benefits. The Post 9/11 GI Bill offers a housing stipend to qualifying GI Bill users equal to the housing allowance for an E5 with dependents.

It would be easy to assume you could qualify for a VA mortgage using that housing stipend as income, but that would be the wrong assumption to make. The VA Loan program specifically instructs lenders not to accept GI Bill housing payments as income because those payments are limited to a specific amount of time and are not “likely to continue”.

You can’t draw the housing stipend indefinitely, it is only paid when you actually attend class, and your lender can’t count on that as verifiable income under VA loan program rules.

Some veterans transition from military life into a civilian career with few problems. Consider the Air Force pilot who moves into a civilian airline job right out of the military. A VA loan for a highly-skilled employee like a pilot or engineer would not be as difficult to approve because the borrower has the ability to compete for lucrative, hard-to-fill opportunities.

But what happens to the military member who leaves the service with the goal of starting her own business? Lenders typically want to see two years of income from self-employed applicants, plus business paperwork like profit-and-loss statements, taxes, etc. If you haven’t been self-employed for two years at application time you may have difficulty getting a loan approved.

The same is true for those who want to work on a commission basis, operate as freelancers or independent contractors, etc. In short, the nature of the work you pursue outside the military could affect your home buying plans, especially if you want to purchase right away after getting out of the military.

House Hunting

Depending on the branch of military service, mission demands, staffing issues, and other variables, you may be allowed to request permissive TDY to go house hunting before you retire or separate.

This can be especially important for those who, due to circumstances, must separate from an overseas location. If your final out-processing is accomplished overseas, you may wish to use permissive TDY for house hunting to help ease the transition. Ask your command support staff, First Sergeant, Command Sergeant Major, or Detailer about the TDY option and what it may require to be approved.

Using a real estate agent in such cases may be a very good idea. If you want to get help narrowing down your choices while still serving (especially overseas) an agent could become your best friend in the house hunting journey.

And if you do choose this option, consider getting pre-approved for a VA mortgage loan to help home sellers take you more seriously as a buyer. Pre-qualifying and pre-approval are often viewed as two separate steps in the home loan process. What you want to do first is to fill out the basic pre-qualification form, get an estimated loan amount, and talk to the lender about preliminaries.

With a pre-qualification letter in hand, you and a real estate agent can work together to find a suitable home even if you are still assigned overseas when the process begins.

This is a stage that leaves you vulnerable to fraud, hacking, and scamming if you aren’t careful. Beware of replying to unsolicited offers, don’t respond or click on links in email or text messages. Be especially wary of any communication asking you to initiate or receive a wire transfer. Many lenders state specifically that they will never ask you to participate in a wire transfer by email.

Why the concern? Scammers use wire transfers because they are easy ways to take your money and disappear. It’s one of the most common features of a scam–the inability or refusal to accept payment in any way except a wire transfer.

Things to Remember About the VA Loan Process

Everything about the VA loan application process will require details about your current status. If you don’t have a DD Form 214, or if you do not have a retirement/separation date yet, a loan officer may not be able to help much. The same is true for things like the waiver for the VA loan funding fee; if your records show your current status as awaiting a VA decision, the lender can’t act on future updates to your records. They must take the data that is shown in your records as current at face value.

That is one reason why it is smart to talk to a VA lender long before you apply–knowing when to submit your application (based on status updates and other factors) may change your mind about the speed of the entire process. In the same way that it’s better to wait to apply for a home loan until you have a solid 12 months of on-time, every time payments on all financial obligations on your credit report, it’s also a good idea to wait in some cases until you have had your status updated, received your separation date, etc.

For some, that wait may not be an option, but if it is, consider the timing of your loan. It could wind up being an important factor.

 

Get a free, no-obligation consultation regarding your VA Loan!

 

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VA Loan Rules for Mortgage Approval: Employment and Income

VA home loans are government-backed mortgages. That government backing makes it easier to qualify with FICO scores, employment history, and debt ratios. But even with the government’s guarantee to repay the participating VA lender in case of home loan default, the borrower must still financially qualify for the loan. What do you need to know about being approved for a VA mortgage?

A good portion of that information involves the lender having to find ways to justify approving your loan. If your loan officer’s job depends on making good decisions on who to lend to, the contents of a credit report and employment history become very important.

What Does It Take to Be Approved for a VA Mortgage?

Borrowers should know that unlike some other government-backed mortgage loans such as the FHA Single-Family Home Loan program, VA loan rules do not specify a minimum FICO score. This is up to the participating lender to decide. Not all lenders will offer you the same rates, terms, and fees and not all of them have the same FICO score requirements, either.

VA and FHA loan rules do have similar features in this department; both require that the FICO score and other loan approval standards be “reasonable and customary” for loans similar to it. Your lender may not have specific instructions on FICO score numbers, but a VA loan can’t have an outrageously higher or lower requirement in this area than similar loans that may be conventional, FHA, USDA, etc.

The first thing you will need to do is to compare lenders and see who is most willing to work with you and your FICO scores. If you have had a bankruptcy or foreclosure in your past this becomes even more critical, as some lenders may have more experience dealing with such issues than others. And that experience counts.

 

Get a free, no-obligation consultation regarding your VA Loan!

 

Why does this matter so much? It’s easy to assume that there will be little variation among lenders, but that’s not always true.

You’ll want to know what kind of interest rate your lender will offer based on your FICO scores, and you’ll also want to know a lender’s requirements for loan approval in terms of employment history, debt ratios, and other details.

What does it take to be approved for a VA mortgage loan? You’ll have to qualify with your FICO scores but also with your employment history, debt repayment history, and credit utilization. Here’s where the VA no-money-down home loan gets interesting.

VA loans typically require no down payment. But if you are a borrower who has FICO scores that are lower than the lender’s standards, you could offer to make a down payment as a compensating factor. Depending on circumstances, that may help the lender justify approving the loan.

VA borrowers who make a down payment also get a benefit from a reduced VA loan funding fee, so there’s a financial benefit that goes beyond the lower principal balance you get after putting money down.

Qualifying with Employment and Income

In the paragraphs above we mention that you must qualify for a VA mortgage with credit scores, repayment history, and employment. Some may ask an important question. If the VA loan program is for military people, why is employment verification even needed? Don’t all applicants for the VA loan program have active-duty military jobs?

The short answer is no. Some may be Reservists, some may work for the National Guard, and some may be military retirees or veterans who separated from the military without hitting retirement age. And then there are those who do serve but are junior enlisted and may not earn enough money yet to be able to afford the loan.

All of those circumstances must be taken into account by a participating lender. So yes, employment verification and income verification are both crucial.

Your participating lender may want to see two years of employment history to approve your mortgage loan application. Anything less may require a waiver or a written explanation. In some cases, no exception can be made.

Verifiable Income

Not all income–including some military benefits–can be counted as verifiable income for the purposes of approving your home loan. For example, your basic military pay and allowances may be considered, because any pay that is “likely to continue” could be considered verifiable.

An annual clothing allowance may be included because it is a recurring payment. A one-time payment of a bonus may not qualify in the same way, and certain types of income (think commissions or money from self-employment) may be counted if there is sufficient history behind the payments.

If you haven’t been paid commission for a full year, you’re likely not going to be allowed to use that income for purposes of loan approval. If you’ve been earning it for more than two years, it may be countable depending on the lender, state law, and other variables. The lender wants to see indications that this income is going to continue into the loan term.

Some Income Just Doesn’t Count

Some income isn’t considered steady or reliable. Selling things on eBay or in an online marketplace, for example. There may be exceptions depending on the nature of your business but if you earn money selling online you will need to have a conversation with the lender about whether your specific business qualifies or not.

Some income cannot be counted even if it comes from a federal agency in the form of a military benefit. For example, the Post-9/11 GI Bill provides a housing stipend for those attending college under the program. The housing payment is equivalent to the monthly housing allowance of an E-5 with dependents.

And it would be very easy to understand how you would want to use that monthly housing allowance to qualify for a home loan. Yet, VA loan rules don’t permit the use of the GI Bill as income. Chapter Four of VA Pamphlet 26-7, the VA Lender’s Handbook, instructs your VA loan officer;

“Do not include temporary income items such as VA educational allowances (including the Post 9/11 GI Bill benefit) and unemployment compensation in effective income.”

You read that correctly, unemployment also cannot be used as income to qualify for a VA mortgage. Why?

The key is the word “temporary”. The GI Bill and unemployment compensation are not “likely to continue” as they have definite expiration dates which vary depending on when you use the benefits. This expiration is what keeps this income from being used to approve your loan. You can still use that income to pay for VA loan expenses like closing costs, but you cannot have it counted toward your “official” annual income for purposes of calculating the debt-to-income ratio.

What’s Next?

Loan approval standards will vary depending on the lender and other variables. You’ll want to compare at least three or more lenders together to see who offers you the best deal. Are you worried that getting mortgage rate quotes and other details may affect your credit scores?

It’s true that certain credit inquiries can temporarily lower your credit scores but if you have multiple inquiries due to shopping around for a lender, as long as those are accomplished within a certain window of time (14 days typically but may be longer depending on the credit scoring model) those multiple inquiries will only count as one.

Loan approval depends on a variety of factors and don’t forget that in addition to all of the information above you will need to avoid applying for new credit in the meantime and work on reducing your debt ratio and account balances to get closer to loan approval. It’s not just about what;s already in your credit report, but what could be coming in that report in the days and weeks leading up to loan application time.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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VA Home Loan Approval: Facts You Should Know

If you are eligible for a VA home loan and want to apply to buy a home, there are some issues you should be familiar with long before you begin the process. The VA loan benefit is one of the most important options offered for some military members and veterans; the ability to qualify for a government-backed mortgage with no money down is a major advantage.

What do you need to know about the VA home loan process when compared to conventional mortgages or even other government-backed home loans? We’ll explore some important differences below, but remember that the VA mortgage program’s uniqueness starts with the fact that these loans are not open to the public, but for those with qualifying military service, certain surviving spouses, and certain members of the other “uniformed services” such as the National Oceanic and Atmospheric Administration, and the U.S. Public Health Service.

VA Home Loan Approval: FICO Scores

The government-backed FHA loan and USDA home loan programs both have specific FICO score requirements listed for many loan products. There are other qualifying guidelines for each home loan option but the FICO score issue is standard across the board. Except for VA home loans, which have no VA-specified FICO score ranges for qualifying.

Instead, those requirements are left up to the lender’s own standards. The only caveat (for the lender) is that most features of the VA home loan program are typically required to be “reasonable and customary” for similar loan products in that market.

Lender standards for government-backed mortgages tend to vary in general but typically you may find lenders looking for FICO scores ranging from 620 upward. Your experience may vary depending on the lender.

VA Home Loans vs USDA Mortgages

Both are government-backed home loans and both offer important perks for first-time homebuyers, though the VA may not specifically target those perks toward any one type of loan applicant. The zero-down option for VA mortgages is one of the most first-time-homebuyer-friendly options available.

The USDA home loan program may also offer no money down home loans, but USDA mortgages are generally intended as need-based home loans, and income limits may apply. You read that correctly, USDA loans have a maximum household income limit depending on the loan you seek and other variables.

VA mortgages are not need-based loans, they do not have income limits or require you to purchase within a targeted area for the most competitive rates and terms. USDA loan options may include better pricing, lower rates, or other advantages if you buy a home in a targeted area identified by the agency, depending on the program.

VA Home Loans vs FHA Mortgages

There are many reasons why VA loans are different than FHA mortgages–too many to list them all here. But the most important ones you should know include the fact that FHA mortgages require both an Up-Front Mortgage Insurance Premium, and a monthly mortgage insurance premium.

VA home loans have no mortgage insurance requirement, which is another reason why VA mortgages can be an advantage for the borrower.

VA loans also have no down payment, while FHA mortgage down payment requirements start at 3.5% but could be as high as 10% if the applicant’s FICO scores are not within the FHA’s standards for maximum financing.

FHA loans and VA mortgages are similar in some respects; both offer an Energy Efficient Mortgage loan add-on so you can get extra funds to apply toward approved energy-saving upgrades to the home.

VA and FHA loan approval rules both say that the number of add-ons to your home loan may increase your monthly mortgage payments; too many additions to the loan amount can be just as tough for the lender to justify approving as trying to buy a home that has a price tag above your budget.

VA Home Loan Approval: Appraisals Required

Like FHA and USDA mortgages, VA loans require the property to pass an appraisal as a condition of loan approval. All three government-backed mortgage loan programs feature this requirement as a way to ensure the property has remaining economic life for the duration of the loan.

What does that mean? It means that the house you buy with a VA mortgage should be financially viable to sell or keep for the full term of the mortgage. What good is a home you pay for but cannot sell? VA loan rules are designed to prevent that from becoming an issue.

The appraisal process for VA mortgages is similar to the FHA appraisal; your lender will arrange it and receive the appraisal report when it is finished. You, the borrower, are entitled to know what is in the appraisal report but do not expect to communicate directly with a VA appraiser; this is generally not done.

Appraisals Lower Than the Sale Price

If your appraisal comes back with a fair market value lower than the asking price of the home, you can use something called the VA Loan Escape Clause to walk away from the deal without penalty. Federal law says you cannot be compelled to buy a home that appraises lower than the asking price with a VA mortgage. The Escape Clause is non-negotiable for the lender–they must provide you with the opportunity to walk away from the loan in such cases.

You also have the option of buying the house anyway, but you will be required to pay the difference between the asking price and the appraised value of the home in cash at closing time. It cannot be rolled into the loan amount or financed as part of the VA mortgage.

Buying a house that appraises lower than the sale price involves a risk for the buyer. What if you cannot sell the home for at least what you put into it? Expect to take a loss on such a deal and consider your options accordingly.

VA Loan Approval and Your Credit

One mistake borrowers make with VA home loans, and indeed ANY home loan program is when a home loan application is in the system and the borrower chooses to apply for another line of credit before the home loan is closed. Doing this is a big mistake,. Don’t assume your lender will pull your credit report only once during the home loan process. That is not true. Your lender will check your credit multiple times during the journey from approval to closing day.

If your credit changes too much, or if you experience other sudden financially-related changes that can affect your ability to afford the home loan, the lender may be required to re-qualify you for the mortgage. Whether that is done successfully or not depends greatly on the details involved and there are no one-size-fits-all answers, but in general, you should expect it to be much harder to remain qualified for the loan in such cases.

Learn to Think Like a Lender

Learning to think like a loan officer can be a big help when it’s time to decide what to do about your credit, your loan repayment history, your credit utilization, and other important factors. Remember that your lender must justify you as a good credit risk and that making a mistake in that area can be career-threatening. A lender’s caution in approving or denying a home loan is a lot more understandable knowing that’s a factor when you are ready to start the journey toward homeownership.

Are you ready for a VA mortgage? If you know your credit scores and what your credit reports say, you’re a lot closer than some. If you already know what kind of down payment you might like to make (if any), have a price range for the homes you want to consider, and know your debt repayment history has been reliable over the last 12 months, you’re likely a lot closer to being ready than you might think.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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A Scam Warning from the Department of Veterans Affairs

The Department of Veterans Affairs doesn’t typically dispense consumer advice the way federal watchdog agencies like the Federal Trade Commission does. But some circumstances require going the extra mile and the VA issued its very first “warning order” all the way back in 2017 to let VA borrowers know about a growing wave of scams targeting homeowners, especially those who might be experiencing trouble with their mortgages. Those scam attempts still happen today.

The good news is that there are warning signs to watch out for when dealing with these issues. You can make a formal or mental checklist of these signs and compare them to any offers you might get as a preliminary filter of sorts. What do these scammers do and what should you know going forward?

The First Warning Signs of A Home Loan Scam

The first thing the VA and the Consumer Financial Protection Bureau (the agency they partnered with to issue that first warning order) want you to watch out for? People trying to contact you about a mortgage offer without you having initiated contact first.

Offers that come unsolicited should be viewed with extreme caution. You simply don’t know whether the offer is legitimate or not when that offer arrives by phone, text, e-mail, social media, and even sometimes popups on a web page. Clicking through any links provided is NOT recommended. Never click on the links you are sent by a third party you did not contact first. It’s a terrible idea to do so.

So, checklist item number one should be asking yourself whether you initiated the contact or if the third party has gotten your contact information somehow and is reaching out to you first.

Another early warning sign of a home loan or refinance loan scam to be wary of? High-pressure sales tactics include admonishments like “Don’t delay! Time is running out!” If your third party won’t give you time to think about the offer, skip them and keep moving. If your third party keeps telling you time is short, supplies are low, availability is extremely limited, or that the offer ends very very soon, don’t give in.

Move on and consider yourself lucky to have avoided a fraud attempt.

A Major Sign of A VA Home Loan Scam

Any third-party offer claiming to let you refinance or purchase and skip a payment or two is to be avoided at all costs. Government-backed mortgages including VA home loans have a prohibition on skipping payments as part of the transaction. Your scam warning checklist should include this type of bogus offer.

No, it’s not common or even likely in most cases to be offered a purchase loan that immediately offers to let you skip a mortgage payment. Perhaps a truly ham-fisted scam artist might try such a thing, but it’s more likely this scam would be run as a refinance offer. Don’t trust any refinance offer that advertises skipped payments on a government-backed loan of any type; VA, FHA, USDA, etc.

Offers to Refinance a VA Mortgage

Some home loan scams are refinance scams, offering to refinance your VA home loan at very low interest rates without explaining the specifics. A common trick is to entice you with either deliberately non-specific language or to post the interest rate on a 15-year mortgage (without saying it’s the 15-year rate) when you are really seeking a 30-year loan. Does that sound like “bait-and-switch” to you?

Other features of refi loan scams you should add to your checklist include situations where you are asked to sidestep your loan officer or otherwise keep your existing loan servicer in the dark about your plans or activities related to the mortgage. Basically, any third party asking you to deceive your loan servicer or withhold information from them should be viewed as a scam and avoided at all costs.

The same goes for any third party asking you to take your name off the deed of your home.

Offering Cash Back On a VA Purchase Loan

If you go into a VA home loan application expecting to get unrestricted cash back above $500, you will be disappointed. That’s because VA mortgages for purchasing a home do not allow cash back at closing time except for bona fide refunds of money paid upfront for things later financed into the loan amount.

VA Purchase loans that are advertised with thousands of dollars back to you at closing time are a scam. The VA loan program is, like all government-backed home loans, equipped with one type of loan that does allow cash at closing; the VA Cash-Out Refinance.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Blended Retirement System Continuation Pay: What is it?

What is Continuation Pay in the Blended Retirement System?

One of the key features of the “new” Blended Retirement System (BRS) is a feature called continuation pay. In short, continuation pay is a bonus-like payment given mid-career, for those enrolled in the BRS, in exchange for adding more years to their service.

BRS Broken Down

BRS went into effect in January 2018 and was a major change to the previous retirement system previously in place for service members. It came about from the blending of “the existing annuity provision for those who retire after 20 or more years of service, PLUS the Thrift Savings Plan (TSP).”

Continuation Pay Summarized

As a part of the BRS, continuation pay was created as a direct cash payout to eligible members who have completed at least eight, but not more than 12 years of service – calculated from a servicemember’s Pay Entry Base Date (PEBD). The reason as to why it’s offered is easily explained through retention, “as a way to encourage Service members to continue serving.”

Who’s Eligible?

Most service members are eligible for continuation pay, but when it’s paid out and how much is given is determined through an individual’s branch of service. It is open to Active Duty, National Guard, and Reservists participating in the BRS who are capable of entering into an extension of their current obligated service. It comes in addition to any other career field specific incentives or retention bonuses. Those active duty service members, including Active Guard Reserve (AGR) and Full Time Support (FTS) who opt into BRS are authorized pay-rate multipliers of 2.5 to 13 times regular monthly base pay; Reservists are authorized 0.5 to 6 times their monthly base pay. You can find the Continuation Pay Rates Chart for 2022 here.

These multipliers can be variable, depending upon specific needs of an individual’s branch, critically manned positions, and special skills (comparable to stipulations for re-enlistment bonuses). Branch-Specific Continuation Pay Information:

AIR FORCE / ARMY / COAST GUARD / MARINES / NAVY

TSP Investing

As with other specialty pay and bonuses, continuation pay can be diverted as an investment into a TSP, bearing in mind the IRS’s maximum amounts allowed annually. While there are no matching contributions from the DOD specifically for invested continuation pay, this invested amount can affect other types of income that will be matched; hitting a maximum too quickly could affect other government automatic and matching contributions.

Additional Information

If interested in additional information about BRS and Continuation Pay, visit the following sites:

  • The Blended Retirement System (BRS) Continuation Pay Fact Sheet
  • Blended Retirement System (BRS) Website
  • Blended Retirement System (BRS) Calculator
  • IRS Contribution Limits Facts

 

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Financial Institutions Offering Early Direct Deposits for Military

Banks and Credit Unions That Make Early Deposits for Active Duty Military

As a standard rule, service members know their bi-weekly salary will get paid out on the 1st and 15th of every month. For instances when that date falls on a weekend, the pay gets moved to the closest weekday instead.

However, there are a number of banks and credit unions that offer early direct deposit of military pay as a benefit for their military clientele. These military-friendly financial institutions offer to distribute pay as early as three days in advance of the Defense Finance Accounting Service (DFAS) actually depositing these funds into their coffers.

Military Pay Calendar

Military Pay Dates

Pay Period Mid-month Pay Day LES*
Available
End-of-Month Pay Day LES*
Available
January Jan. 15 Jan. 8 Feb. 1 Jan. 25
February Feb. 15 Feb. 8 Mar. 1 Feb. 22
March Mar. 15 Mar. 8 Apr. 1 Mar. 25
April Apr. 15 Apr. 8 Apr. 30 Apr. 23
May May 14 May 7 June 1 May 25
June June 15 June 8 July 1 June 24
July July 15 July 8 July 30 July 23
August Aug. 13 Aug. 6 Sept. 1 Aug. 25
September Sept. 15 Sept. 8 Oct. 1 Sept. 24
October Oct. 15 Oct. 8 Nov. 1 Oct. 25
November Nov. 15 Nov. 8 Dec. 1 Nov. 22
December Dec. 15 Dec. 8 Dec. 31 Dec. 23

* LES – Leave and Earnings Statements (for end-of-month and mid-month pay days)

These dates are applicable to all branches: Army, Marine Corps, Navy, Air Force, Coast Guard, and Space Force.

List of Banks or Financial Institutions with Early Deposit Dates for Military Pay

Though this is by no means a comprehensive list, it does hit on the most common military-friendly banks that offer early direct deposits (outside of USAA and NFCU). We are not endorsing these banks, simply providing information about their early depositing habits. If you don’t see your bank here, don’t be afraid to inquire if this is a service provided that just isn’t widely broadcasted.

Armed Forces Bank

The bank’s website clearly sets out the specifics for their Early Pay service: it is a “free, automatic direct deposit service” which is only offered to active duty or retired service members. Pay is available one business day before the standard payday and only on DFAS direct deposits; there are no other qualifying companies.

Armed Forces Bank Pay Dates

Pay Period First-of-Month Pay Day Pay Available Mid-Month Pay Day Pay Available
January 1/1 12/30 1/15 1/13
February 2/1 1/31 2/15 2/14
March 3/1 2/28 3/15 3/14
April 4/1 3/31 4/15 4/14
May 5/1 4/28 5/15 5/12
June 6/1 5/31 6/15 6/14
July 7/1 6/30 7/15 7/14
August 8/1 7/29 8/15 8/12
September 9/1 8/31 9/15 9/14
October 10/1 9/29 10/15 10/13
November 11/1 10/31 11/15 11/14
December 12/1 11/30 12/15 12/14

For more info, please visit their website.

Frontwave Credit Union

Frontwave Credit Union (formerly known as Pacific Marine Credit Union) calls its early pay program “Advance Pay.” They provide DFAS funds to military members two days before the actual payday.

For more info, please visit their website.

Langley Federal Credit Union

“Early Payday Deposit” from LangleyFCU is a member benefit advertised as the ability to receive direct deposited paychecks “up to 3 days earlier than other financial institutions.”

For more info, please visit their website.

NFCU

Navy Federal Credit Union Early Deposit Dates for Military Pay

Security Service Federal Credit Union – SSFCU

As the SSFCU website boasts “Your Money, No Wait.” They offer a free, expedited direct deposit service for active or retired military pay, which gets you access to pay anywhere from 1-3 days prior to payday. As soon as SSFCU receives information from DFAS, they immediately post it to their clients’ accounts.

For more info, please visit their website.

Service Credit Union

Service Credit Union states that its Military Early Pay means service members “get paid up to 2 business days early,” pending the receival of DFAS data.

For more info, please visit their website.

USAA

USAA Early Deposit Dates for Military Pay

Other Banks That May Offer Early Direct Deposit for Military

A few additional banks that may offer early direct deposit options:

 

You may be wondering why the major national banks are missing from this list. One internet source reported that in their research, the following banks responded to inquiries about early pay programs as a benefit they do not offer. They stated that no funds are deposited prior to the date specifically indicated by an employer, in this case DFAS:

  • Bank of America
  • BB&T
  • BECU
  • Capital One
  • Central Bank (including MetaBank)
  • Chase
  • Citibank
  • Citizens Bank
  • KeyBank
  • Pentagon Federal Credit Union (PenFed)
  • PNC
  • Regions
  • SunTrust Bank
  • TD Bank
  • S. Bank
  • Wells Fargo

 

These rates went into effect January 1, 2021 and will be reflected in January 15th paychecks.

 

Enlisted Military Base Pay for 2021
Pay Grade Years of Service        
< 2 2+ 3+ 4+ 6+ 8+ 10+ 12+ 14+
E-9 / / / / / / 5637 5765 5926
E-8 / / / / / 4615 4819 4945 5097
E-7 3208 3501 3635 3813 3952 4190 4324 4562 4760
E-6 2775 3053 3188 3319 3455 3763 3883 4114 4185
E-5 2542 2713 2844 2978 3187 3406 3585 3607 3607
E-4 2330 2450 2583 2713 2829 2829 2829 2829 2829
E-3 2104 2236 2372 2372 2372 2372 2372 2372 2372
E-2 2001 2001 2001 2001 2001 2001 2001 2001 2001
E-1 1785 1785 1785 1785 1785 1785 1785 1785 1785
E-1 < 4 mo 1652

* For a complete Pay Rate chart for Officers, Warrants, and Enlisted, visit DFAS

These rates are applicable to all branches: Army, Marine Corps, Navy, Air Force, Coast Guard, and Space Force.

 

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2023 Military Pay Chart: Largest Pay Raise In a Decade Proposed

4.6% Military Pay Raise Possible in Proposed Pentagon Budget

The Biden Administration released its proposed budget for fiscal year 2023, which would raise defense spending by $30 billion, a 4% increase over last year’s budget proposal. With this increase in spending, troops could see a 4.6% pay raise.

The last time the military saw a 4.6% raise in base pay was in 2007, just before the financial crisis of 2008. Considering that America is dealing with inflation levels not seen since the 70’s, the proposed pay raise would certainly help those families struggling with the spiking prices of food and fuel.

>> Click here to go to the 2023 Proposed Military Pay Charts

One thing to keep in mind is that this is simply a budget proposal from the executive branch of government. It does not mean that the pay raise is guaranteed. In fact, it could go up or down by the time it is approved.

LATEST: Even Bigger Military Pay Raise Due to Inflation Possible?

According to Military.com, it appears that Congress may be thinking about approving a higher raise because of the rate of inflation. As of May of 2022, the inflation rate is 8.6%, which is the highest it has been since 1981. Compare that to 5.4% back in June of 2021.

Military.com talked to Rep. Jackie Speier, D-CA who chairs the House Armed Services Committees. When asked about anticipating boosting the raise, she stated that she’s “certainly contemplating it.” The Senate Armed Services Committee is also expected to debate on it.

In order to increase the rate, the money would have to come from somewhere else in the budget, or the defense budget would need to be increased. This could be a reason why it would not go higher than 4.6%. The House Armed Services Committee’s Personnel Subcommittee also called for studies and reports to modernize service members’ compensation. There are many questions about if they should continue to use the Employment Cost Index to decide on the rate and if the pay tables need to be changed.

We will have to see what is decided once Congress debates and comes to a decision on the proposed pay rate.

The Budget’s Next Step

As it stands now, the budget proposal is heading to Congress, where our elected representatives will debate the merits of the Pentagon’s request. Both the House of Representatives and the Senate will add, remove, or modify parts of the budget before they vote to approve it.

Historically, Republicans seek to increase defense spending, while the Democrats seek to fund government programs outside of the Pentagon. The debates will likely be heated as some points of the defense budget will be hotly contested. This is especially true when other legislative measures not related to defense spending are included in these monstrous bills.

It is worth noting here that our Congressional leaders have made the Continuing Resolution (CR) a funding preference over actually passing a budget. In recent years, the politically divisive environment in Congress made any budget agreements impossible, leading to an increasing reliance on the Continuing Resolution.

Hope and Expectations

The Biden administration’s budget will likely emerge from the halls of Congress in a different form and amount than what was proposed yesterday. While the pay raise proposed for our nation’s heroes is currently at 4.6%, it could increase once more data is added to the equation.

You can expect that if a budget is actually agreed upon, it will likely not happen until after the summer time. The goal is to get it approved before October 1, 2022, which is the start of the 2023 fiscal year. As we move into the summer months, the inflation numbers will be scrutinized to determine the outcome of a military pay increase.

Proposed 2023 Military Pay Charts

We will keep you updated as more information becomes available.

Enlisted: E-1 – E-3

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsE-1E-2E-3
< 2$1,917.32$2,149.53$2,260.41
Over 2$1,917.32$2,149.53$2,402.66
Over 3$1,917.32$2,149.53$2,548.06
Over 4$1,917.32$2,149.53$2,548.06
Over 6$1,917.32$2,149.53$2,548.06
Over 8$1,917.32$2,149.53$2,548.06
Over 10$1,917.32$2,149.53$2,548.06
Over 12$1,917.32$2,149.53$2,548.06
Over 14$1,917.32$2,149.53$2,548.06
Over 16$1,917.32$2,149.53$2,548.06
Over 18$1,917.32$2,149.53$2,548.06
Over 20$1,917.32$2,149.53$2,548.06
Over 22$1,917.32$2,149.53$2,548.06
Over 24$1,917.32$2,149.53$2,548.06
Over 26$1,917.32$2,149.53$2,548.06
Over 28$1,917.32$2,149.53$2,548.06
Over 30$1,917.32$2,149.53$2,548.06
Over 32$1,917.32$2,149.53$2,548.06
Over 34$1,917.32$2,149.53$2,548.06
Over 36$1,917.32$2,149.53$2,548.06
Over 38$1,917.32$2,149.53$2,548.06
Over 40$1,917.32$2,149.53$2,548.06

 

Enlisted: E-4 – E-6

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsE-4E-5E-6
< 2$2,503.08$2,730.06$2,980.05
Over 2$2,631.74$2,914.16$3,280.26
Over 3$2,773.99$3,055.37$3,424.60
Over 4$2,915.20$3,199.71$3,565.81
Over 6$3,039.68$3,423.56$3,712.25
Over 8$3,039.68$3,658.91$4,041.74
Over 10$3,039.68$3,851.37$4,171.45
Over 12$3,039.68$3,874.38$4,420.40
Over 14$3,039.68$3,874.38$4,495.71
Over 16$3,039.68$3,874.38$4,551.15
Over 18$3,039.68$3,874.38$4,616.00
Over 20$3,039.68$3,874.38$4,616.00
Over 22$3,039.68$3,874.38$4,616.00
Over 24$3,039.68$3,874.38$4,616.00
Over 26$3,039.68$3,874.38$4,616.00
Over 28$3,039.68$3,874.38$4,616.00
Over 30$3,039.68$3,874.38$4,616.00
Over 32$3,039.68$3,874.38$4,616.00
Over 34$3,039.68$3,874.38$4,616.00
Over 36$3,039.68$3,874.38$4,616.00
Over 38$3,039.68$3,874.38$4,616.00
Over 40$3,039.68$3,874.38$4,616.00

 

Enlisted: E-7 – E-9

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsE-7E-8E-9
< 2$3,445.52
Over 2$3,761.42
Over 3$3,905.76
Over 4$4,095.09
Over 6$4,244.67
Over 8$4,500.94$4,956.99
Over 10$4,645.29$5,176.65$6,055.29
Over 12$4,900.51$5,311.59$6,193.37
Over 14$5,113.89$5,474.76$6,365.96
Over 16$5,258.24$5,650.49$6,568.88
Over 18$5,413.05$5,968.48$6,774.94
Over 20$5,473.72$6,130.61$7,103.39
Over 22$5,674.55$6,404.66$7,381.62
Over 24$5,782.29$6,556.33$7,673.46
Over 26$6,193.37$6,930.80$8,121.14
Over 28$6,193.37$6,930.80$8,121.14
Over 30$6,193.37$7,069.91$8,526.99
Over 32$6,193.37$7,069.91$8,526.99
Over 34$6,193.37$7,069.91$8,953.76
Over 36$6,193.37$7,069.91$8,953.76
Over 38$6,193.37$7,069.91$9,402.49
Over 40$6,193.37$7,069.91$9,402.49

 

Warrant Officer: W-1 – W-3

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsW-1W-2W-3
< 2$3,399$3,872$4,376
Over 2$3,765$4,238$4,558
Over 3$3,863$4,351$4,746
Over 4$4,071$4,429$4,807
Over 6$4,316$4,679$5,002
Over 8$4,679$5,070$5,338
Over 10$4,848$5,264$5,789
Over 12$5,085$5,454$5,979
Over 14$5,317$5,687$6,198
Over 16$5,500$5,869$6,423
Over 18$5,669$6,033$6,828
Over 20$5,873$6,231$7,102
Over 22$5,873$6,360$7,265
Over 24$5,873$6,463$7,439
Over 26$5,873$6,463$7,676
Over 28$5,873$6,463$7,676
Over 30$5,873$6,463$7,676
Over 32$5,873$6,463$7,676
Over 34$5,873$6,463$7,676
Over 36$5,873$6,463$7,676
Over 38$5,873$6,463$7,676
Over 40$5,873$6,463$7,676

 

Warrant Officer: W-4 – W-5

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsW-4W-5
< 2$5,012.43
Over 2$5,391.08
Over 3$5,545.89
Over 4$5,698.61
Over 6$5,961.15
Over 8$6,220.56
Over 10$6,483.11
Over 12$6,877.45
Over 14$7,224.72
Over 16$7,554.21
Over 18$7,824.08
Over 20$8,087.67$8,911.92
Over 22$8,473.65$9,363.79
Over 24$8,791.63$9,701.65
Over 26$9,153.55$10,072.98
Over 28$9,153.55$10,072.98
Over 30$9,336.60$10,578.20
Over 32$9,336.60$10,578.20
Over 34$9,336.60$11,106.43
Over 36$9,336.60$11,106.43
Over 38$9,336.60$11,662.90
Over 40$9,336.60$11,662.90

 

Commissioned Officers: O-1E – O-3E (w/ Prior Enlisted Experience)

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsO-1EO-2EO-3E
< 2
Over 2
Over 3
Over 4$4,577.30$5,682.92$6,469.51
Over 6$4,886.91$5,789.61$6,780.17
Over 8$5,067.87$5,984.17$7,120.12
Over 10$5,253.01$6,295.87$7,339.78
Over 12$5,433.97$6,536.45$7,701.70
Over 14$5,682.92$6,716.37$8,007.13
Over 16$5,682.92$6,716.37$8,182.86
Over 18$5,682.92$6,716.37$8,421.35
Over 20$5,682.92$6,716.37$8,421.35
Over 22$5,682.92$6,716.37$8,421.35
Over 24$5,682.92$6,716.37$8,421.35
Over 26$5,682.92$6,716.37$8,421.35
Over 28$5,682.92$6,716.37$8,421.35
Over 30$5,682.92$6,716.37$8,421.35
Over 32$5,682.92$6,716.37$8,421.35
Over 34$5,682.92$6,716.37$8,421.35
Over 36$5,682.92$6,716.37$8,421.35
Over 38$5,682.92$6,716.37$8,421.35
Over 40$5,682.92$6,716.37$8,421.35

 

Commissioned Officers: O-1 – O-3

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsO-1O-2O-3
< 2$3,636.94$4,191.32$4,850.30
Over 2$3,786.52$4,772.90$5,497.78
Over 3$4,577.30$5,496.73$5,932.91
Over 4$4,577.30$5,682.92$6,469.51
Over 6$4,577.30$5,799.02$6,780.17
Over 8$4,577.30$5,799.02$7,120.12
Over 10$4,577.30$5,799.02$7,339.78
Over 12$4,577.30$5,799.02$7,701.70
Over 14$4,577.30$5,799.02$7,891.02
Over 16$4,577.30$5,799.02$7,891.02
Over 18$4,577.30$5,799.02$7,891.02
Over 20$4,577.30$5,799.02$7,891.02
Over 22$4,577.30$5,799.02$7,891.02
Over 24$4,577.30$5,799.02$7,891.02
Over 26$4,577.30$5,799.02$7,891.02
Over 28$4,577.30$5,799.02$7,891.02
Over 30$4,577.30$5,799.02$7,891.02
Over 32$4,577.30$5,799.02$7,891.02
Over 34$4,577.30$5,799.02$7,891.02
Over 36$4,577.30$5,799.02$7,891.02
Over 38$4,577.30$5,799.02$7,891.02
Over 40$4,577.30$5,799.02$7,891.02

 

Commissioned Officers: O-4 – O-6

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsO-4O-5O-6
< 2$5,274$6,112$7,332
Over 2$6,104$6,885$8,055
Over 3$6,512$7,362$8,583
Over 4$6,603$7,451$8,583
Over 6$6,981$7,749$8,616
Over 8$7,386$7,927$8,985
Over 10$7,892$8,318$9,035
Over 12$8,285$8,606$9,035
Over 14$8,558$8,977$9,548
Over 16$8,715$9,544$10,455
Over 18$8,805$9,814$10,988
Over 20$8,805$10,081$11,521
Over 22$8,805$10,384$11,824
Over 24$8,805$10,384$12,131
Over 26$8,805$10,384$12,725
Over 28$8,805$10,384$12,725
Over 30$8,805$10,384$12,980
Over 32$8,805$10,384$12,980
Over 34$8,805$10,384$12,980
Over 36$8,805$10,384$12,980
Over 38$8,805$10,384$12,980
Over 40$8,805$10,384$12,980

 

Flag and General Officers: O-7 – O-8

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsO-7O-8
< 2$10,112.73$12,171.26
Over 2$10,583.43$12,564.55
Over 3$10,799.95$12,834.42
Over 4$10,973.59$12,908.69
Over 6$11,286.34$13,238.18
Over 8$11,594.91$13,789.42
Over 10$11,952.64$13,918.08
Over 12$12,309.33$14,442.12
Over 14$12,667.06$14,592.75
Over 16$13,789.42$15,043.57
Over 18$14,738.14$15,696.28
Over 20$14,738.14$16,297.73
Over 22$14,738.14$16,700.44
Over 24$14,738.14$16,700.44
Over 26$14,813.45$16,700.44
Over 28$14,813.45$16,700.44
Over 30$15,110.52$17,118.84
Over 32$15,110.52$17,118.84
Over 34$15,110.52$17,545.60
Over 36$15,110.52$17,545.60
Over 38$15,110.52$17,545.60
Over 40$15,110.52$17,545.60

 

Flag and General Officers: O-9 – O-10

Proposed 2023 Military Pay Chart (4.6% Increase from 2022)

YearsO-9O-10
< 2
Over 2
Over 3
Over 4
Over 6
Over 8
Over 10
Over 12
Over 14
Over 16
Over 18
Over 20$16,445$16,975
Over 22$16,682$16,975
Over 24$16,975$16,975
Over 26$16,975$16,975
Over 28$16,975$16,975
Over 30$16,975$16,975
Over 32$16,975$16,975
Over 34$16,975$16,975
Over 36$16,975$16,975
Over 38$16,975$16,975
Over 40$16,975$16,975

 

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VA Cash-Out Refinancing Loans: Good Or Bad Idea?

VA Cash-Out Refinance loans are an option for those who qualify for the VA home loan program. This refinance loan option can be used to refinance any mortgage whether VA or non-VA into a VA home loan with cash back to the borrower at closing time. VA cash-out refi loans are different from other government-backed refinance loans like FHA mortgages.

Why? Because you can refinance up to 100% of the home’s value rather than being limited by a loan-to-value ratio of 85% the way FHA cash-out loans are structured. These VA loans also have no mortgage insurance requirement and no early payoff penalties are permitted.

VA Cash-Out Refinance Loan Basics

In order to apply for a VA Cash-Out Refinance, you must be eligible for the VA loan program with minimum time in service and/or other criteria that make you eligible for a VA home loan. These VA refinance loans can be used for a current or delinquent mortgage and may be used for both VA and non-VA mortgages.

Cash proceeds from the loan can be used to pay its fees and you can also purchase discount points with a VA Cash-Out loan. You must have “sufficient entitlement” remaining to use on this VA refi loan. If you are using it to pay off an existing VA mortgage, your entitlement will be restored as part of the transaction. Ask your loan officer how to apply for restoration of VA loan entitlement as part of a VA-to-VA refinance loan.

 

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VA Cash-Out Refinancing requires a new credit check and your lender will need to establish the current fair market value of the property with a new appraisal. You will require a new appraisal for VA Cash-Out loans regardless of when you purchased the property.

You are not required to use the same lender that issued your existing mortgage. It’s important to shop around for a VA mortgage loan and a lender who will work with your circumstances. No two home loan situations may be exactly the same and some lenders have more flexibility than others when it comes to credit qualifying issues and related concerns. When looking for a new lender, be sure to go back to the loan servicer you currently have to see if they will match or beat another lender’s rates / terms.

VA Cash-Out Refinance loans require mortgage insurance, and the loan must be the “first lien” and cannot be written as a “subordinate lien”. You are required to recertify occupancy as a condition of loan approval and you are not allowed to use a VA Cash-Out Refinance on an investment property.

VA Cash-Out loans can be written for 30 years, with a maximum loan term of 30 years and 32 days.

When Is It A Good Idea To Apply For VA Cash-Out Refinancing?

Some borrowers want to use a cash-out refinance loan to pay off or consolidate debt, others may wish to finance home improvements with a VA Cash-Out Refinance. The key to making the most of the new loan is to calculate how much you will pay in closing costs, fees, etc., and see  how much you are spending to get the new loan.

Does the cost of the loan outweigh the benefit? For example, if you are planning a kitchen remodel and want to pay for it with the proceeds of your VA mortgage, you will want to examine the cost to value ratio of that project. How much would you recoup on the remodeling job if the home were sold? Is the expense of the upgrade worth it?

Of course, the answer to that question depends greatly on whether your motivation to remodel has more to do with enjoying your home as opposed to selling it.

You may not recover 100% of the cost of the project if the home is sold, so if your goal is to get a dollar-for-dollar increase in the value of the house thanks to the money spent on the project you may be disappointed.

A cash-out refinance loan is a good option for those who have run the numbers and find the cost of the loan, the return on investment, and the overall necessity of the project acceptable. The same is true for certain kinds of debt consolidation. If your goal is to get a single loan to manage a number of smaller bills, the VA loan program’s generally more forgiving credit qualification guidelines make it possible to get a lower interest loan to wipe out those debts. But the nature of your debt is key.

Are you paying off student loan debt that is not likely to be run up again? That’s a smart use of cash-out refi money. What’s not so healthy for your budget and bottom line?

When Is It A Bad Idea To Apply For VA Cash-Out Refinancing?

In general, it’s a bad idea to use a VA Cash-Out Refinance loan to pay off debts you have a likelihood of getting into again. Paying off a credit card account you still use with the cash-out loan proceeds is risky. How would it feel to completely pay off your credit card with such a loan, only to find that the card has been used again until you owe a significant balance on it and your refinance loan?

Using a refinance loan to pay off any debt likely to recur is not advisable. Paying off one-time expenses is a better use of the cash. The same is true for some types of home improvements. We mentioned them above in the context of good things you can do with a cash-out loan, but there are home improvement projects that may not actually add any value to your home. If that’s what you want–improvements that suit the owner but not necessarily a potential buyer–there’s no issue.

But if you want specific upgrades to add value to the home, it’s best to consult an expert to determine which improvements are worth taking out a refi loan for. Repairing and recovering from a natural disaster is one thing, but if you want to add a “mother-in-law apartment” over a garage and use a VA Cash-Out Refinance Loan to do it you may wish to see whether that specific improvement adds any value overall. You may be surprised to learn which projects are discouraged for the purposes of raising property values.

What You Should Know About These Loans

Some applicants have more of an advantage than others. If you receive or are eligible to receive VA compensation for service-connected medical issues, you may qualify for a waiver of the VA Loan Funding Fee, which can potentially save thousands of dollars. That’s an advantage when applying for a VA loan…any savings on your upfront costs is good to consider.

Add to that the fact that a VA Cash-Out Refinance loan has no mortgage insurance requirement (compare that to FHA Cash-Out Loans which do require both an up-front premium and monthly mortgage insurance premium) and it’s easy to see there are some advantages to the VA version of this refinance option.

Still not sure about your options? Ask a participating lender compare both VA and non-VA refinance loan options side by side for you. This can help you see what costs might affect your budget for a specific type of option. It never hurts to make a more informed decision and doing a comparison is a smart way to learn more about the different refinance loan types open to you.

Not all lenders are participating VA lenders, but those who are can show you the differences between each refinance product they offer. Also, it’s good to keep in mind that not all participating VA lenders offer the same loan products. You may have better luck with some lenders for the type of VA mortgage you seek than with others.

 

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VA Loans and the Appraisal Process: What You Need to Know

What You Need to Know About the Appraisal Process for VA Loans

If you are interested in buying a home, the appraisal process is one of the most important parts of the journey toward purchasing a house. This is due to two things.

One is that your loan officer is required to ensure the home meets minimum safety and livability standards. The appraisal process does not pretend to review the entire home for all known problems but it does serve as a benchmark to make sure the home meets minimum standards.

The appraisal is also meant to help the lender establish the fair market value of the property and compare that value to the asking price of the home.

This is done by reviewing the home as-is and comparing it to similar properties in that housing market (known as “comparables”) to determine how much the home is worth. In some cases, if a borrower is buying and remodeling a home at the same time, the home’s valuation may depend on how it measures up once the work is all done and the upgrades are ready to use.

VA Appraisals: The Basics

The VA appraisal process is initiated by the lender and paid for by the borrower. The VA appraisal process does not require the person doing the work to be an expert in things like the home’s electrical system, foundation, or plumbing.

That means that your appraiser will review these systems, but may not be experienced enough to spot every issue that could be a problem with the home.

Your appraiser is not required to step out onto the roof of the home, so if there are issues there you won’t notice them without a home inspection. More on the home inspection issue below. The bottom line? The appraisal process is a tool the lender uses and is not a tool for the borrower. We’ll discuss that in-depth below.

 

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In spite of the fact that the appraisal is not a complete top-to-bottom review of every square inch of the home, certain issues may arise that require correction as a condition of home loan approval.

This means that the appraiser has spotted a condition that is in violation of state or local building code, a violation of VA home loan Minimum Property Requirements or MPRs, or some other problem that means the home is not compliant with minimum standards.

Sometimes there are no corrections possible. The appraiser notes a condition that cannot be corrected or would cost too much to correct. A good example? An appraiser notes that a home has a high-voltage line that cuts across the property.

This is a condition that is unacceptable for more than one government-backed mortgage program including VA loans. The owner is likely to be unable to have this issue corrected, and that is a problem that could stop a loan to purchase the home.

Other issues may be corrected through repairs or upgrades. In such cases the VA appraiser will note the problem recommend the corrective action on the appraisal report, then the borrower and seller of the property must work out the details. In cases like these, a compliance inspection is likely necessary, and that is an expense you will pay as the buyer of the home.

What You Need to Know About VA Appraisals

If you disagree with the results of an appraisal, but your issue is simply that you didn’t agree with the dollar amount valuation of the home, you are not able to request another appraisal just to get another shot at a better value.

If there are what the VA calls “material deficiencies” on the appraisal, it may be contested. But if the only reason to ask for a review of the appraisal is to get another opinion you will be disappointed as this is not permitted.

The appraisal process is between lender and appraiser and you will not have direct communication with the appraiser. That does not mean you won’t get to see a copy of the appraisal report, but don’t expect to be a part of the process. That’s a lot different than the borrower-arranged home inspection, which we’ll discuss later.

Some want to know if a specific feature of a property will “pass” the VA appraisal. More specifically, some borrowers want to know if the home they want to buy is going to “pass” the appraisal because the home is served by a well, or has a septic tank. There are other issues similar to these but those two are fairly common.

VA appraisal rules do not spell out the requirements for septic and wells except to defer to the local authority on those issues. VA appraisal guidelines do not have specific parts-per-million or bacteriological specifications for health risks associated with well water.

But the state or local health authority does and that’s who VA appraisers defer to for such standards. If the well or septic situation is not in compliance with state or local health code, it is not acceptable to the VA.

In general, homes purchased with government-backed mortgages like VA home loans or FHA mortgage loans are required to connect to the local utility providers whenever feasible, but some properties cannot meet this standard and there are provisions in the VA mortgage loan rules for them.

Appraisals Versus Home Inspections

Some borrowers make the mistake of equating a VA appraisal with a home inspection. They assume that because the home “passed’ the appraisal process it must be defect-free. This is NEVER TRUE. The appraisal, as discussed above, is a tool for the lender and not the borrower.

The home inspection is a borrower-arranged, borrower-paid option that goes into much greater detail on the condition of the home. A home inspection is intended to give you the most accurate view of the home’s true condition so you can make an informed decision about whether to buy the property or not. Yes, the home inspection is optional. No, a borrower should never skip it. Some do. And some go on to find major problems with their home after they purchase it, move in, and live there for a few months to a year. Not all problems manifest themselves early in your days of home ownership.

A foundation issue, for example, may take years to show symptoms. Or you may notice trouble right away. It all depends on the age and condition of the home, and sometimes local environmental factors could play a part in the speed of a problem manifesting itself.

And the borrowers who skipped the home inspection and did not learn about the issues present in that home have no resource against the lender, the seller, or the VA if they buy a home without a home inspection and have such issues later.

One government-backed loan program, FHA Single-Family Home Loans, even has a special publication called For Your Protection, Get A Home Inspection that warns about these issues. That is how serious this issue is–even the agencies guaranteeing the loans want you to know to never skip the inspection.

Basically, buying a home without having it inspected is like purchasing a used car without ever taking it for a test drive. It is literally the same thing, and the same consequences can come as the result. It’s true that a home inspection may potentially cost about the same as an appraisal, but those who balk about paying that sum should remember one very important thing.

By spending the money on a home inspection, you are paying hundreds of dollars that could save you from paying thousands of dollars later on. And that’s a tradeoff well worth considering. And if you aren’t sure whether a home inspection is worth the trouble, it’s smart to ask a real estate agent or even a loan officer for some horror stories of those who chose not to have the home inspected and what happened as a result.

 

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What Credit Score Do I Need For a VA Mortgage?

What credit score do you need to qualify for a VA mortgage? Many potential borrowers want to know the answer to this question, and some worry that the no-money-down option might raise the FICO score requirements needed to be approved for a zero-down mortgage.

FICO Score Ranges

There are credit score ranges. Lenders use these ranges to establish degrees of creditworthiness. The higher your scores, the less of a risk you are considered to be. What do credit reporting agencies say about the FICO score ranges? Let’s see what Experian says about what constitutes good and bad credit score ranges:

  • Poor: 300-579
  • Fair: 580-669
  • Good: 670-739
  • Very Good: 740-799
  • Excellent: 800-850

How Many FICO Scores Do You Have?

There are a few things to know before we answer that basic question posed in our headline. The first is that typically, borrowers have more than one FICO score. When you have two or three FICO scores the lender may use the middle score or median score to approve your mortgage.

So if you have more than one FICO score, make sure you know which one the lender will use. It’s true that you may not see too much variation between those numbers, but in cases where you do, the middle score is one to pay attention to.

 

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What Is The FICO Score I Need To Qualify For An VA Mortgage?

You should know that the VA Lender’s Handbook, VA Pamphlet 26-7, does not instruct the lender as to the “acceptable to VA” credit score range needed to qualify for the loan. Instead, the VA leaves it up to the lender to establish minimum credit qualifying standards where FICO scores are concerned.

That means you may need to shop around for a lender who is willing to work with your circumstances, especially if your FICO scores are below 640. Lower scores potentially mean higher interest rates and you’ll want to know whether or not making a downpayment on the VA mortgage might help you avoid a higher rate in cases where your FICO scores aren’t quite in line with lender standards for approving the mortgage.

Putting money down on a zero-down loan is, in this context, a potential “compensating factor” that can offset a lower credit score range if your lender agrees.

FICO scores of 640 or better are typically used as minimum qualifying scores for many home loans. The fact that a VA mortgage is government-backed and therefore offers less risk for the lender offering the loan may make it possible to qualify for a VA mortgage with a FICO score lower than 640.

Comparing Qualifying FICO Scores

As a comparison, another government-backed mortgage loan program, the FHA Single-Family Home Loan program, offers the lowest downpayment (3.5%) for those with FICO scores at 580 or above.

Note that this is the FHA loan program’s minimum standard, not the lender’s. Lender standards may exceed this and often do. The bottom line? You’ll want to consider the FICO score issue carefully when shopping around for a lender. Don’t assume that all banks offer the same credit qualifying requirements, this is not necessarily true. If you worry that your scores are low, ask about making a down payment as a compensating factor.

Improving FICO Scores Before You Apply

There are ways to bring up your credit scores over time to improve your ability to be approved for a VA mortgage. The important caveat here is that you must give yourself enough time for credit improvement strategies to begin working.

They will not show results overnight, and may not show results for a few weeks or even months. But eventually, they WILL show up, and we are specifically talking about credit repair efforts you can do yourself without paying a third party to do for you.

There are three important steps you can take for free that will, over the course of a year, show results as long as you consistently apply these principles on time, every time.

These steps include paying ALL financial obligations on time with no late or missed payments for a full 12 months before you apply for your VA mortgage or VA refinance loan. You should also be working to reduce the amount of your overall debt and lower your credit card balances to well below 50% of your credit limit.

Those three things will help. But while you are doing this, you will also want to actively monitor your credit and review your credit reports for errors and other potential problems. Don’t assume that once you have read your credit report that everything is fine going forward and you never have to look again. You will want to know if your credit and personal identity have been compromised by reviewing your reports for any unauthorized activity.

Having a dispute on your credit at the time you apply for a VA mortgage, especially one that involves damage to your FICO scores, may complicate or slow down the loan process significantly. You’ll need to make sure you have no issues to deal with before your lender reviews your credit reports to approve your mortgage.

Finding such issues in your credit report takes time to deal with, and if you are facing a major mortgage deadline AND trying to dispute unauthorized use of your credit accounts, you may find that time is not on your side. It’s best to resolve all such issues as early as possible.

Should You Pay Others To “Repair” Your Credit?

Some are tempted to pay a third party to do credit repair for them. This is a choice left up to the borrower. But know this. You can repair your own credit as mentioned above over time, yourself, without paying someone else to do it for you.

That’s enough for some people to quit looking into credit repair agencies–they assume fixing credit requires some specialized knowledge to do properly. But really, all you have to know is that paying on time, lowering your balances, and avoiding too much use of credit really do contribute toward potentially higher FICO scores.

If you do choose to pay a third party to help, remember NEVER to trust someone who promises you they can remove accurate negative credit information from your report. Unless that information is outdated or expired, it will remain on your report no matter how many times it is contested. It will fall off your credit report in a matter of years, but don’t believe the hype about being able to erase accurate bad credit information.

And even if you do find a third party worth using to help you fix your credit, this process will take just as much time to resolve as if you were doing it yourself. In cases where there is inaccurate information that needs to go, there is a dispute and resolution process that cannot be hurried. If you put off working on your credit assuming a third party can help you do it faster, you may be setting yourself up for disappointment.

Once Your Home Loan Gets Started

If you get approved for a VA mortgage or a VA Cash-Out Refinance Loan, be prepared to have your credit run at least a second time by the lender during the course of the loan process. If your FICO scores change between loan approval and loan closing, your lender may be required to re-qualify you if the scores decline too much. That is one reason why borrowers are urged to completely avoid applying for other lines of credit during the home loan approval process and all the way up to closing day.

Your lender can and likely will run your credit more than once. Don’t let a bad assumption (that you only have one credit check) derail your mortgage loan; stay away from all new credit applications until after closing day. You’ll be glad you did.

 

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VA Home Loan Rules For Mobile Homes and Manufactured Housing

There are VA mortgages for a variety of loan purposes. You can buy a condo unit, townhome, duplex, and multi-unit properties with a VA mortgage. You can also use a VA loan to buy a mobile home and even the land that home is to be placed upon. VA loan rules for manufactured home purchases are a bit different than for buying a typical suburban home, but some of those differences have to do with the unique nature of manufactured housing.

Some don’t realize that VA home loans can be used to purchase mobile homes, manufactured homes, modular housing, and similar properties that meet both VA loan requirements and state/local building code. VA home loans allow buyers to consider homes that are factory-built, transported to a site for installation where they will be put on a permanent foundation.

And what do the VA loan rules say about that foundation? Basically that any manufactured home loan guaranteed by the Department of Veterans Affairs must conform to the guidelines found in the publication titled, HUD Manufactured Home Construction and Safety Standards.

If you want to buy a manufactured home with a VA mortgage, the first thing you’ll need to do is to find a participating VA lender offering these loans.

Not all VA lenders offer VA mobile home loans; the nature of the housing market in your area may or may not include them depending on location. But where they are offered, there are some important things to know about VA loans for mobile homes and manufactured housing.

 

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A Word About Modular Housing

VA loan rules observe a distinction between manufactured homes and modular housing. VA Pamphlet 26-7 Chapter 12 says of modular housing, “The appraiser will typically treat modular housing and on-frame modular housing in the same manner as conventionally built housing.”

The VA appraiser must choose “comparable sales that would be competing properties on the market which may include modular homes, conventionally built homes, or manufactured homes.”

In other words, it pays to know how the property you want to purchase is classified–modular, manufactured, or something else? Some types of modular housing are described as “on-frame” or mounted on a permanent chassis. In order to be approved for a VA mortgage an on-frame modular home must have its running gear stripped from the home and the crawl space must have a vapor barrier installed.

Mobile Homes Must Meet Certain Requirements For VA Loans

VA loan rules in Chapter 12 of VA Pamphlet 26-7 state that the manufactured home and the land where it will be placed, “must be considered a real estate entity in accordance with state law and meet all local zoning requirements for real estate.” That means no VA loan is possible for a houseboat or recreational vehicle or RV.

The real estate entity requirement may also be applicable to how the property is taxed. If the property cannot be taxed as real estate, it may not be eligible for a VA mortgage. This is true even if the state does not tax the property at all.

Some borrowers want to know if it’s possible to buy or build a tiny home using a VA mortgage. In cases where the property is classified as a manufactured home, modular home, or mobile home, there is a square footage requirement, but one reason a tiny home purchase loan may not be possible could have more to do with a lack of comparable properties that can be used in an appraisal to determine the home’s fair market value.

In other words, if you want to buy or build an unusual home that cannot be compared to other, similar properties in that housing market, a VA mortgage may not be possible due to the lack of comparables. This issue may vary depending on the housing market.

Wells, Septic Tanks, And Other Issues

Buying any type of home with a VA mortgage means understanding some loan rules that may apply to the nature of the property.

For example, there are no VA loan appraisal specifics when it comes to determining if well water from a specific source is acceptable fort loan approval. Like other government-backed mortgages, VA loans defer to the standards set by the local authority in these areas. The VA does not have a list of well water safety requirements that must be met outside of being acceptable to the local health authority.

You may find that government-backed mortgages including VA loans require a home (manufactured housing or not) to be hooked up to the local utility “wherever feasible”. Some properties cannot be connected to the local provider and well water or septic tanks may be needed.

VA home loans are not automatically ruled out in cases where a property has a septic tank and/or a well, but they must meet state standards and any applicable VA requirements.

Mobile Homes Purchased With A VA Mortgage Must Have A Permanent Foundation

The foundation issue is non-negotiable. The property must be attached to a permanent foundation that meets federal standards as a condition of loan approval. The mobile home may not start out on a foundation, but it must end up being placed on one that meets VA and other requirements.

Manufactured Homes Have A Size Requirement

A single-wide mobile home cannot have a total floor area of less than 400 feet. A double-wide cannot have floor space smaller than 700 feet.

Manufactured Homes Appraised As Proposed Construction Projects

In cases where the manufactured home is appraised as a proposed construction project the following are required by the VA:

  • Foundation plan exhibits
  • Floor plan showing room layout and exterior dimensions,
  • Elevation plans
  • Specifications for flooring, heating, plumbing, electrical equipment, appliances and other items included with the manufactured home.

VA Home Loans For Manufactured Homes And Land

VA home loans allow the borrower to choose between purchasing a mobile or manufactured home without buying land to place it on or buying both house and land. In cases where the borrower wants to buy a mobile home and put it on land they already own, VA loan rules say the loan amount may include:

  • The purchase price of the home
  • The cost of “all other real property improvements”
  • The VA funding fee

In cases where the buyer wants to purchase both home and land, the following may be included in the loan amount:

  • Purchase price of the manufactured home
  • Purchase price of the land
  • The cost of all other real property improvements
  • VA Loan Funding Fee
  • Any balance owed by the Veteran “on a deferred purchase money mortgage or contract given for the purchase of the lot”

What You Should Know About VA Home Loans For Manufactured Homes

Buying a modular home, manufactured home, or mobile home with a VA mortgage means the potential to purchase a home with no down payment and with the ability to pay the mortgage off early without penalty.

But before you commit to the purchase of a manufactured home, it’s smart to get some important details such as the age of the property, the total square footage of the floor area, and whether or not you will have to contend with issues like installing a vapor barrier in the crawlspace.

You should also consider your options in terms of buying (or not buying) the land to place your new home on. If you never considered the purchase of a parcel of land in this context, using a VA loan to do so may be a good idea thanks to the zero-down option as well as the ability to refinance the loan later on with a VA Streamline Refinance that could result in a lower monthly payment or interest rate, depending on circumstances.

VA loan rules also allow cash-out refinancing of a mobile home or manufactured home, but you will need to see if there is a participating VA lender willing to offer such an option for a mobile home.

 

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Why You Should Consider a Down Payment On a VA Mortgage

VA Loan: Where a Down Payment May Make Sense

Why should you consider making a down payment on a VA home loan? The zero-down option is one of the most appealing parts of the VA home loan program; most borrowers are thrilled to have no downpayment requirement to budget for. But there are definite advantages to making a downpayment.

Do you know the scenarios where you may want to (or have to) make a down payment? They include situations where the borrower just wants a lower loan balance to start with, a need to reduce the VA loan funding fee and even cases where the sale price of the home is higher than the fair market value of it.

And in some cases, depending on the borrower’s credit and other factors, the lender may actually require a down payment as a compensating factor for lower credit scores or for a less-than-ideal loan repayment history. This factor may vary depending on the lender, the applicant’s financial history, and other factors.

 

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Those who don’t have to make a down payment but are tempted to do so should consider one important factor before deciding; how long to stay in the home?

If you are buying a starter home or anticipate a change in family size down the road that may make you reconsider keeping the house long-term? A down payment may not necessarily be the right decision in those cases. It really does come down to your financial goals and needs in many cases.

VA Loan Down Payments: Lower Principal Balance

The first major advantage of making a down payment is the lower principal loan balance. You’ll ideally pay less for the loan over time by starting out with that lower balance. Some VA loan applicants have a goal of saving as much over the lifetime of the loan as possible; for these applicants, a down payment is an excellent idea.

Some even choose a shorter loan term in addition to putting money down on their VA mortgage, making their savings potentially larger because the term of the loan is shorter and the interest rate could be lower under the right circumstances. Basically, a shorter term means reduced risk or the lender, and a lower interest rate could be a possibility as a result.

VA Loan Downpayments: Reduced VA Loan Funding Fee

The VA loan funding fee is required for most VA purchase loan transactions unless the borrower is exempt from paying it due to receiving or being eligible to receive VA compensation for service-connect disabilities.

The funding fee varies depending on whether you are applying for your first VA loan or are a second-time applicant. The VA loan funding fee is lower for first-time use and higher for subsequent use. But those who make a downpayment on their VA mortgage will get a reduced fee. How much your fee gets reduced depends greatly on the percentage of the down payment.

For those making a downpayment of five percent or less, the VA loan funding fee for first-time use is 2.3%. Subsequent use for the same down payment is 3.6% Those putting more than 5% down but less than 10% for first-time use or subsequent use pay a VA loan funding fee of only 1.65%. Paying 10% down gets you a VA loan funding fee of 1.4% for first-time and subsequent use. These rates apply to veterans, active-duty service members, and National Guard / Reserve members.

VA refinance loans don’t feature a reduced funding fee option, the funding fee for VA refi loans is either 2.3% (first-time use) or 3.6% (subsequent use).

VA Loan Down Payments: When the Asking Price Is Higher Than the Appraisal

In cases where the seller’s price turns out to be higher than the appraised value of the home, the borrower has some choices. One is to renegotiate with the seller to bring the asking price down.

Remember, VA borrowers cannot be compelled to close the deal on a VA mortgage where the appraisal is lower than the sale price–this is sometimes known as the VA loan “escape clause”. Basically, you are free to walk away from such a situation without penalty. You can’t be required to forfeit earnest money and you cannot be compelled to purchase.

If you don’t renegotiate with the seller, you have the option of moving forward with the mortgage anyway. But in such cases, your lender will require you to come up with the difference between the asking price and the appraised value in cash at closing time.

This amount must be paid upfront and cannot be financed into the loan amount. There is sometimes a difference of opinion as to whether this actually constitutes a down payment in the technical sense, but the result is basically the same. You pay a certain amount at closing time without rolling it into the mortgage loan.

VA Loan Downpayments for Partial Entitlement

You may or may not use up all your VA loan entitlement when you get a VA mortgage. Borrowers who use some but not all of their entitlement are free to use it again even if it’s not at the 100% mark. But doing so will definitely require some form of money down on the transaction to offset the lack of the full VA loan benefit.

Who does this rule potentially affect? A number of circumstances may apply when it comes to having partial VA loan entitlement:

  • You have an active VA loan and it’s not fully paid off;
  • You paid a previous VA loan in full and still own the home and have not applied for entitlement restoration;
  • You refinanced a VA loan into a non-VA loan and still own the home;
  • You had a short sale on a VA loan but did not repay the VA in full;
  • You had a foreclosure or deed-in-lieu of foreclosure on a previous VA loan;
  • You had a foreclosure on a previous VA loan and didn’t repay the VA in full.

The list above implies that the borrower, in each of these circumstances, has some amount of the VA loan benefit remaining but not 100%. You’ll need to work with a loan officer to discover how much money down might be needed for a specific VA loan transaction under such conditions.

VA Loan Downpayments As a Compensating Factor

Another situation where a down payment might be required on a VA loan? When the borrower’s credit qualifying information, FICO scores, or other financials require a “compensating factor” in order to justify approving the loan.

Borrowers who have strong credit may not deal with this issue, but those who are working on fixing the financial mistakes of the past may (depending on how far along the credit repair journey might be) require the lender to ask for a downpayment.

This is something that is basically left up to the lender. The VA does not have a set FICO score range indicating an “ideal” applicant. Instead, the VA defers to the participating lender’s standards.

What to Consider About a VA Home Loan Downpayment

It’s easy to give generalized advice here. A downpayment that reduces your loan principal is never a bad thing for those who can afford to make that choice. Some don’t have a choice and must put money down in order to make their purchase a reality. Either way, a lower VA loan funding fee might be the result.

The complicating factor for some borrowers is the other expenses associated with the loan getting in the way of having enough money left over to make a down payment.

There are closing costs to deal with such as appraisal fees, compliance inspections, issues related to the title, even relocating expenses like movers or moving truck rentals. Not everyone can afford to put money down, but if you can afford to do so there are enough advantages that doing so may be well worth the expense.

 

>> Interested in a zero down payment possible home loan with no PMI?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Buying a Condo Unit With a VA Mortgage

VA Loan: Buying a Condo Unit

If you are looking for a condominium unit to purchase with a VA loan, there are some important aspects of the condo loan process you should be aware of. VA mortgages have some unique rules that may affect your choices. Knowing your options, your rights, and the general rules associated with VA condo loans can help you in the loan planning process.

The VA Lender’s Handbook, HUD 4000.1, states clearly that VA mortgages may be used, “to purchase or construct a residence, including a condominium unit to be owned and occupied by the veteran as a home.” VA condo loans feature the same zero-down options as other VA mortgages.

VA Condo Loans are offered by participating lenders, but not all lenders who approve VA mortgages may offer a condo loan. Much depends on the demand in the housing market you are in, the nature of the condominiums in the area, and whether or not the project meets VA standards.

Condo Purchases Are Unique

Whether using a VA loan or not, borrowers who choose condo units should know that buying such a property comes with some added considerations you may not be subject to when purchasing a typical suburban home, manufactured home, or even a farm residence.

What kinds of considerations? The fact that a single condo unit is part of a larger community means that certain common areas may require the group to pay for upkeep and maintenance. The shared roof is an excellent example; if you buy a unit in a condo with six living units, all six tenants are likely to have to pay for repairs when the time comes.

 

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This often means that there is a condo owner’s association that votes on such issues. You may be required to join as a condition of purchase, and in such cases, you’ll want to know what the organization’s bylaws and covenants are. This will be important for the VA loan in ways we’ll examine below.

Remember that a condo project may or may not involve mixed-use or mixed-zoning residential properties. In cases where there is a combined residential and non-residential project, it must be “primarily residential” in nature according to the VA. The Department of Veterans Affairs does not have regulations about specific zoning issues, instead, it defers to the local authority. If the condo does not meet the state regulations applicable to it, the project cannot become VA-approved.

VA Condo Approval

Like other government-backed mortgage loan programs, VA condo loan rules include a requirement that the condo project be on or added to the VA-approved list. It’s the lender’s responsibility to request additions to that list where appropriate.

VA Pamphlet 26-7, the VA Lender’s Handbook has an entire chapter dedicated to condo loan procedures; it includes the following instructions to the lender for adding a project not currently on the VA’s list:

  • The lender must submit a written request to the Department of Veterans Affairs for the condo project to be added;
  • The lender must submit the condominium’s “organizational documents”
  • The submission must be reviewed by VA compliance officials prior to approval.

In cases where a condo project is on other government-backed loan program approval lists, it may only be necessary to have that approval reviewed and applied for the VA program.

VA condo unit approval is not the same as a VA appraisal nor does it act as such. The condo approval process is more about determining that the project meets VA standards, that the bylaws don’t contain restrictive clauses that are contrary to VA loan standards and policy, and that the project meets state laws and other requirements.

In other words, when the condo project is added to the VA approved list, or the lender acknowledges that the project is already on the list, a VA appraisal is still required as a condition of loan approval.

Condo Approval Caveats

If a project is already on the VA-approved list, it’s not necessary to jump through all the hoops required to get the approval done. But in cases where approval is needed, there is a major caveat. It’s one borrowers and sellers should understand going forward.

When the VA approves a project, it does so as mentioned above in part by reviewing the condo’s documentation, bylaws, etc. It is assumed that this documentation is current at the time of review. But what happens if there are changes, updates, or modifications to the rules after the condo project is VA approved?

VA Pamphlet 26-7 Chapter 16 states, “VA approval of any amendments to the declaration, bylaws, or other enabling documentation is required while the declarant is in control of the homeowner’s association. A written statement signed by an officer of the Association’s Board of Directors and submitted with VA Form 26-1844, is required as evidence of approval.”

This could be interpreted as protection against VA-compliant bylaws that could be amended after initial VA approval where the changes don’t meet VA standards. However, VA loan rules in this section add that approval is “not required” for condo project amendments “which annex additional phases to the condominium in accordance with a development plan previously accepted by VA.”

What Causes A Condo To Be Rejected By The VA?

There are a number of technical, behind-the-scenes reasons why a condo project might not meet VA approval. One would be that the project does not meet the legal requirements established by the state the condo is in.

Another is that the condo project is located in an area the VA won’t approve loans in. But the issues that are most relevant to the borrower in this area involve restrictive covenants or clauses in the condo owner’s association documents or other paperwork relevant to the project.

What does the term “restrictive clauses” mean? Simply that the condo project wants all owners to agree in a legally binding document that certain rights are subject to prior approval, or subject to “alienation”.

The VA Lender’s Handbook in Chapter 16 states that the following must not be present in any agreement for the buyer:

  • Right of first refusal;
  • Right of prior approval of either a prospective purchaser or tenant;
  • Leasing restrictions which amount to unreasonable restrictions on use and occupancy of a unit;
  • Any minimum lease term in excess of 1 year.

Notice a pattern? Most of the above refer to conditions placed on the owner that restrict her ability to freely use, transfer, or otherwise dispose of the property. The “right of first refusal” is basically a clause that prevents the individual condo unit owner from selling the unit to anyone they want. The condo owner’s association may in such cases reserve the right to approve or deny the transaction.

That is in direct contradiction to VA loan rules which state that the owner must be free to sell, transfer, or otherwise use the property as they see fit as a primary residence.

What To Know About VA Condo Loans

Buying a condo unit means participating in a collective of sorts. You may have rules that dictate what color you can paint exterior walls, the kinds of public-facing adornments to windows, doors, or porches, and you may be required to attend condo owner association meetings to decide how to pay for maintenance of common areas, parking lots, etc.

It’s true that some typical suburban neighborhoods also feature homeowner’s associations, but when buying a condo you may find them far more commonplace. There are dues associated with such organizations and those who do not meet their financial obligations to the association may be financially liable depending on the terms of the legally binding agreement you sign.

These are important issues to know, don’t be taken by surprise when you are shopping for a new place to live. You’ll want to understand what to look for in the condo owner’s association documents in terms of your obligations and your rights as the owner of the unit in a given project.

 

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Veterans Housing Grants Through the Home Depot Foundation

Help for Veterans through the Home Depot Foundation

You might shop at Home Depot, and know they have a military discount. But, they also have the Home Depot Foundation, which is committed to helping improve the homes and lives of U.S. Veterans and train skilled tradespeople to fill the labor gap and support communities that are impacted by natural disasters. Starting in 2011, they have invested more than $400 million in veterans causes and have improved more than 50,000 veteran homes and families.

RELATED: Home Depot Military Discount

They have also pledged to invest half of a billion dollars in veteran causes by 2025 as well as $50 million in training the next generation of skilled tradespeople through the Path to Pro Program.

Their Veteran Housing Grants are between $100,000 and $500,000 and is an amazing program that awards grants to nonprofit organizations for the new construction or rehabilitation of permanent supportive housing for veterans.

Who qualifies for this program?

This program is for organizations that fit these qualifications:

  • 501(c)3 nonprofits that have maintained good standing with the IRS for at least five years.
  • Have a current operating budget of at least $300,000.
  • Have previous experience developing veteran housing and currently manage or own veteran-specific housing.
  • Have a 15+ year ownership stake in the development.
  • Be involved in the Continuum of Care or a local collaboration to end homelessness in their community.

Where are the grants awarded?

They award grants through the U.S. and Puerto Rico, but priority goes to large cities, which are cities with over 300,000 people.

They state that they focus on the following cities:

  • Los Angeles, CA
  • Seattle, WA
  • New York, NY
  • Houston, TX
  • Detroit, MI
  • San Diego, CA
  • Denver, CO
  • Chicago, IL
  • Atlanta, GA
  • Tampa, FL

There are also eligibility requirements for the program

  • The program supports new construction or rehabilitation of multifamily, permanent supportive housing for veterans.
  • The grant can only be used for the costs of the physical construction of housing for veterans.
  • The funding must comprise less than 50% of the total development cost of the project or program.
  • The target population of the veterans must be at or below 80% AMI.
  • 75% of their funding sources must be identified when applying for the program.
  • The project needs to commence within 12 months of proposal submission.
  • At least 20% of housing units must be reserved for veterans.
  • Proposals must show evidence of a 3rd party binding agreement that ensures that the housing units are actually occupied by veterans for a minimum of 15 years.
  • Supportive services must also be provided.

How do you apply for the program?

You can fill out the application on their website. You will then be contacted no more than 45 days after the grant proposal due date. The remaining due dates for 2022 are 3/25/22 and 7/8/22. It’s important to know that this grant is not for individual veterans, or organizations for single repairs. The Home Depot Foundation does have a list of partners that might be able to help with that.

 

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VA Loan Limits 2022

2022 Limits for VA Loan

What are the VA loan limits for 2022? The short answer is, if you have never used your VA loan benefits before or have had your VA loan entitlement restored to 100% (by paying off the VA loan, selling the home, and applying for restored entitlement with the VA you have NO VA LOAN LIMIT. No loan limits make it potentially easier to buy a larger single-unit home, a multi-unit property, or even a mixed-use property that is primarily residential.

Thanks to federal legislation, the Department of Veterans Affairs gained the ability to provide government guarantees to participating VA lenders for VA home loans above the annual per-county VA loan limits. While this does not mean that VA borrowers can apply for unlimited funds to purchase a home, it does improve the buying power for those who qualify.

 

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Why Is There No VA Loan Limit?

The actual truth is, there ARE still VA loan limits for any VA borrower with less than 100% entitlement. We’ll discuss those loan limits below but for those who do have full entitlement, starting in 2020 the VA loan limit for mortgages above $144,000 no longer applies thanks to federal legislation in the Blue Water Navy Vietnam Veterans Act.

That legislation accomplished many things at once. One of those was the elimination of the VA loan limit as described above.

This means that, according to the VA, all eligible VA borrowers not only have the option of a zero-down home loan with no mortgage insurance but now have the ability to apply for a loan with limits they negotiate with the participating VA lender.

Who Is Eligible for the No-Loan-Limit VA Mortgage?

Borrowers with FULL VA LOAN ENTITLEMENT are eligible to apply for a VA loan with no loan limits. All others will be subject to loan limits set each year by the Federal Housing Finance Authority (FHFA). Who has full or 100% entitlement?

A borrower is said to have 100% or “full entitlement” if ANY of the following is true: i

  • The borrower has never used the VA home loan benefit;
  • The borrower has paid off a previous VA loan and sold the home;
  • You’ve used your home loan benefit, but had a foreclosure or short sale and have repaid the VA.

If you have used your entitlement but are eligible to have it restored, know that it may not be automatically restored. Contact the Department of Veterans Affairs to learn how to apply to get your 100% entitlement back. It is a good idea to start this process as early as possible in case you have any complications that may require further assistance.

Applying For A VA Loan Without Full Entitlement

Borrowers don’t always use their full VA home loan entitlement. In such cases, a borrower who applies for a loan with partial entitlement has a loan limit which are based on the same limits used for conventional mortgages. Your VA mortgage will have a loan limit that was set by the Federal Housing Finance Agency for that county.

Who Has “Partial Entitlement” for a VA Home Loan?

Circumstances vary but in general, you may have partial entitlement remaining if you:

  • Have an active VA loan you’re still paying on;
  • Paid off a previous VA loan in full and have not sold the property;
  • Refinanced a VA mortgage into a non-VA loan and still own the home;
  • Had a VA “compromise claim” AKA a short sale but did not repay the VA;
  • Had a deed in lieu of foreclosure on a previous VA loan;
  • You had a foreclosure on a previous VA loan without repaying the VA in full.

Where Do I Find Out How Much VA Loan Entitlement I Have Left?

Your VA Certificate of Eligibility (COE) has a section describing how much entitlement remains on your VA mortgage loan benefit. If you do not see 100% entitlement but feel you should have your full amount, you should contact the Department of Veterans Affairs directly to see how to have your entitlement restored.

Some borrowers get confused by the COE. They see a line showing a dollar amount when full entitlement is available–$36,000. That figure is NOT how much you are limited to borrow for the mortgage. Instead, that dollar amount is the figure the VA would pay to the lender for loans at or below $144,000 that go into foreclosure.

For VA mortgages above that amount, the VA promises to pay 25% of the loan when it is approved for more than $144,000. These guarantees are why your lender can offer you a lower interest rate and a no-money-down mortgage.

What Do I Need to Know About VA Loans That Exceed VA Loan Limits?

If you are applying for a VA mortgage with partial entitlement, and the loan exceeds the county limit, you may be required to pay the difference between the limit and the sale price in cash. This generally cannot be financed; it’s a similar situation to when the seller establishes an asking price for the home but the appraised value of the property is lower than the sale price. In such cases, if the seller will not reprice the home the borrower can either pay the difference in cash or walk away from the mortgage. You cannot finance the difference in this instance, either.

2022 VA Home Loan Limits

In 2022, the maximum VA loan limit for single-unit properties is $647,200. The upper loan limit, the “ceiling” for single-unit properties in typically high-cost areas will be $970,800. These loan limits are the same as those used for Fannie Mae and Freddie Mac

VA loan limits will generally either stay the same or increase–the Federal Housing Finance Agency official site states clearly that even if home values are declining, the loan limits will not be adjusted downward.

What You Need to Know About VA Home Loan Lending Limits

VA loan limits–and the lack of them–involve the amount of money you can borrow once you have financially qualified for the mortgage. Just because you are eligible to apply for a VA mortgage after having served the minimum time in uniform does NOT mean you are automatically approved for a major credit line. You will be required to credit-qualify for the mortgage in any case.

Your lender will need to know you are basically eligible for the VA loan program, get a copy of your VA Certificate of Eligibility, and review your credit application. The loan officer will pull your credit reports, review your FICO scores and repayment history and the other typical steps it takes to approve a mortgage.

A lack of VA loan limits also does not mean you can apply for more money than the home loan requires with the intent of taking out the difference in cash. This is not permitted. In general, government-backed mortgage programs do not permit “excess cash back” to the borrower at closing time except where refunds for money paid up front is concerned.

If you paid for something in cash that you later changed your mind about and had rolled into the loan amount, a refund is due–and permitted under VA loan rules.

But a home loan cannot be used like a cash-out refinance and there is no provision for “unrestricted funds” back to the borrower at VA home loan closing time if not in the form of a refund.

And finally, borrowers should also be aware of the lender standards angle. Just because VA mortgages have no loan limit for those with 100% entitlement, that does not mean your participating VA lender won’t have an upper limit for a home loan in your housing market. Lender standards also apply in addition to VA loan rules, so it’s smart to remember that you’ll need to negotiate the loan in a variety of ways including the loan amount.

 

>> Interested in a zero down payment possible home loan with no PMI?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Can I Use Crypto for a VA Loan Down Payment?

VA Loan Down Payment with Cryptocurrency as Down Payment

There are two basic questions you’re likely to have when reading the headline for this article. The first is naturally, “Why would I want to make a down payment on a VA mortgage?” It’s true that VA loans typically do not require a down payment. But there are good reasons to make a down payment anyway, and we’ll get to that below.

The second question some are likely to ask is something along the lines of, “Why using cryptocurrency for a down payment is an issue at all?”

The short answer to that question is that at press time when interest in Bitcoin, Ethereum, and other virtual currency is at an all-time high, many investors wonder about using non-traditional, decentralized finance to execute more traditional investments and transactions like VA mortgages.

But what can you do with Bitcoin where a mortgage is concerned? We’ll address that below, but first:

Why Make A Down Payment On a VA Mortgage?

Some might laugh at the idea of putting money down on a mortgage that has no down payment requirement. But those who make down payments of a certain size on a VA mortgage get a benefit from doing so–a reduction in the amount of the VA loan funding fee. You can get a lower fee by putting five percent or up to ten percent down.

The amount of the VA loan funding fee you are charged (which is a percentage of the loan) depends on the down payment. Five percent or below and your VA loan funding fee is 2.3% for first-time use.

Above five percent but below 10% and your VA loan funding fee is 1.65%, and 10% or greater your VA loan funding fee is 1.4% for first-time use. VA loan funding fees may be higher for subsequent use.

As you can see from the numbers above, it makes sense to make a down payment if your funding fee is discounted as a result. 1.65% is a bargain compared to 2.3%

 

>> Interested in a zero down payment possible home loan with no PMI?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

Using Cryptocurrency To Make A Down Payment?

Home loans in general have strict rules about the sourcing of down payment funds. The lender has to see a paper trail documenting the funds you use for your down payment showing that it did not come from sources like a payday loan, a pink slip loan, or credit card cash advances. Money that cannot be verified by the lender cannot be used for the down payment.

By its very nature, cryptocurrency is not verifiable by your lender. The anonymous nature of crypto is part of the problem, and decentralized finance doesn’t permit the lender to do her due diligence in terms of sourcing the money.

And then there is the mechanism for delivering crypto to the lender. You may find that traditional financial institutions are not equipped to receive crypto as payment for anything unless it is specifically related to buying, selling, or trading Bitcoin, Ethereum, etc. Some traditional lenders have started to embrace crypto, but where mortgages are concerned, you may find that Bitcoin isn’t an option for your down payment. At least not directly.

Cryptocurrency Is Not Cash

That sounds wrong to some. Bitcoin, Dogecoin, Ethereum, and others can be used to buy and sell, how is it NOT considered cash?

That is a question for the United States federal government, which does not classify crypto as legal tender but rather as property. It is taxed by the IRS as property. This concept is so important we will say it twice–cryptocurrency is not a form of legal tender in the eyes of the U.S. government.

Therefore, cryptocurrency is not available to the borrower to use as a down payment.

Home loans have specific procedures and processes for payment. You cannot bring a wheelbarrow full of cash to your closing day appointment and expect to pay your closing costs with it, your loan officer will tell you what form of payment is acceptable for cash to close. But crypto will not be one of those options.

The Alternative To Using Crypto For A Down Payment

Technically, a borrower should be able to convert cryptocurrency into cash and use the cash to make the down payment. But there’s just one issue–the sourcing requirements your lender has for the down payment make it necessary to use caution when taking this approach. The best thing to do is to confer with your loan officer about this option.

If your lender allows you to convert crypto to cash for down payments and/or closing costs they may require you to “season” the money in an account for a set amount of time before it can be used. This will depend greatly on lender standards and your experience may vary depending on the lender and other variables. State law and changes to federal law may also affect this option.

The Bottom Line

Making a down payment on a VA mortgage is a good idea; using crypto to do it is not really an option. Talk to your loan officer about options for converting cryptocurrency to cash and what the requirements might be in order to pay closing costs or make a down payment using those funds.

 

>> Interested in a zero down payment possible home loan with no PMI?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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VA Loans, Investment Properties, and Deployments

Investment Properties, Deployments and the VA Loan

What do VA home loan rules say about occupancy, deployments, and investment properties? These don’t sound like related topics at first, but believe it or not, the VA Lender’s Handbook, VA Pamphlet 26-7, has a lot to say about all three subjects and they do intersect.

Basically, the VA Loan program is designed for those who plan to live in the home they buy. Renting out unused portions of that home is permitted. Using the home primarily as a business is not. Buying a home and being deployed is not a violation of VA occupancy requirements, but buying one and never occupying it IS a violation of the loan agreement you’ll sign.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

VA loans are for qualifying service members, veterans, surviving spouses, and those who serve in what are referred to as “uniformed services” such as those commissioned by NOAA and those who serve as certain types of public health officials.

VA loans are sometimes approved with non-VA borrowers in a process known as a joint loan. VA occupancy requirements only apply to those using the VA loan program for the purchase–non-VA borrowers in the same transaction are not asked to honor the VA loan rules when not using a VA mortgage. Multiple borrowers can also apply when all applicants are using their VA loan benefits–in such cases all occupancy rules apply.

VA Loan Occupancy Rules

Occupancy is a critical issue for any use of your VA home loan benefit. VA purchase loans require the buyer to certify in writing that she will use the home purchase with a VA mortgage as the primary residence or have an eligible family member who can meet the occupancy requirement instead.

Occupancy is an issue because VA home loans and VA refinance loans are intended for owner-occupied homes and while it is possible to purchase a mixed-use or mixed zoning type property with a VA mortgage, the use of that home must be “primarily residential” and the non-residential nature of the property must be “subordinate” to use of the structure as a home first.

But military members get deployed, sent TDY, experience permanent change of station moves, or go to professional military education for prolonged amounts of time. How does this affect the borrower’s occupancy status?

The short answer is that it does NOT. The owner is expected to have military duty and you do not have to live in the house every single day you own it in order to be considered using the property as your home address.

Deployments, Temporary Duty (TDY)

VA Pamphlet 26-7 Chapter Three states, “Single or married servicemembers, while deployed from their permanent duty station, are considered to be in a temporary duty status and able to meet the occupancy requirement. This is true without regard to whether or not a spouse will be available to occupy the property prior to the veteran’s return from deployment.”

There is a bit of a grey area where PCS moves are concerned. Chapter Three does not directly address whether or not a PCS move complicates the VA loan for the owner.

However, there are hints of the VA’s position on PCS moves elsewhere in Chapter Three where “intermittent occupancy” is addressed. In order to be compliant on this issue, VA loan rules say the home secured with the VA loan must be reasonably near the borrower’s job.

Whether you can legally rent out a home you buy with a VA loan after PCSing out of the area is something you may have to review your purchase contract for–any fine print or stipulation in the contract will be legally binding.

If you want to fee you are safely within the VA loan rules for renting out the home, you can always consider refinancing the mortgage with a VA Interest Rate Reduction Refinance Loan (which generally must result in some tangible benefit to the borrower) as this type of VA refi requires you certify only that you have previously used the home as your residence.

VA Loans For Investment Properties

Why do people want to turn to VA mortgages to buy bed and breakfasts, Air b-n-b operations, and other things like them? The no-money-down VA home loan is one reason. VA mortgages also have no VA-required private mortgage insurance or PMI, which is another way to save money on the loan up front.

And then there is the comparatively low interest rate on the loan. Government-backed mortgages offer an advantage in this way since the government, in this case, the Department of Veterans Affairs, is promising the lender an offset in the cost of the lender’s loss if the loan goes into foreclosure.

Buying an investment property with no money down definitely DOES have an appeal to it. But the VA loan program is for residences only. It’s true that you can use a multi-unit home purchased with a VA mortgage as an investment property when you live there, too. But buying a house without intent to occupy? That’s not permitted with VA mortgages.

And that is consistent all the way down the line with VA purchase loans. Did you know you can buy a farm residence with a VA mortgage but that only the residential value of the property is considered for the loan? There is no extra money available to buy a farm business, and no appraisal valuation for the non-residence nature of the property.

The way many investors think about investment properties–to buy, rent out immediately, and never occupy? That’s the sort of thing VA loan rules are designed to prevent–the borrower purchasing a house they do not intend to live in. So in that sense, you cannot use a VA purchase loan to buy a bed and breakfast, an Air b-n-b operation, or a house you plan to rent out to someone else.

But you are permitted under VA loan rules to buy a multi-unit home and rent out the unused units you are not living in. This type of “investment property” arrangement is 100% acceptable to the Department of Veterans Affairs as long as the borrower or borrowers live in one of the units themselves.

You can legally rent out a duplex or townhome you buy with a VA loan in this way or a multi-unit home up to four living units. But what you generally cannot do is to use your VA loan to buy (or create) non-residential, “intermittent” or transient occupancy type operations where occupancy is 30 days or less.

The Bottom Line

If you are not sure how VA loan occupancy rules affect your mortgage, have a frank conversation with your lender about what you would like to do and whether it is permitted under VA mortgage loan rules. VA loans allow you to buy and refinance a home; they also allow you to rent out the home freely if you refinance with a VA Interest Rate Reduction Refinance Loan. Some borrowers consider applying for a VA Cash-Out Refinance instead–thinking the same rules might apply.

However, VA Cash-Out Refinancing requires the borrower to again certify occupancy in writing and use the home as the primary residence. If you choose not to refinance your VA mortgage with another VA loan, know that the occupancy rules you agreed to under the original VA loan are no longer applicable and any new requirements for occupancy that may apply (FHA and USDA mortgages especially) will apply instead.

Make sure you fully understand any new occupancy requirements for a different, non-VA mortgage loan before you commit.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Changes Coming to the Thrift Savings Plan in 2022

There Will Be a New TSP App, and More!

The Thrift Savings Plan (TSP) is a retirement savings and investment plan for federal employees and members of the uniformed services, including the Ready Reserve. The TSP was established by Congress in the Federal Employees’ Retirement System Act of 1986 and offers the same type of savings and tax benefits that many private corporations provide their employees under their 401 K plans.

There are some updates coming to the TSP that will help improve the user experience. This is all a part of the Federal Retirement Thrift Investment Board’s Converge Program. This program hopes to modernize the TSP. 

New Mobile App for TSP Platform

There will be an app that is coming out in mid-2022, that will make access to the TSP platform even easier. This mobile app will allow users to manage investments and contact the agency for assistance through their mobile devices. Users will also be able to use added security measures, facial recognition, and other methods to increase security.  In addition to the mobile app, there will be new tools such as a virtual assistant and virtual chat.

New Mutual Fund Window Opening

There will also be a mutual fund window opening for the TSP. TSP participants will be able to search to see what they want to invest in.  The window will feature over 5,000 mutual funds. TSP users will need to have at least $40,000 in their TSP accounts, and the minimum initial transfer will be $10,000. TSP users won’t be able to exceed 25% of their TSP index fund balance. 

Mutual fund offerings were authorized for the TSP back in 2009 by Congress but had been held up because of regulatory and technological challenges. 

Look for the TSP app and other changes and additions this summer. They seem to be able to make the user experience a little easier and offer some much-needed updates to the program. 

 

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VA Loan Occupancy Rules–What You Need To Know

What You Need to Know About VA Loan Occupancy Rules

What are the rules for occupancy when you are approved for a VA home loan? Most government-backed purchase loans have an occupancy requirement. Occupancy in this case means that you intend to live in the property as your full-time residence or have a spouse or approved dependent do so on your behalf.

Any loan with a government guarantee such as FHA mortgages, USDA home loans, and yes, VA mortgages, stipulate that the property to be secured for the mortgage must be owner-occupied within a specified period of time as the borrower’s primary residence or home address.

VA loans require the buyer to certify in writing that the home securing the VA mortgage as collateral will be used as the buyer’s home and not as an investment property, second (non-primary) home, or vacation home.

What Constitutes a Primary Residence?

According to VA Pamphlet 26-7, the VA Lender’s Handbook, the borrower must certify that they intend to personally live in the home or “…intend, upon completion of the loan and acquisition of the dwelling, to personally move into the property and use it as his or her home within a reasonable time.”

A primary residence is basically, in the eyes of the Department of Veterans Affairs your home address where you get your bills, your personal mail, etc.

Do You Have to Occupy a Home Purchased with a VA Loan?

When you purchase property with a VA mortgage, you are expected to occupy the home as your primary residence within a reasonable time after closing. That time period is normally 60 days, but you and your loan officer can negotiate this.

That is especially helpful in cases where the buyer is still serving elsewhere and cannot physically relocate due to a deployment, temporary duty or TDY, attendance at professional military education programs, permanent change of station moves, etc.

What is required to get an extension on the move-in time above and beyond 60 days? The borrower must certify in writing that she intends to occupy the home “at a specific date after loan closing”, and there is, “a particular future event that will make it possible for the veteran to personally occupy the property as his or her home on a specific future date.”

Renegotiating the occupancy date does have its’ limits–VA loan rules found in VA Pamphlet 26-7, Chapter 3 state clearly that 12 months is the upper limit.

RELATED: VA Loan Requirements: What You Need to Know

Other Delayed Occupancy Issues With VA Mortgages

There are other reasons why a borrower may not be able to move into a home purchased with a VA mortgage right away. One of those? Renovations. If the home is being repaired, renovated, or remodeled in conjunction with a VA mortgage loan, the home may not be habitable at closing time.

Chapter Three of VA Pamphlet 26-7 states:

“Home improvements or refinancing loans for extensive changes to the property which will prevent the veteran from occupying the property while the work is being completed, constitute exceptions to the “reasonable time” requirement.”

In these cases, the borrower is required to certify in writing that they will “occupy or reoccupy the property as a home upon completion of the substantial improvements or repairs.”

Note that there is no time frame for when such projects must be completed after closing, it’s likely you and your loan officer will have to negotiate this time frame based on the specifications of the work being done and its complexity.

What If the Borrower Cannot Occupy?

The loan applicant is not the only person who can occupy the residence to meet the VA occupancy requirement. Spouses and qualifying dependent children (the term used by the VA) may be able to meet this obligation according to Chapter Three of the VA Lender’s Handbook;

“Occupancy (or intent to occupy) by the spouse or dependent child satisfies the occupancy requirement for a veteran who is on active duty and cannot personally occupy the dwelling within a reasonable time.”

When a dependent is needed to meet the occupancy requirement, VA loan rules say the veteran’s attorney-in-fact or legal guardian of the dependent “must make the certification and sign VA Form 26-1820, Report and Certification of Loan Disbursement.” Military spouses are allowed to occupy the home instead, “if the veteran cannot personally occupy the dwelling within a reasonable time due to distant employment other than military service.”

How Does the VA Certify Occupancy?

The VA requires the borrower to certify their intent to occupy on two documents.

  • VA Form 26-1802a, HUD/VA Addendum to the Uniform Residential Loan Application
  • VA Form 26-1820, Report and Certification of Loan Disbursement

In typical cases, the signed documents listed above are enough to satisfy the VA, and VA loan rules state that the lender is permitted to accept these certifications “at face value unless there

is specific information indicating the veteran will not occupy the property as a home or does not intend to occupy within a reasonable time after loan closing.”

What is the VA lender instructed to do if there IS a reasonable doubt? According to the VA official site, the lender must decide if “a reasonable basis exists for concluding that the veteran can and will occupy the property as certified.

Myths About VA Loan Occupancy Rules

Occupancy does not necessarily mean you are physically living in the home on a daily basis. VA loan rules accept that some may have intermittent physical occupancy, but in general, the home must be reasonably expected to be the main address, taking factors like proximity to work into consideration.

VA loan rules state that when employment “requires the veteran’s absence from home a substantial amount of time”, certain conditions must be met as a condition of loan approval:

  • The borrower must be able to show “a history of continuous residence” in the local area AND;
  • There must be “no indication that the veteran has established, intends to establish, or may be required to establish, a principal residence elsewhere”.

Some websites and blogs about VA loans perpetuate myths about VA home loans whether by accident or ignorance of the rules.

One good example of this where occupancy is concerned? A quote from a 2020 blog entry on a third-party website discussing how soon you can sell a home purchased with a VA mortgage. “Basically, anyone getting the loan must live in the home, ruling out renting the property, using the building exclusively for work purposes or allowing friends or non-eligible family members to live there.”

There is much in the above statement that is not entirely true, and some that is not true at all.  VA Pamphlet 26-7, Chapter 7 does state that any VA borrower using a VA loan benefit must certify occupancy, but there is no prohibition on allowing family and friends to live in the home.

What this article writer likely MEANS to say is that there is no way a non-eligible friend or non-eligible family member can fulfil the borrower’s occupancy requirement on the veteran’s behalf the way a spouse or eligible dependent child can.

VA Joint Loan Issues

VA loan rules also permit non-VA borrowers to apply with the veteran for a “joint loan”. The military member’s VA loan entitlement is charged for the veteran’s share of the mortgage only. Any non-VA borrower on such a joint loan is not required to meet the occupancy requirements because the non-VA borrower isn’t using the VA loan benefit and is therefore not subject to the same rules.

Can you rent out a home you purchased with a VA mortgage? If you have purchased a multi-unit property you are free to rent out the unused living units to anyone you like. That’s in direct contradiction to the statement made (see above) by a VA loan blogger saying you cannot rent out your property to someone else. Under the VA loan rules, some perceive a grey area around the issue of buying a home, living in it for a few years, then moving on and renting it out.

Some do this with VA loans, but on paper, the acceptable process is to refinance the property first with a VA Interest Rate Reduction Refinance Loan or VA IRRRl first. VA IRRRLs require you only to certify that you have previously used the property as your primary residence before the refi. Refinancing with a VA IRRRL is different from VA cash-out refinance options in this way.

 

>> Interested in a zero down payment possible home loan with no PMI?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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The VA Loan Certificate of Eligibility

The VA Certificate of Eligibility (COE) you need to apply for a VA home loan is one of the most important documents in the group of items you must submit to a participating VA lender. The VA COE is your gateway to the VA home loan program and without it, you can’t officially move forward with a VA mortgage application.

You will need a VA COE whether applying for a typical VA purchase loan, a VA refinance loan or a VA Native American Direct Loan.

Who Is Eligible to Apply for A VA COE?

Some do not realize that there are many categories of people eligible to request a VA COE once they have met their time-in-service requirements (see below). These include:

  • Active duty military
  • Retirees and veterans
  • Qualifying surviving spouses of military members who died as a result of military service
  • Guard and Reserve members
  • Public Health Service officers
  • National Oceanic and Atmospheric Administration officers
  • Cadets, Midshipmen, and those at the Coast Guard Academy
  • Merchant seaman who served during World War II

The time-in-service requirements for each of these categories depend greatly on the era of service. For example:

Those currently serving on active duty must serve 90 consecutive days outside of training;

Those who served from August 2nd, 1990 to the preset must meet one of the following VA criteria:

  • 24 continuous months of military service OR;
  • The full period (at least 90 days) for which you were called or ordered to active duty OR;
  • At least 90 days if you were discharged for hardship, a reduction in force, or for convenience of the government OR;
  • Less than 90 days if you were discharged for a service-connected disability.

The full list of service eras is lengthy–it’s best to discuss your COE needs directly with the VA or with a participating lender if you aren’t sure what your time-in-service commitment must be to qualify.

RELATED: VA Loan Requirements: What You Need to Know

 

Get a free, no-obligation consultation regarding your VA Loan!

 

Applying for Your VA Certificate of Eligibility for A VA Mortgage

Depending on the nature of your military service, you may have different requirements to obtain your COE. The first thing you will need to do is gather your documents which will include VA Form 26-1880 or its electronic equivalent.

You can apply by mail, the VA’s web portals such as eBenefits, or apply with the help of your participating lender.

If you are retired or separated you will need to submit copies (never originals) of your retirement or separation paperwork. For active-duty military members, this will be your DD Form 214, for others such as Guard or Reserve members, the paperwork may be different.

Guard and Reservists should be prepared to show current points statements where applicable, and any relevant discharge paperwork for prior service, current service where applicable, etc.

Currently serving military members typically require a statement from their chain of command indicating that the military member is in good standing, how much active duty service commitment remains on the current commission or enlistment, when you started active duty, total years of service, any “lost time”, plus personal data such as full name, Social Security Number, etc.

You should ensure that any such letter is written as an official communication including any letterhead that might be used in such correspondence. The verification letter should not be treated as a casual document but rather one that could make or break loan approval.

If you applied for a VA COE in the past but are seeking a VA loan after many years, you may need to reapply for one, depending on the circumstances.

Those who got a COE on active duty but have since retired or separated will need a new one that reflects current military status (active, Guard, Reserve, Retired, Separated, etc.) and any applicable VA disability information that could affect your requirement to pay the VA Loan Funding Fee.

Applying for VA COE as a Surviving Spouse

Surviving Spouses have a special set of procedures to follow when applying for a VA COE.

To apply, VA Form 26-1880 must be accompanied by the veteran’s discharge documents and/or enlistment paperwork (depending on circumstances) as well as a marriage certificate, death certificate, and any paperwork showing receipt of (or an application for) VA Dependency & Indemnity Compensation (DIC) benefits.

If you need to apply for DIC,. you’ll need to include VA Form 26-1817, Request for Determination of Loan Guaranty Eligibility—Unmarried Surviving Spouses.

What the COE Tells the Lender

Your VA Certificate Of Eligibility tells your participating VA lender a variety of things including:

  • How much VA loan entitlement you have to use
  • Your current status in the military (active, retired, separated, Guard, Reserve, etc.)
  • The last four digits of your Social Security Number
    Any applicable VA entitlement code

If you have never used your VA home loan benefits before, you have 100% entitlement to use. However, you may or may not use all 100% of the entitlement for your home loan.

Any remaining entitlement is technically available to use on another VA loan at some point down the line. Those who have used their VA home loan benefits before but have paid off the original VA mortgage can apply to have their VA loan entitlement restored to 100% to use for another loan.

But that entitlement restoration is not automatic. It must be applied for and reflected on your VA COE when you go to use your VA loan benefits again. Your lender should check to see how much VA loan entitlement you have to use before approving or denying the mortgage loan.

The VA COE also tells your lender if you are currently receiving or are eligible to receive VA compensation for service-connected medical issues.

This is crucial because receipt of such VA benefits makes you eligible to apply for an exemption to the VA loan funding fee. That fee is normally calculated as a percentage of the loan and can amount to a savings of thousands depending on circumstances.

Some veterans are in the process of having a VA disability rating assigned to them while their home loans are being processed. In such cases there is a likelihood that the disability ratings won’t be made official until after the loan has closed.

In such cases, your loan officer is bound by what the VA COE tells them is current. Once your records (including your COE) are updated with the new information you can request a refund of the VA loan funding fee on the basis that you should be exempt for having a VA Disability rating and being declared eligible to receive compensation for that rating.

As with many other VA loan issues, this option is not automatic and must be applied for.

Getting the Lender’s Help with Your VA COE

As mentioned above, it’s possible to apply for a VA COE yourself using the VA eBenefits portal, or by mail. You can also get the lender’s assistance to obtain your Certificate of Eligibility but there are some instances where the lender may not be able to help.

One of those situations is when a qualifying surviving spouse wants to apply for the VA COE. VA loan rules require these applicants to apply through the VA directly. It may be best for surviving spouses to call the VA at their toll-free number (1-800-827-1000) for the most current guidance for the COE process.

Lenders also may not be able to help service members who have had a VA loan in the past that went into loan default and foreclosure, and those who have any military discharge other than Honorable will have to contact the VA directly for assistance.

What You Need To Know About The VA Certificate Of Eligibility

When you obtain your VA COE, you have cleared the first hurdle in getting your VA home loan. But the VA COE is NOT a guarantee of loan approval. You must credit-qualify for your VA mortgage the same way you would for any major line of credit. VA loan qualifications are more lenient than some conventional mortgages, but they are not a no-credit-check home loan option.

Receiving your VA COE is not a guarantee that you definitely will be approved for a home loan. If your employment history, FICO scores, loan repayment history, and credit utilization aren’t acceptable to the lender, your home loan is likely not to be approved.

VA home loans are more affordable than some home loan options because of the no-money-down option and lower interest rates which are typical of many government-backed mortgage loan programs such as the FHA, USDA, and the VA home loan benefit.

 

>> Get a free, no-obligation consultation regarding your VA Loan!  Get started today!

 

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3 Reasons Military Pay Increases in 2022

Overall Military Pay and Compensation Set to Increase in 2022.  Here’s Why.

The New Year has arrived, and with it comes the usual focus on improving certain areas of our lives. We set goals for healthier lifestyles, productive use of our time, and improving our financial situations. For service members, there are three things that will have an impact on your 2022 military pay.

BAH Increase

The Department of Defense released the 2022 Basic Allowance for Housing (BAH) rates in mid-December, 2021. According to the DoD press release, BAH rates are set to increase by 5.1% on average.

For most military families, the BAH portion of their compensation is used to the fullest extent possible, which is covering rent/mortgage and applicable utilities. The increase is based on information collected by the DoD in partnership with military commanders and local installation housing offices. Data from hundreds of housing areas is compiled and analyzed to determine when and if increases are necessary for military personnel.

For more information, the Defense Travel Management Office (DTMO) published the 2022 BAH Rates.

To calculate your BAH rate, use the CollegeRecon BAH Calculator.

COLA Increase

In another DoD press release, the 2022 Cost of Living Allowance (COLA) rates took effect on 1 January, 2022, with a 2.7% increase. This allowance offsets the higher prices faced by military members at duty locations whose cost of living is higher than the national average.

When it comes to income, more money is good. But it’s not all good news for some locations. The DoD reported that six Military Housing Areas (MHA) will see their COLA rates decrease, and 25 MHAs will no longer receive COLA. The two largest decreases were both in Massachusetts, with the Boston and Worcester MHA rates dropping from 4 to 0 percent.

New York City still has the highest COLA rate in the US at 6 percent.

To calculate the COLA rate for your current location, check out DTMO’s CONUS COLA Calculator.

Deferral on Payroll Tax Ends

For most military members, 2021 saw a reduction in pay to recoup the payroll taxes that were not collected as part of a 2020 Presidential Memorandum. The amount active service members paid each month was upwards of 2% of their base pay. The situation was beyond their control, but the service members went a whole year with less pay.

Now that 2022 has arrived, the payroll tax deferral has ended for most service members. This naturally means that paychecks will “increase”. While it’s not an actual increase in pay, it is letting America’s Defenders have what they deserve, again.

Good Timing?

With the rate of inflation rising to the highest it’s been in decades, it would seem that these increases in pay may help ease the financial strain many are facing today. Because of this, it is ever more prevalent to spend and save our money wisely.

For low-income service members, the Basic Needs Allowance has been approved and will start sometime in 2022.

For residents of some states, retired military pay is now tax-free, which leaves more money in the bank.

I suggest further reading The 10 Best Financial Benefits for Members of the Military. This will help you keep your eyes on your benefits.

 

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VA Refinance Loan Basics

If you are eligible for a VA mortgage, you also have the option to use a VA loan to refinance a VA or non-VA mortgage depending on the type of loan you currently have.

There are two basic types of VA mortgage, the VA Cash-Out Refinance Loan and the VA Interest Rate Reduction Refinance Loan also known as a VA IRRRL. Both of these loans are for specific purposes, but only one features cash back to the borrower at closing time.

VA Refinance Loan Basics

To qualify for a VA refinance loan you must meet the basic requirements of the VA loan program including minimum time served. That minimum will vary depending on when you joined the military, but the basic prerequisites are the same based on the “era of service” when you served.

Some who become eligible for the VA loan program already have home loans and in order to refinance with a VA mortgage, you need to apply for a VA Certificate of Eligibility the same way a new VA borrower would when applying for a VA purchase loan. In these cases, a borrower has 100% of their VA loan entitlement to use on the refinance loan.

Refinance loan options require you to use your VA loan eligibility the same as for VA purchase loans. You will use your VA loan entitlement (100% for first-time borrowers) to take out your first VA mortgage. When applying for VA refinancing you are paying off the original loan and starting a new one; paying off an existing VA mortgage restores your entitlement for the refi.

VA home loans generally require occupancy and you will be required to certify that the home you are refinancing is or has been your primary residence depending on the refi loan you choose.

And remember, investment properties, vacation homes, timeshares, and similar properties cannot be refinanced using a VA mortgage.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

VA Loan Funding Fees For Refinancing

One thing to remember about VA refinance loan options is that there is a required VA Loan Funding Fee that will apply to your transaction.

However, those who receive or are eligible to receive VA compensation for service-connected medical issues are able to apply for a funding fee waiver which can save thousands of dollars on the transaction.

That’s a very important advantage to be aware of when considering your refinance loan options. Ask your loan officer about this option if you aren’t sure or call the VA directly to get more information on how to claim your funder fee waiver.

VA refinance loans do not require private mortgage insurance, which is an advantage over conventional loans in general. VA loan rules do not allow your lender to charge a penalty for early payoff of the loan.

But if you have a non-VA mortgage such as a Fannie Mae or Freddie Mac conforming mortgage you may need to check the fine print before you refinance to see if an early payoff penalty applies when refinancing the non-VA mortgage.

VA Cash-Out Refinancing

VA Cash-Out Refinancing is similar to other cash-out refi loans in that you are borrowing against the equity in your home and getting cash back at closing time for any purpose acceptable to the lender. Basic cash-out refinance loan issues to consider include the fact that interest rates and loan terms may vary among participating lenders.

VA loans are not all identical and shopping around for the right lender is an important part of making an informed decision about your loan. If you have an existing VA mortgage, keep in mind that you are not limited to your existing financial institution to get a VA refinance loan.

VA Cash-Out Refinancing is available for current loans as well as for those trying to catch up on delinquent mortgages, and you can refinance any home loan using VA cash out as long as the VA refinance loan is the “first lien”.

VA Cash-Out Refinancing loans require both a new credit check and a new appraisal. You will not be permitted to use an old appraisal to qualify for this type of loan no matter how recent. A new VA case number for a cash-out loan will require a new appraisal to ensure the current fair market value of the property is known.

VA Cash-Out Refinancing Versus Non-VA Refi Options

One important difference between VA Cash-Out and some non-VA cash-out options? VA loan rules found in VA Pamphlet 26-7, the VA Lender’s Handbook, state that you can apply for a VA Cash-Out Refinance loan for 100% of the home’s appraised value.

Compare that to FHA mortgages which have a cash-out refinance option limited to a loan-to-value ratio of 80% rather than the VA’s 100%.

The VA official site says borrowers who need to refinance a Fannie Mae or Freddie Mac conforming loan using a VA Cash-Out Refinance can do so up to the Fannie/Freddie loan limits for that area without a downpayment. If you need to refinance a conforming loan above the limit, you are generally required to make a downpayment.

VA Interest Rate Reduction Refinance Loans (VA IRRRLs)

The VA IRRRL program is a different kind of refinance loan option altogether. No cash back to the borrower is allowed with these refinance loans, except when a refund is due for items paid for in cash, for example, but later financed into the mortgage amount.

A VA IRRRL is designed to provide a specific benefit to the borrower such as a lower monthly mortgage payment. It also has no VA-required appraisal or credit check, which is a big plus for borrowers who might be struggling to get back on track with their mortgage payments. Other benefits could include a lower interest rate, or the ability to get out of an adjustable-rate mortgage into a fixed-rate loan instead.

In such cases, the interest rate on the VA IRRRL might actually be a bit higher than on the adjustable-rate mortgage depending on when the borrower refinances the loan. The benefit to the borrower in this instance is the predictable payments of the fixed-rate loan.

VA IRRRLs, like most other VA mortgages, come with the option to add a VA Energy Efficient Mortgage package to the loan. This allows extra loan funds to be included in the refinance loan for the express purpose of adding upgrades to the home that are approved by the lender.

However, add-ons to the loan may increase the amount of your monthly mortgage payments. You will need to work with the lender to determine how high your payments might go if you include a VA EEM, closing costs, or other approved add-ons to the mortgage.

VA loan rules say the no-credit-check option may not apply if your add-ons to the loan increase the monthly payments too much.

The caveat for the VA IRRRL option? It is only approved for existing VA mortgages. You cannot refinance a non-VA loan with a VA Interest Rate Reduction Refinance Loan. When applying for a VA IRRRL you will be required to certify that you use or have used the home to be refinanced as your primary residence.

What To Remember About VA Refinancing Loans

You must be eligible for the VA loan program overall in order to apply for VA refinancing. Eligibility for the VA loan program is not the same as loan approval and all applicants are required to credit-qualify for the home loan.

VA mortgages typically feature lower interest rates than some conventional loans, but not all. Some conforming loans such as the Conventional 97 offer a 3% down payment and may feature interest rates that compete with a VA loan but the lack of a mortgage insurance requirement for VA loans makes the VA refi option a lot more competitive depending on the borrower’s other financial qualifications.

The Department of Veterans Affairs does not lend the money for your refinance loan in typical cases. You will need to shop around for a lender offering the best terms and rates for your refi. No two lenders may offer the same perks or rates–be sure to shop around as aggressively for your lender as you would for an automobile.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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VA Loan Basics

Basics of the VA Loan

If you are new to your VA loan benefits, it’s good to review the requirements ahead of time so you can come to the home loan process ready to make informed choices about your home loan and your VA benefit. Here’s a primer on the VA home loan benefit that can help you get started.

No matter what kind of VA mortgage you need, there are some distinct benefits. The first is the zero downpayment option.

No money down on a home loan? That’s a major up-front and out-of-pocket expense veterans and currently serving military members typically don’t worry about with the VA mortgage process.

Aside from the no-money-down mortgage option, there are other advantages including (but not limited to) the following:

  • No VA requirement for private mortgage insurance
  • No penalty for early payoff of the VA loan
  • Lower interest rates compared to some conventional mortgages
  • Limits on closing costs the borrower can pay
  • You can re-use your VA mortgage benefit multiple times
  • VA refinance options are available including VA Streamline mortgages (see below)

A Word On VA Loan Down Payments

Some VA loans may require you to pay upfront when the appraised value is lower than the asking price of the home–you are free to walk away from the purchase without penalty if that is the case.

But for those who want to purchase the home anyway, the difference between the appraised value and the asking price must be paid in cash at closing time and cannot be financed.

Qualifying For A VA Mortgage

There are basic minimum requirements to qualify for the VA loan program based on time served in the United States military or the uniformed services such as the Commissioned Corps of the National Oceanic and Atmospheric Administration, and Commissioned Corps of the Public Health Service.

These time-in-service requirements vary depending on when you joined. When you have served the minimum amount of time needed to qualify, you’ll need to apply for a VA Certificate of Eligibility (COE) which the lender will need to prove you are able to apply for a VA mortgage.

Getting your COE does NOT mean you are approved for a VA mortgage, but it does mean you are eligible to apply for such a loan with a participating lender.

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

Obtaining A VA COE

You can apply directly for a VA Certificate of Eligibility but many applicants choose to have their loan officer help them obtain it. If you want to apply directly with the VA by mail–you’ll need to fill out VA Form 26-1880 and mail it to the address listed on the form–or you can apply online using the VA eBenefits portal.

The VA official site says it’s also possible to apply through the VA LGY portal but you may need to ask your lender to help in such cases.

VA Loan Types At A Glance

There are a few basic VA loan benefits you should know about. They might seem a bit complicated at first until you get to know the program.

The first VA loan benefit you should know is the VA purchase loan, but there are also VA refinance loans, a special program for qualifying service members who want to buy land in tribal areas, and an add-on to the VA mortgage loan (purchase or refi) called the VA Energy Efficient Mortgage or VA EEM that allows extra loan funds for approved energy-saving upgrades to the home.

VA Purchase Loans

The “forward mortgage” options for VA loans. VA mortgages can be used to purchase a wide variety of properties including condo units, townhomes, farm residences (the residence only, you cannot use a VA mortgage to buy a farm business), manufactured housing, mobile homes, and even multi-unit properties up to four living units.

You should know that the requirements for a VA purchase loan include occupancy–no VA mortgage can be used to buy investment properties you don’t intend to occupy as your full-time residence. VA loan rules require you to declare in writing that the home will be your primary residence.

You can use a VA mortgage to buy a home in the United States or its territories and protectorates including:

  • Puerto Rico
  • Guam
  • Virgin Islands
  • American Samoa
  • Northern Mariana Islands

VA Refinance Loans

The VA refinance loan benefit comes in three basic forms. You can apply for a VA Cash-Out Refinance Loan which permits cash back to the borrower for any purpose acceptable to your lender.

There is a VA Interest Rate Reduction Refinance Loan (also option also known as the VA IRRRL for short.) This is a refinance loan that usually requires some tangible benefit to the borrower like a lower monthly payment or a lower interest rate.

You can also, as the third alternative, apply for a VA loan of either type and apply for the VA Energy Efficient Mortgage (VA EEM mentioned above) to include extra loan funds for approved energy-saving improvements.

The reason we list this as a “third loan” here? When applying for VA Cash-Out refinances, the EEM money cannot be used in an unrestricted way like the cash-out funds themselves. You must use any EEM loan money specifically for the approved projects you’ll be investing in to upgrade your home.

VA Direct Loans

Like the VA home loan program itself, VA Direct Loans are not offered to all applicants. These are the only VA loans offered directly from the VA itself rather than via a participating lender. In order to apply for a VA Direct Loan, also known as a VA Native American Direct Loan (VA NADL), you must either be a Native American or married to one AND meet all the following requirements:

  • You must intend to occupy the home you purchase with a VA NADL
  • Your tribal government has a Memorandum of Understanding (MOU) with the Department of Veterans Affairs;
  • You have a VA Certificate of Eligibility;
  • You meet VA income and credit requirements

VA Energy-Efficient Mortgages

The VA Energy-Efficient Mortgage or VA EEM is not a separate home loan option but rather an add-on to a VA refinance or purchase loan that provides extra funds for approved energy-efficient upgrades to the home you purchase or refinance with your VA mortgage.

VA EEMs may require the use of an Energy Consultant and the money you get with a VA EEM can only be used for the specific upgrades you and the lender agree on.

Those projects must be on the VA approved list, which includes but may not be limited to the following:

  • Solar heating and cooling systems
  • Weatherizing
  • Furnace efficiency
  • Insulation
  • Storm windows and doors
  • Heat pumps
  • Vapor barriers
  • Efficient thermostats
  • Ceiling upgrades
  • Attic or wall upgrades

Be sure to ask your loan officer about the EEM and how much adding this package to your loan will affect your monthly mortgage payment. VA loan rules state clearly that the borrower may be permitted to act as their own contractor to install certain upgrades themselves, but be advised that lenders may not permit this.

In cases where a lender does permit it, the borrower cannot use loan funds to “pay themselves” for the labor. These loan funds must only be used for materials when the borrower is doing their own work.

How much extra money is available to you via a VA EEM? The VA loan rules found in VA Pamphlet 26-7 state the VA mortgage can have the following amounts added depending on circumstances;

  • As much as $3,000 (determined only by “documented costs”)
  • As much as $6,000 IF the added loan funds do not result in an increase in monthly mortgage payment above the amount you would save on utility bills
  • More than $6,000 “subject to a value determination” by the Department of Veterans Affairs.

You don’t have to choose a VA EEM add-on to your loan, but the benefits of doing so over the long term may be worth considering.

 

Get a free, no-obligation consultation regarding your VA Loan with Veterans First!

 

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Basic Needs Allowance for Low-Income Service Members

New Basic Needs Allowance for Low-Income Military Members

The National Defense Authorization Act of 2022 (NDAA) has been sent to the president’s desk for signature as of 23 December, 2021. If it becomes a law, provisions for a new Basic Needs Allowance will move forward in an effort to combat the food-security issues faced by many lower enlisted service members.

Food Insecurity in the Military?

In 2021, the National Military Family Association (NMFA) conducted a survey of over 11,000 service members and their families. They asked one question:

“In the past 12 months, have you, or someone in your household, had to visit a charitable food distribution site to make ends meet?”

The results of that survey are mind-blowing. The NMFA Survey found that 14% of those surveyed, or 1,632 military families, reported that they visited a food bank within the past year.

In another study, Blue Star Families conducted a Pulse Check between March 1-16, 2021. Over 4,000 respondents participated in the poll, which included active military, veterans, National Guard, Reserve, and Gold Star spouses or family members.

The Blue Star Family Pulse Check found that 18% of active duty families and 23% of National Guard families reported having difficulties in purchasing food and other essentials within the past year.

Furthermore, within the active duty ranks, food security ranked as a most immediate need for Junior Enlisted (22%), Mid/Senior Enlisted (20%), and Commissioned Officers (23%). In other words, nearly a fifth of the service members polled indicated that food security is an immediate need for them.

Military Family Basic Needs Allowance

With the passage of the NDAA, each of the services is supposed to identify families within their ranks who may benefit from the new Basic Needs Allowance.

According to the text of the legislation, any families whose income is below 130% of the federal poverty guidelines will be eligible for the allowance. For reference, the 2021 Federal Poverty Guidelines for a family of three is $21,960 annually, or $1,830 per month. 

The 130% amount for a family of three is $28,548 annually, or $2,379 per month. According to the 2021 Military Pay Charts, that would mean most lower enlisted service members ranked from E1-E3 are eligible if they have families.

How Much Is the Basic Needs Allowance?

According to the text of the bill, the amount of the allowance will be determined as follows:

The amount of the monthly allowance payable to a member…shall be the amount equal to 130% of the Federal poverty guidelines of the Department of Health and Human Services for the calendar year during which the allowance is paid based on the location of the member and the number of individuals in the household of the member during the month for which the allowance is paid; minus the gross household income of the member during the preceding year; divided by 12.

The gross household income means all household income, which seems to mean BAH and BAS are also included. However, the Secretary of Defense has the latitude to determine whether or not the BAH should be counted in the calculation of the new allowance. This provision mainly revolves around areas with a high cost of living.

What About Families with More than One Eligible Member?

If a household has two or more members who are eligible to receive the Basic Needs Allowance, only one of them can receive the allowance at any given time.

Who Is Not Eligible for the Basic Needs Allowance?

A service member who does not have dependents is not eligible for the allowance.

Cadets or Midshipmen at any of the armed forces service academies are ineligible for the allowance.

If a service member is eligible and then gets promoted, prompting for a permanent increase in pay, and that pay increase raises the service member above the policy’s financial guidelines, then that member becomes ineligible.

Curiously, if a service member is demoted and their pay is reduced to within the guidelines of the Basic Needs Allowance, that member will remain ineligible solely based on the reduction in rank.

Any eligible service member may voluntarily elect not to receive the benefit, and they must do so in writing.

How to Apply for Basic Needs Allowance

An eligible service member must apply for the Basic Needs Allowance once the administrative system is in place to do so. Because it’s a new program, they still need to figure out the regulations and policies necessary to administer it, as well as the forms necessary for submission by the service member.

The legislation does state that eligible service members will have to apply or verify their eligibility at least annually. So, it’s not a once-and-done allowance.

Once the Basic Needs Allowance is up and running, the services will begin screening recruits during Initial Entry Training to determine their eligibility.

Timeline for the Basic Needs Allowance

The allowance will begin on or after the date that is one year from the enactment of the National Defense Act of 2022. So, if the president signs it today, the allowance will begin a year from now.

The text of the bill also says that the termination of the Basic Needs Allowance will be December 31, 2027.

More Information Needed

The legislation tasks the Secretary of Defense to conduct a study on food insecurity in the Armed Forces. The results of this study will include:

  1. An analysis of “food deserts” that impact members of the military and their families who live in areas with high costs of living.
  2. A comparison of the current methodology used to determine areas with high costs of living.
  3. Leveraging the Bureau of Labor Statistics to determine the buying power and consumer spending in specific regions.
  4. The feasibility of setting up a web portal for members of the military to apply for the allowance.
  5. Determining an appropriate allowance to supplement the income of service members suffering food insecurity.

The Defense Secretary will report the initial findings of the study no later than April 1, 2022. The study must be completed and final results submitted to the Committees on Armed Services of both congressional houses no later than October 1, 2022.

That explains the 12 month delay to implement once the NDAA is signed.

Closing Opinion

First, it’s a shame that there are thousands of military families who struggle to make ends meet. With a wallet-killing inflation and a supply chain lag, the problem is fed by things that are largely outside of their control. Even so, no service member or their dependents should have to worry about food.

Second, I’m glad to see that the issue has made it to the halls of Congress. While this legislation is just the first step, only time will tell if the Basic Needs Allowance is as effective as we all hope.

Third, and this is just my bias as a Veteran, if they’re setting aside millions of dollars to implement a new program and conduct a year-long study, why don’t they just raise the pay of our service members.

I understand that food insecurity doesn’t impact a large portion of our Armed Forces. But even one Soldier, Sailor, Marine, Airmen, Coast Guardsman, or Guardian who can’t feed their family is a national travesty.

 

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COLA to Increase 5.9% for Retirees, Disabled Veterans in 2022

The annual Cost of Living Adjustment (COLA) will increase by 5.9% on January 1, 2022. This means that many retired and disabled veterans will receive a bump in pay between $10 to $90 per month.

What is COLA?

The COLA adjustment is determined based on inflation and is authorized to preserve the purchasing power of our nation’s veterans and those receiving Social Security.

According to KWTX of Temple, Texas, this COLA increase would be the largest pay raise since 1983.

The Military Officers Association of America (MOAA) hosts a unique COLA Watch, wherein they provide detailed analysis of COLA related data.

How Much is Increase for Military Retirees?

According to the MOAA, retired military members will see a $59 increase for every $1,000 of pension they receive.

 

>> Have a question about your or your spouse’s military benefits? We’ve partnered with the Veterans Education Project to help find the answers you need. Find the answers to your benefits questions today!

 

How Much is Increase for Disabled Veterans?

As for our disabled Veterans, they will see their checks raise by an average of $8.50 per month for each 10% increment of disability. So:

  • 10% disabled = + $8.50
  • 20% = + $17.00
  • 30% = + $25.50
  • 40% = + $34.00
  • 50% = + $42.50
  • 60% = + $51.00
  • 70% = + $59.50
  • 80% = + $68.00
  • 90% = + $76.50
  • 100$ = + $85.00

Remember, these are approximate and are provided to give a general idea of the expected per-paycheck increase.

RELATED: Military Benefits Changes in 2021

What is Inflation?

According to Forbes, the economic phenomenon called Inflation “describes the gradual rise in prices and slow decline in purchasing power of your dollars over time.”

Additionally, inflation is not limited to a price increase in one sector, say at the gas pump for example. Rather, inflation entails a broad increase in prices across an entire industry that impacts the country’s economy.

The Devil in the Details

While a 5.9% increase sounds great, remember that it is a response to an expected rise in the rate of inflation. If economists and those involved with the COLA increase perceive that inflation will jump, then so will COLA.

The Consumer Price Index (CPI), published each year by the Department of Labor, determines any COLA increase. The CPI compares the costs of certain goods or services today to the same goods and services of previous years. If the cost today is higher than it was before, that usually leads to a COLA increase.

RELATED: TRICARE Dental Premiums to Increase Soon

 

(Image courtesy of Andrey Popov via Shutterstock)

 

>> Have a question about your military benefits? We’ve partnered with the Veterans Education Project to help find the answers you need.  Please go here to get answers to your military benefits questions.

 

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Amazon Accepts SNAP EBT as Payment Method

InciSNAP EBT Now Accepted By Amazon

Since mid-2020, Amazon has accepted the Supplemental Nutrition Assistance Program (SNAP) Electronic Benefit Transfer (EBT) payments. This pilot program aims to make food more accessible and more affordable for those most in need.

What is SNAP EBT?

Uniquely, SNAP EBT is a US Department of Agriculture (USDA) program that helps low-income families put food on the table.  Decades ago, people called it “food stamps” because they were literal stamps. Today, over 44 million Americans use the SNAP EBT program each month. Surprisingly, about 1.3 million of them are veterans. It is difficult to determine the number of military families that use the benefit. But, because Basic Allowance for Housing (BAH) is counted as income to determine eligibility, the number is much lower than it likely should be.

Where can I use SNAP online?

“Of the online food providers included in the program, Amazon is by and large the biggest.” They offer a number of options through Amazon Pantry, Amazon Prime Now, and Amazon Fresh. Some other online retailers include Safeway, Hy-Vee, Hart’s Local Grocers, ShopRite, and Dash’s Market. Unfortunately, not all locations in all states are participating.

Is Amazon’s Program a Good Thing?

For some reason, this is the first time that SNAP benefits have been allowed for use online. Some fear an increase in benefit fraud. And yet, others feel that it could impact local businesses who have a steady stream of customers.

Alternatively, this move is a relief for EBT beneficiaries using SNAP benefits in person. The pandemic caused an exponential increase in food delivery services, especially during lockdowns. Many customers used stimulus money to pay for food. With this change, Amazon opened up virtual food shopping for those who need it. There are additional benefits when registering:

  • Free access to Amazon Fresh: available in most metropolitan regions. Amazon Fresh delivers perishable, shelf-stable, and household products in everyday package sizes.
  • Free delivery: Customers receive free shipping on orders of $25 or more on Amazon Grocery and $35 or more ($50 in New York City) on Amazon Fresh. Also, both SNAP-eligible and non-SNAP eligible items will count towards order minimums.
  • Exclusive deals: EBT customers receive exclusive discounts on produce, grocery staples, and other essential items with constantly-updating offers from popular brands.
  • 50% off Prime membership: Amazon Prime is just $5.99/month (typically $12.99/month) for qualifying EBT and government assistance recipients. Prime membership is not required to take advantage of the benefits above.

As of now, Amazon’s website states that currently accepts SNAP EBT cards from all states except Alaska, Hawaii, Louisiana, and Montana. To register, simply visit www.amazon.com/snap and follow the on-screen instructions.

Feedback from Beneficiaries

It was pretty slick and easy, which surprised me. I’m pretty sure that most folks who’ve ever used SNAP benefits are familiar with the frustration of waiting in line at the grocery store when the system malfunctions or [the] cashier starts arguing about what is or isn’t allowed. It’s not just time consuming, but humiliating too.

“The foods approved for SNAP EBT are all sold and shipped by Amazon. Meaning, no third-party sellers or “fulfilled by Amazon” allowed. Once you add your card to your Amazon account, as you place items in your cart, it will tell you if it’s an approved item or not.”

“When we were ready to place the order, I simply selected [the] SNAP EBT card for payment, and the Amazon app took me to a special page where I could input [the] PIN.”

“As with all SNAP purchases, this one was tax-free, and the order was large enough to have no shipping fee (which can’t be paid with a SNAP card). We placed the order on Saturday night and about 95% of it is expected to arrive by Thursday.”

More Amazon SNAP Info

Finally, Amazon predicts that this pilot program will run for about two years. Moreover, the program’s potential could bring more big-name companies (like Walmart) to the list of participants. For more information about Amazon’s program, visit the Frequently Asked Questions page on their website.

 

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Spring Cleaning and PCS Prep: Companies That Can Help 

PCSing anytime soon? These Companies Can Help

PCS season is here and with it, military families from around the US and the world are getting ready for their next move. There can be so much to do and a lot to think about when preparing for a PCS. Here is a list of companies that can help with cleaning, donating, or PCS prep in general. 

Cleaning Companies

Hiring a cleaning company before a PCS is a smart idea. While you can spend the time doing the cleaning yourself, hiring a company can take some of the pressure off. If you are not moving anytime soon, hiring a cleaning company can give you a great start towards spring cleaning. Here are some companies worth checking out:

  • Tidy.com – where they combine the best cleaners in your area, with well-crafted technology.
  • Maid Pro – who will work with you on a cleaning plan that is tailored to your needs and budget.
  • Maids.com – who specializes in cleaning for health. They also offer a military discount of $45 off of your first cleaning.
  • The Cleaning Authority – where they offer detail-oriented and consistent cleaning services. They also reduce the total of the Franchise Fee and Territory Fee by 30% for all honorably discharged veterans of the American and Canadian Armed Forces.
  • Maid Brigade – who has a partnership with Operation Homefront to support military families in crisis by offering free cleaning services. 

Always Ready Cleaning, Flash Clean, and Merry Maids of Northern Kentucky are regional companies but offer a military discount. 

 

RELATED: PCS and Moving Discounts For Military

 

Veteran and Military-Spouse Owned Businesses

Household Six Home Services offers a variety of services located in the Ft. Bragg, Ft. Bliss, and JBLM areas. 

Veterans Elite Services offer a variety of services including junk removal and specialized cleaning. 

LineCrew, run by military families, connects service members and dependents to different businesses, from those who can help with home decor or lawn service. 

 Where To Donate Or Get Rid Of Junk

Military families are always aware of their weight allowance, and never want to go over it. Going through your belongings before a move and getting rid of what you don’t need and use anymore is a good idea. Here are a few companies that can help with donating or getting rid of junk: 

  • Installation thrift stores
  • Civilian thrift stores
  • Food Banks (for food)
  • Libraries (for books)
  • Hope for Heroes (equipment, clothing, tools, and food)
  • Dress for Success (work-appropriate clothing) 
  • Habitat for Humanity ReStores (household goods and vehicles)
  • GreenDrop (gently used clothing and household goods)
  • Local non-profits 
  • 1-800-GOT-JUNK is a full-service junk removal company that takes almost anything. 
  • Local neighborhood pages where you can find people willing to buy or even just take your items as well as those who can haul away anything you might need. 

PCS Prep Help

Lost about your PCS? Unsure what to do? There are some companies out there to help. From helping you organize your belongings to helping you find a place to live at your new duty station. 

  • Permanent Change of Storing, run by a military spouse, can help prepare you for a PCS with services such as virtual organizing, PCS prep, and helping you once you get to your new home. 
  • Military One Source has many resources to help you prep for your PCS, from checklists to tips for a smoother move. 
  • MILLIE can help you find the right place to live with their MILLIE Scouts. They can be your boots on the ground when you can’t be there yourself.

Whether you are deep into your spring cleaning or preparing for a PCS, take a look at these companies to help you on your way. 

 

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Military Pay Charts 2022 [updated]

2022 Military Pay Charts

On June 30th, the House Appropriations Committee approved the fiscal year 2022 Military Construction, Veterans Affairs, and Related Agencies bill, which includes a 2.7% pay raise for service members.

In total, the bill provides $279.9 billion for programs that cover veterans’ health care and military construction, among other things. This legislation is more than 10 percent higher — $28.1 billion — than the 2021 budget.

This raise is lower than the 2020 amount of 3.1%. But it is still higher than all other pay raises since 2011, which only gave a 1.4% raise.

RELATED: 3 Reasons Military Pay Increases in 2022

Military Pay Increases tied to ECI

According to federal law, military pay increases are tied to the Employment Cost Index (ECI). Under federal law, the ECI number is used in setting the proposed pay changes for the military. The ECI is a measure of the changes in pay versus living costs.

The ECI is based on the data for 12 months through each September.   Then, a half percentage point is taken off that figure, and locality pay is determined to also be paid. The resulting percentage for the period to be applied toward January 2022 sits at 2.7%. According to the military pay raise formula outlined in title 37, the military pay raise for 2022 will be 2.7%.  However, this can also serve as a guideline and the White House or Congress can propose another figure.

Find the 2022 military pay charts below.

By Paygrade: Military Pay Charts for 2022

The military pay raise can be highly debated each year.  It isn’t as simple as the President or Congress just picking a number. The ECI (US Employment Cost Index) determines the pay raise each year.  The Labor Department’s Bureau of Labor Statistics puts out this figure each year.

2022 Military Pay Charts

Enlisted: E-1 – E-3

2022 Pay Charts (2.7% increase from 2021)

YearsE-1E-2E-3
< 2$1,833$2,055$2,161
Over 2$1,833$2,055$2,297
Over 3$1,833$2,055$2,436
Over 4$1,833$2,055$2,436
Over 6$1,833$2,055$2,436
Over 8$1,833$2,055$2,436
Over 10$1,833$2,055$2,436
Over 12$1,833$2,055$2,436
Over 14$1,833$2,055$2,436
Over 16$1,833$2,055$2,436
Over 18$1,833$2,055$2,436
Over 20$1,833$2,055$2,436
Over 22$1,833$2,055$2,436
Over 24$1,833$2,055$2,436
Over 26$1,833$2,055$2,436
Over 28$1,833$2,055$2,436
Over 30$1,833$2,055$2,436
Over 32$1,833$2,055$2,436
Over 34$1,833$2,055$2,436
Over 36$1,833$2,055$2,436
Over 38$1,833$2,055$2,436
Over 40$1,833$2,055$2,436

 

Enlisted: E-4 – E-6

2022 Pay Charts (2.7% increase from 2021)

YearsE-4E-5E-6
< 2$2,393$2,610$2,849
Over 2$2,516$2,786$3,136
Over 3$2,652$2,921$3,274
Over 4$2,787$3,059$3,409
Over 6$2,906$3,273$3,549
Over 8$2,906$3,498$3,864
Over 10$2,906$3,682$3,988
Over 12$2,906$3,704$4,226
Over 14$2,906$3,704$4,298
Over 16$2,906$3,704$4,351
Over 18$2,906$3,704$4,413
Over 20$2,906$3,704$4,413
Over 22$2,906$3,704$4,413
Over 24$2,906$3,704$4,413
Over 26$2,906$3,704$4,413
Over 28$2,906$3,704$4,413
Over 30$2,906$3,704$4,413
Over 32$2,906$3,704$4,413
Over 34$2,906$3,704$4,413
Over 36$2,906$3,704$4,413
Over 38$2,906$3,704$4,413
Over 40$2,906$3,704$4,413

Senior Enlisted: E-7 – E-9

2022 Pay Charts (2.7% increase from 2021)

YearsE-7E-8E-9
< 2$3,294
Over 2$3,596
Over 3$3,734
Over 4$3,915
Over 6$4,058
Over 8$4,303$4,739
Over 10$4,441$4,949$5,789
Over 12$4,685$5,078$5,921
Over 14$4,889$5,234$6,086
Over 16$5,027$5,402$6,280
Over 18$5,175$5,706$6,477
Over 20$5,233$5,861$6,791
Over 22$5,425$6,123$7,057
Over 24$5,528$6,268$7,336
Over 26$5,921$6,626$7,764
Over 28$5,921$6,626$7,764
Over 30$5,921$6,759$8,152
Over 32$5,921$6,759$8,152
Over 34$5,921$6,759$8,560
Over 36$5,921$6,759$8,560
Over 38$5,921$6,759$8,989
Over 40$5,921$6,759$8,989

Warrant Officers:  W-1 – W-3

2022 Pay Charts (2.7% increase from 2021)

YearsW-1W-2W-3
< 2$3,399$3,872$4,376
Over 2$3,765$4,238$4,558
Over 3$3,863$4,351$4,746
Over 4$4,071$4,429$4,807
Over 6$4,316$4,679$5,002
Over 8$4,679$5,070$5,338
Over 10$4,848$5,264$5,789
Over 12$5,085$5,454$5,979
Over 14$5,317$5,687$6,198
Over 16$5,500$5,869$6,423
Over 18$5,669$6,033$6,828
Over 20$5,873$6,231$7,102
Over 22$5,873$6,360$7,265
Over 24$5,873$6,463$7,439
Over 26$5,873$6,463$7,676
Over 28$5,873$6,463$7,676
Over 30$5,873$6,463$7,676
Over 32$5,873$6,463$7,676
Over 34$5,873$6,463$7,676
Over 36$5,873$6,463$7,676
Over 38$5,873$6,463$7,676
Over 40$5,873$6,463$7,676

 

Warrant Officers:  W-4 – W-5

2022 Pay Charts (2.7% increase from 2021)

YearsW-4W-5
< 2$4,792
Over 2$5,154
Over 3$5,302
Over 4$5,448
Over 6$5,699
Over 8$5,947
Over 10$6,198
Over 12$6,575
Over 14$6,907
Over 16$7,222
Over 18$7,480
Over 20$7,732$8,520
Over 22$8,101$8,952
Over 24$8,405$9,275
Over 26$8,751$9,630
Over 28$8,751$9,630
Over 30$8,926$10,113
Over 32$8,926$10,113
Over 34$8,926$10,618
Over 36$8,926$10,618
Over 38$8,926$11,150
Over 40$8,926$11,150

 

Commissioned Officers: O-1E – O3E (w/ Prior Enlisted Experience)

2022 Pay Charts (2.7% increase from 2021)

YearsO-1EO-2EO-3E
< 2
Over 2
Over 3
Over 4$4,376$5,433$6,185
Over 6$4,672$5,535$6,482
Over 8$4,845$5,721$6,807
Over 10$5,022$6,019$7,017
Over 12$5,195$6,249$7,363
Over 14$5,433$6,421$7,655
Over 16$5,433$6,421$7,823
Over 18$5,433$6,421$8,051
Over 20$5,433$6,421$8,051
Over 22$5,433$6,421$8,051
Over 24$5,433$6,421$8,051
Over 26$5,433$6,421$8,051
Over 28$5,433$6,421$8,051
Over 30$5,433$6,421$8,051
Over 32$5,433$6,421$8,051
Over 34$5,433$6,421$8,051
Over 36$5,433$6,421$8,051
Over 38$5,433$6,421$8,051
Over 40$5,433$6,421$8,051

Commissioned Officers: O-1 – O-3

2022 Pay Charts (2.7% increase from 2021)

YearsO-1O-2O-3
< 2$3,477$4,007$4,637
Over 2$3,620$4,563$5,256
Over 3$4,376$5,255$5,672
Over 4$4,376$5,433$6,185
Over 6$4,376$5,544$6,482
Over 8$4,376$5,544$6,807
Over 10$4,376$5,544$7,017
Over 12$4,376$5,544$7,363
Over 14$4,376$5,544$7,544
Over 16$4,376$5,544$7,544
Over 18$4,376$5,544$7,544
Over 20$4,376$5,544$7,544
Over 22$4,376$5,544$7,544
Over 24$4,376$5,544$7,544
Over 26$4,376$5,544$7,544
Over 28$4,376$5,544$7,544
Over 30$4,376$5,544$7,544
Over 32$4,376$5,544$7,544
Over 34$4,376$5,544$7,544
Over 36$4,376$5,544$7,544
Over 38$4,376$5,544$7,544
Over 40$4,376$5,544$7,544

 

Commissioned Officers: O-4 – O6

2022 Pay Charts (2.7% increase from 2021)

YearsO-4O-5O-6
< 2$5,274$6,112$7,332
Over 2$6,104$6,885$8,055
Over 3$6,512$7,362$8,583
Over 4$6,603$7,451$8,583
Over 6$6,981$7,749$8,616
Over 8$7,386$7,927$8,985
Over 10$7,892$8,318$9,035
Over 12$8,285$8,606$9,035
Over 14$8,558$8,977$9,548
Over 16$8,715$9,544$10,455
Over 18$8,805$9,814$10,988
Over 20$8,805$10,081$11,521
Over 22$8,805$10,384$11,824
Over 24$8,805$10,384$12,131
Over 26$8,805$10,384$12,725
Over 28$8,805$10,384$12,725
Over 30$8,805$10,384$12,980
Over 32$8,805$10,384$12,980
Over 34$8,805$10,384$12,980
Over 36$8,805$10,384$12,980
Over 38$8,805$10,384$12,980
Over 40$8,805$10,384$12,980

 

Flag and General Officers: O-7 – O-8

2022 Pay Charts (2.7% increase from 2021)

YearsO-7O-8
< 2$9,668$11,636
Over 2$10,118$12,012
Over 3$10,325$12,270
Over 4$10,491$12,341
Over 6$10,790$12,656
Over 8$11,085$13,183
Over 10$11,427$13,306
Over 12$11,768$13,807
Over 14$12,110$13,951
Over 16$13,183$14,382
Over 18$14,090$15,006
Over 20$14,090$15,581
Over 22$14,090$15,966
Over 24$14,090$15,966
Over 26$14,162$15,966
Over 28$14,162$15,966
Over 30$14,446$16,366
Over 32$14,446$16,366
Over 34$14,446$16,774
Over 36$14,446$16,774
Over 38$14,446$16,774
Over 40$14,446$16,774

 

Flag and General Officers: O-9 – O-10

2022 Pay Charts (2.7% increase from 2021)

YearsO-9O-10
< 2
Over 2
Over 3
Over 4
Over 6
Over 8
Over 10
Over 12
Over 14
Over 16
Over 18
Over 20$16,445$16,975
Over 22$16,682$16,975
Over 24$16,975$16,975
Over 26$16,975$16,975
Over 28$16,975$16,975
Over 30$16,975$16,975
Over 32$16,975$16,975
Over 34$16,975$16,975
Over 36$16,975$16,975
Over 38$16,975$16,975
Over 40$16,975$16,975

 

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Washington, DC Real Estate Options for Veterans

Housing Market and Real Estate Options for the Washington, DC Area for Veterans &  Military

If you serve in the military long there is a chance you will be stationed in or near Washington, DC. There are many bases including Joint Base Andrews, Fort Meade, Quantico Marine Corps Base, Washington Navy Yard, and of course, the Pentagon. Veterans who seek employment in the federal government will likely find success applying around DC as well. Several federal agencies are headquartered in DC and the immediate area including the FBI, GSA, Social Security Administration, and many others. There are nearly 250,000 federal jobs in the DC area.

The housing market in DC is typically a seller’s market due to stability in employment brought on by the military and government offices in the area. Unfortunately, this means prices in the immediate area are inflated and perhaps out of the price range of the average service member or veteran. With a little legwork a home or investment property can be acquired in a great area with positive growth potential. Look into the following areas just outside of DC to see if any fit your housing needs.

Frederick County, Maryland

Frederick County, including the charming and self-contained city of Frederick, is a still-developing semi-rural suburban area and a commuter’s dream. Drive north or west for 15 minutes and you are lost among the rolling country side. Drive East or South, and you will find yourself with an unlimited number of dining, and nightlife options in the metropolitan DC and Baltimore areas. The Commute to DC proper will be about an hour depending on traffic.

Zillow Median Housing Price: $325,967

1-Year Projected Value: +4.7%

Veterans Population: 16,173

Nearest Military Installation: Fort Detrick

Nearest VA Healthcare Facility: Fort Detrick VA Clinic

Nearest VA Hospital: Martinsburg, West Virginia. Approximately one hour west of Frederick.

Cost of Living: Slightly higher than national average. Slightly lower than Maryland average.

Median Household Income: $92,000

Jobs Outlook: High. Located near a densely populated area (I-270 corridor) with metropolitan amenities. A skilled professional should be able find work with any number of companies within a 30-mile radius the engineering, software, IT, healthcare, and government fields. Family members looking for part-time work can find any number of opportunities including retail, food-service, childcare, laborer, and other service-oriented openings.

 

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

Accokeek, Maryland

Southeast of DC just across the Potomac River lies Accokeek, Maryland. A quickly developing area where well-to-do DC-types are moving to raise families. Commuting to DC will take at least 30 minutes or longer if travelling at rush hour.

Zillow Median Housing Price: $420,449

1-Year Projected Value: +5.2%

Veterans Population, Accokeek Census Designated Place: 1,445

Nearest Military Installation: Joint Base Andrews or Indian Head Navy Base

Nearest VA Healthcare Facility: Southern Prince George’s VA Clinic near Joint Base Andrews

Nearest VA Hospital: Washington, DC VA Medical Center (Downtown DC)

Cost of Living: Much higher than US and Maryland Average

Median Household Income: $125,914

Jobs Outlook: Decent. Accokeek is a DC commuter suburb, so professionals should have plenty of upward mobility. However, family members looking to work in the service industry will be limited to Waldorf, Maryland, a nearby town with plenty of shopping. Consider childcare, tutoring, or pet sitting as a standby for part-time work options.

Waldorf, Maryland

A little farther from DC than Accokeek, Waldorf is the shopping capital of Southern Maryland. Commute time to DC can be 30 minutes to an hour or more depending on traffic. A great spot to choose for fishing and outdoor enthusiasts.

Zillow Median Housing Price: $318,931

1-year Projected Value: +4.8%

Veterans Population: 7,608

Nearest Military Installation: Joint Base Andrews or Indian Head Navy Base

Nearest VA Healthcare Facility: Southern Prince George’s VA Clinic

Nearest VA Hospital: DC VA Medical Center

Cost of Living: Somewhat higher than US Average

Median Household Income: $91,950

Jobs Outlook: Good for DC commuters. Waldorf itself has many shopping and dining options, so any service professional should have no problem securing work.

Fredericksburg, Virginia

With liberal telework policies being enacted, living farther away from big cities is becoming more viable. Fredericksburg, Virginia sits just over 50 miles away from DC, so attending mandatory meetings is still possible. Even for those who travel to work every day, the historic town of Fredericksburg may be worth looking into. The commute time to DC will be at least 1 hour, but many rideshares exist.

Zillow Median Housing Price: $321,600

1-Year Projected Value: +4.8%

Veterans Population: 2,021

Nearest Military Installation: Quantico Marine Corps Base

Nearest VA Healthcare Facility: Fredericksburg VA clinic

Nearest VA Hospital: Richmond, VA or Washington, DC

Cost of Living: Slightly higher than US Average

Median Household Income: $63,274

Jobs Outlook: Fair. For professionals, Fredericksburg is similar to any other DC metro town. With government offices, military bases, and government contractors relatively close, it should be easy to secure work. Jobs for unskilled and part-time employees may be harder to come by, but those looking will have success in the service or retail industries. The unemployment rate generally stays below 5%.

 

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Self Employment Taxes: An Overview

The Gig Economy and Self Employment Taxes

Even before the pandemic, many within the military community sought income from the “Gig Economy”. These are your Uber and Lyft drivers. They are personal shoppers who deliver groceries and other necessities on demand. It is self employment income for military spouses whose obligations to their families and service members make traditional employment challenging, if not impossible.

Those who run their own small businesses or operate as independent contractors and gig workers, which also includes freelance writers like me, must be aware that there are tax issues and deadlines that differ from regular, W-2 positions. 

The federal government takes the biggest bite out of your income by imposing a number of different taxes. These include:

  • Income Tax
  • Self-Employment Tax
  • Estimated taxes (commonly called Quarterly Taxes)
  • Employment Taxes

Income Tax

For anyone earning more than a minimum amount, you will pay income taxes. On April 15th of each year, most of the time, you will file an annual income tax return with the Internal Revenue Service (IRS), showing your income and deductions for the previous year. You will also report how much you’ve paid in estimated taxes. 

Self Employment Tax

The self employment tax rate is currently 15.3% of your net earnings. That is broken down further with 12.4% going to Social Security taxes and 2.9% for Medicare. 

As a small business owner or gig worker, you do not receive a regular paycheck with taxes and other deductions already withheld, which is called payroll tax. Most notable of these deductions are Social Security and Medicare taxes. Whereas W-2 employees have their companies deduct those taxes for them, those who are self employed pay those taxes directly to the IRS.

If your earnings from self-employment are $400 or more, then you must pay this tax. When you file your annual tax return, you must include IRS Form SE, which shows how much Self Employment tax you’re required to pay. 

To find how much you owe for self employment taxes, you’ll generally use an IRS Schedule C, which is a tax form reporting your revenue and profit from your freelancing or gig work. 

Estimated Taxes

Again, since you do not have your taxes withheld by an employer as a self employed worker, you must make payments to the IRS every quarter of the year. These are called Estimated Taxes. You file these on IRS Form 1040-ES.

Since these are quarterly taxes, the IRS has set the following dates by which you must file, under normal circumstances:

  • April 15
  • June 15
  • September 15
  • January 15

It is your responsibility to figure out how much to pay.

Employment Tax

If you’re a gig worker, this tax will likely not apply to you. But, if you’re a small business owner and you hire employees, then you will pay employment taxes. These taxes include half of your employees’ Social Security and Medicare taxes and all of their federal unemployment tax. You will also withhold the other half of their Social Security and Medicare taxes, and all of their income taxes, from their paychecks.

You must then pay these taxes monthly or bimonthly via electronic deposit to the IRS.

State Taxes

There are too many variants between each state to list them all here, but you will also have to pay state taxes of some kind from your income. These can be:

  • State Income Tax
  • Employment Tax
  • Sales Tax
  • Excise Tax
  • Local Taxes

Managing Your Tax Burden

Military OneSource

The often undiscussed side of becoming a freelancer or independent contractor is the burden you will carry for meeting your tax obligation. It is different and challenging. Fortunately, there are organizations that can help!

MilTax, from Military OneSource, offers free tax services which include tax preparation and e-filing software. They also have MilTax Consultants who are available 24/7, which is just awesome!

These MilTax Consultants are also specifically trained to address issues that affect the military community. This includes deployments, special pays, housing and rentals, living overseas, and multistate filings. Additionally, they can assist military spouses and veterans who are working as independent contractors in the gig economy.

NOLO

A resource I’ve come to depend on for managing my taxes and understanding the intricacies of self employment tax is Nolo.com

While they do offer tax attorneys for hire, the greatest help for me has been their Tax Articles and books. I have many of their books, but the most helpful for my freelance work has been their Tax Guide for Gig Workers and Working as an Independent Contractor. These two resources have given me all the information I need to confidently work in the gig economy.

Informational Resources

Here are other resources I use to stay on top of my tax game:

  • 1800accountant.com Blog – This website is geared toward selling you their services, but they also offer great tax articles and breakdowns of legislation that affect your taxes.
  • The IRS – While we often think of the IRS as the agency that takes our hard-earned money, and it is, their website offers all the information a taxpayer needs to correctly file taxes. Of greatest importance is the IRS Form Library where all the forms you’ll need are free and downloadable.
  • Free Tax Return Preparation – The IRS offers Volunteer Income Tax Assistance (VITA) and Tax Counseling for the Elderly (TCE) programs, which offer free basic tax return preparation to qualified individuals. Those with disabilities, those who make less than $57,000 per year, or those who speak limited English, will generally qualify for this service.

Disclaimer

I am not a tax professional, and the information presented in this article is intended for informational use. The information contained within this article was sourced directly from the IRS and other professional tax websites.

 

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New Tenant Rights for Some Military Families in On-Base Housing

New Tenant Rights for Some Military Families in On-Base Housing

In mid-February, a few additions were approved for the Department of Defense’s (DoD) 2020 Military Housing Privatization Initiative Tenant Bill of Rights.

This bill, signed in February of 2020 and put into effect in May, “commits the [DoD] to ensuring privatized housing tenants receive quality housing and fair treatment from the… project owners that operate and maintain privatized [military] housing.”

The bill was a requirement by law under the National Defense Authorization Act of 2020. It’s aim was to address the “systemic problems in military housing [that] came to light in 2018 following a series of reports by Reuters on the presence of mold, [rodent infestations], lead-based paint, [non-responsive landlords], dangerous wiring, and extensive damage in military homes managed by private companies.”

 

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

Tenant Bill of Rights

The Tenant Bill of Rights covers issues including, but not limited to, the following areas:

The Right to Live in:

  • Housing that meets health and environmental standards
  • Base housing that has working fixtures, appliances, and utilities
  • A community with maintained common areas

In addition, it includes the The Right to:

  • A written lease with clearly defined rental terms
  • A Plain-language briefing, before signing a lease and 30 days after move-in, by the installation housing office on all rights and responsibilities associated with tenancy of the housing unit
  • Have “sufficient time and opportunity” to prepare and be present for move-in and move-out inspections
  • Report inadequate housing standards to the Landlord, the chain of command, and housing management office without fear of reprisal or retaliation
  • Access to a Military Tenant Advocate or a military legal assistance attorney
  • Property management services provided by a Landlord that meet or exceed industry standards
  • Not pay non-refundable fees or have application of rent credits arbitrarily held

The Most Important 4 Tenants’ Rights

These recent additions were originally proposed back in 2020, but were tabled due to a need to further negotiate terms with the contracted companies. They are the 4 rights of tenants that are said to be “among the most important for military families.” The provisions include:

  • Mediated dispute resolution between landlords and tenants
  • Rent withholding (under some circumstances) until issues are resolved
  • Access to a housing unit’s maintenance history
  • Access to common forms and documents

The hope is that these changes will allow military families a stronger voice and additional support against the private companies in communications moving forward.

New Additions Set to Go in to Effect by June 1

The new additions are said to go into effect by June 1 and will apply to rental lease agreements “at the vast majority of installations,” with hopes that the provisions can apply retroactively in most existing instances.

That “vast majority” only applies to 11 of the 14 private contracting companies though; 3 companies that manage family housing across all four major branches have not yet agreed to the additional provisions in their leases. The names of those companies were not disclosed.

Big Step Forward for Tenants’ Rights

It’s still a big step forward. Paul Cramer, principal deputy assistant secretary of defense for sustainment said, “This represents a fundamental step in our ongoing effort to improve the department’s military housing program.” He also highlighted that the DoD was already seeing success with the initial provisions of the bill and has hope that these additions will have similar results.

The DoD instituted a rating-system, allowing families to provide feedback directly visible to garrison commanders, on a scale of one-to-five in response to housing maintenance or repair work. They’ve also already created the formal dispute process to support the first of the 4 additions mentioned above.

More Work to Be Done

But there is still more work to be done. Government Accountability Office analyst Elizabeth Field applauds the progress made by the DoD so far, but points out that more oversight of contractors is needed.

And Subcommittee chairwoman Rep. Debbie Wasserman Schultz, D-Fla., continues to express her concern over the health and welfare of military families forced to live in substandard housing; that is also something that could be addressed with more oversight of the contractors.

 

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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Military Families: Should We Buy a Home?

Things for Military Families to Consider when Deciding Whether to Buy a Home

Buying and owning a home is often more complicated for military families than civilians. Between navigating mortgage options, pinning down the best neighborhood for your family, and predicting the next PCS, there are many factors to consider.

While running through the recommended steps for deciding whether or not to buy a home, this list will introduce key factors for military families to consider.

Pre-Approval

Working with a lender and getting an approval estimate and pre-approval letter is an excellent first step in home-buying. This gives you a price point to use when searching for homes and leveraging power when making an offer on a home.

The Pre-Approval process is also a time to really crunch your numbers. Evaluating your finances will help identify whether or not you are financially ready to buy a home. When budgeting for home buying, consider these factors.

 

>> Get pre-approved while rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

Down Payment

Conventional mortgages can require a 20% down payment – that’s $20,000 on a $100,000 home! VA Mortgages do not require a down payment and may offer lower interest rates than conventional mortgages. There are, however, eligibility requirements.

 

RELATED: Is a VA Loan Right for You?

 

Earnest money. With any type of mortgage, it’s likely that you will need $1,000-5,000 to secure an offer you’ve made on a home.

Other expenses. Homeowner’s insurance, taxes, utilities, and home repairs are not included in the cost of a monthly mortgage. Do your research to ensure your monthly budget accurately captures all possible expenses.

Plan Ahead

Budgeting is a critical step of planning ahead in the home buying journey. Considering what will happen to a home in a couple years is an additional critical step for military families.

Resale. Military families are likely to PCS in a few short years. Before you commit to buying a home, think about what will happen to it when you move. Will you rent the property to another family? Will you resell it? Will you be able to resell it without a headache? Will you be able to afford the repairs the next buyer asks for in the sale process?

Location. Location tends to be a huge factor in the resale of a home. Even families without school-age children should consider the school rankings in the area. Homes in higher ranking school districts sell faster and at a 49% higher cost than other homes.

Search Homes for Sale

The fun part is scouting what’s for sale! After getting a good feel for what’s available and what exactly they want, most families work with a realtor. Working with a realtor as a home buyer is less expensive than when you sell a home. Understand the realtor’s fees and factor those into the budget too.

Location. Also consider location for your own needs. What will your commute look like? What are the crime rates in the area?

Picking the right location to meet your needs can be challenging for military families. Fortunately, there are some great resources to help choose a good location. Millie offers a neighborhood comparison toolkit to help find the right neighborhood for you.

Elbow grease. Buying a fixer-upper, putting your own sweat and tears into fixing it up, and making a profit when the home is resold is possible. Before committing to a fixer-upper, consider how much time you are willing to spend, whether or not DIY projects will pass a home inspection upon resale, and the cost of multiple trips to hardware stores.

RELATED: DIY Home Improvements to Increase Home Value

 

Home value. Getting upside-down in a mortgage – owing more than the home is worth – can have an extremely negative financial impact. Is the home you are buying appropriately priced?

Deciding whether or not you should buy a home rests heavily on budget. Before searching for homes, make sure your financial ducks are in a row. Create a budget and stick to it!

 

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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What is VA Streamline Refinancing and How Can It Benefit You?

What is VA Streamline Refinancing and How Can It Benefit You?

VA Streamline Refinancing is a different way of referring to the VA Interest Rate Reduction Refinance Loan, or VA IRRRL (pronounced “Earl”) and is an option for some homeowners who utilized a VA Loan to purchase their house.

The VA IRRRL

In short, a VA IRRRL refinances your current VA-backed mortgage into an entirely new loan agreement with the purpose of improving the original loan, ie: lower interest rate, lower/better payment schedule, etc. It is one of the best options for homeowners who already have a VA Loan that isn’t as good as what is being offered in the current market. This is often called VA Streamline Refinancing because it’s streamlined – it’s simpler than other refinancing options out there. Due to it not always requiring VA appraisal or a typical underwriting process, it saves time (by reducing paperwork) and money (by cutting out added fees).

>> Rates are still at historic lows!  You may be eligible for a zero down VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

Why Refinance?

Refinancing is the act of replacing an existing loan with a new loan which pays the debt of the original loan and ideally has better terms or features. According to money guru Dave Ramsey, there are three main instances in when refinancing can be a good idea:

  1. You have an Adjustable Rate Mortgage (ARM) (meaning your interest rate is adjustable and moves the risk of changing/rising interest rates to the homeowner instead of the lender).
  2. The length of your mortgage is over 15 years (however, if the interest rate on a 30-year fixed-rate mortgage is low enough already, make sure the shorter term isn’t going to end up costing you more).
  3. You have a high interest rate loan (if current market interest rates are lower than your current mortgage’s rates, finding a loan with a reduction of 1-2% (or even more) interest or one that shortens your payment schedule, is something to consider).

**Note that while Dave Ramsey actually has four main reasons, the fourth cannot apply in the case of a VA IRRRL because you cannot use this benefit to pay off a second mortgage.**

How Does It Work?

You must meet eligibility rules of a VA loan, work with a VA-approved lender, and have a refinancing result that actually proves financially beneficial. While there are exceptions to some rules, generally, you cannot utilize the VA IRRRL to get a cash-out/tap into home equity.

Based on laws established within the 2018 Protecting Veterans from Predatory Lending Act, you cannot begin the process of this refinancing option until roughly six months into your original VA home loan; you have to have made at least 6 consecutive, up-to-date monthly payments.

You do not have to actively live in the home to be eligible, you only have to prove that you have lived in the home, which you are hoping to streamline refinance, in the past. Also, you do not need a new Certificate of Eligibility (COE).  Some lenders though may ask for a copy of the original COE from when you first purchased your house. There is no need for an additional appraisal process, either.

Additional Costs to Consider

There is an upfront funding fee of 0.5% of the loan amount, which acts as a pooled-payment to the VA which covers changes/defaults of all those who benefit from the VA’s services; there are possible exceptions to this fee. It is lower than typical refinancing options.

Closing costs, “discount points,” and origination/lender fees may also be additional expenses. These can vary from lender to lender.

Some states or local government agencies may expect government recording fees as well, for legally recording the deed/mortgage/relevant documents.

Both the funding fee and closing cost (and sometimes these other additional charges) can be rolled into the new IRRRL so there are no out-of-pocket expenses. However, they shouldn’t come as a surprise to you. The loan disclosure documents should explain everything, and if you don’t understand, ask questions of your lender.

Due to market conditions, refinancing may be more challenging than in the past. If you can’t pay your current home loan, check out some of these resources:

 

>> Interested in a no PMI, zero down payment possible home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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