Comprehensive Military Benefits Guide

Military Benefits Guide

A Comprehensive Guide to Military Benefits

Joining the United States Military as a soldier, sailor, airman, Marine, Coast Guard member or Space Force Guardian means accepting a commission or taking an oath of enlistment. The oath describes the new servicemember’s obligations to support and defend the Constitution of the United States against all enemies foreign and domestic.

But after the oath, these new troops learn about the benefits they have earned by taking the oath. What ARE the benefits of joining a branch of the uniformed services?

How do they differ depending on your status as an active duty service member, National Guard, or Reserve component? Do military spouses and dependent children get benefits too? In some cases, the answer is definitely yes. In other cases, the benefits may have qualifying requirements.

Below, we’ll explore military benefits for all eligible applicants below, starting with active duty, Guard and Reserve, and finishing with information for spouses, dependents, and others who may qualify.

Military Benefits for Active Duty Personnel

Military benefits start with pay and allowances but also include healthcare, education, medical care, travel, free tax support, and home loans. Some benefits begin immediately, others require minimum time in service.

Some benefits cannot be accessed until the service member has completed Basic Training and any advance training required before getting a first duty station assignment.

Military Benefits During Basic Training

When you enlist or accept a commission, some benefits are open to you right away. Military pay begins when you begin your initial training, and so do medical benefits in the form of on-base care from a military facility. All new recruits are automatically covered by TRICARE health insurance when they ship out to basic training.

What you do not get right away includes the GI Bill, the VA home loan, spouse tuition assistance, access to on-base child care, military leave, Space-A travel, and special pay/allowances like hazardous duty pay and proficiency pay.

Read More: Military Benefits Offered During Basic Training

Military Allowances

Depending on your duty station, the nature of the duty, your branch of service, and other variables you may be offered a range of military allowances to offset certain costs associated with relocating to and working at a new assignment, deployment, TDY, etc. These allowances may include:

    • Basic Allowance For Subsistence
    • Housing allowance (overseas and stateside)
    • Other “situational” allowances (Cost of Living, Family Separation)
    • Clothing allowances

Most of these allowances must either be approved by your chain of command or you must apply to begin the approval process. The branch of military service, the type of allowance you need, and your rank will all play a factor in determining how much you are entitled to and when.

There are also many other special pay and allowance options that may be offered to you depending on your rank, your career field, and other variables. Many of these must be qualified for through specific service, testing (language proficiency testing is one of those), and experience.

Others may be offered by virtue of being assigned to a certain location (hazardous duty pay is one of those) or because a career field is understaffed and needs retention incentives.

Read More: Military Allowances Guide

“Situational” Military Allowances

Some military allowances are offered if the military decides you need them in specific circumstances. For example, a Cost of Living Allowance (also known as COLA) supplements basic pay in areas overseas where the cost of living is higher. Overseas assignments like Japan, for example, have traditionally featured COLA to make being stationed there more affordable.

Another situational allowance is FSA, also known as the Family Separation Allowance. This is paid to those who must perform duty away from their family.

This allowance is paid for those who are involuntarily assigned away from home and is not offered for those who volunteer to serve elsewhere. Situational allowances (our term, not the DoD’s) are paid when the service member meets the required conditions and is no longer paid when those conditions are no longer met.

Military Housing & Housing Allowances

Some will qualify for a Basic Allowance for Housing stateside or an Overseas Housing Allowance. What does it take to be approved for these housing allowances? In some cases, it’s a simple matter of being assigned to a new base and not being given government quarters. In others, it may be a case of deciding which option works best for you. But what about those offered government quarters as single or married service members?

Some military members may qualify for on-base military housing. Some are offered this as single/unaccompanied service members, others are offered military family housing designed for legally married couples and any dependent children.

You may be offered on-post housing run by the DoD (getting rarer all the time) or you may be offered housing on base or off run by a public/private venture agreement between the federal government and a private housing provider.

If you draw BAH and live off base, you may or may not have the option to choose on-post housing later. Much depends on the assignment you’re at and the available on-base units at the time.

Single and unaccompanied service members who are not offered BAH are usually housed in “the barracks”, which in today’s sense are more like college dorm rooms (depending on the location, housing conditions, and quality in these facilities can vary greatly) than what you might envision a barracks environment to be like. Your options may include:

    • Government-owned on-base housing
    • Privatized on-base housing
    • Single or unaccompanied quarters

Read More: Military Housing Allowances (BAH and OHA)

VA Home Loans

The VA Home Loan benefit is offered to those who serve a minimum amount of time in uniform after completing initial training. VA loans typically require a minimum of 90 days of continuous active duty service but if you joined in an earlier “service era” than the current Gulf War era, your time in service minimums may vary.

Read More: VA Loan Basics

VA mortgages offer zero-down payment options, have no VA-required mortgage insurance, and there are no penalties for paying off the mortgage early. You may have the option of using a VA mortgage to build a home from the ground up, purchase a condo unit or mobile home, and you can use VA mortgages to purchase mixed-use properties that are primarily residential. VA mortgages limit certain costs the lender can pass on to you, the zero-down option is a huge advantage for many buyers, and you cannot be penalized for early payoff of the home loan.

Read More: The VA Home Loan Guide

To apply for a VA loan, you must first get a VA Certificate Of Eligibility and apply through a participating lender. Eligibility for the VA loan program is not the same as VA loan approval, and you are required to credit-qualify for a VA loan the same as any other mortgage program.

Read More: The VA Loan Certificate Of Eligibility

Qualifying for the VA loan benefit does not mean instant loan approval. You must credit-qualify for a VA mortgage the same as any other major line of credit. That said, VA loans are easier to get than some conventional mortgages because they have more forgiving credit standards.

Read More: VA Loans: Why Credit Scores Matter

VA Loans allow you to buy, refinance, renovate or build a home from the ground up. You can buy property in the United States or in its territories, but VA loans cannot be used to buy property overseas.

Read More: Questions And Answers About VA Home Loans

Basic Allowance for Subsistence (BAS)

What is the military’s Basic Allowance for Subsistence, informally known as a Subsistence Allowance or BAS? This is a tax-exempt military allowance designed to offset the cost of a service member’s meals. BAS, also known amongst some service members as “separate rations” or more derisively as “separate rats”, is a callback to the days of old when the United States Military and other military forces offered both room and board for its troops.

BAS is offered when the federal government declares 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 the command feels it’s practical or necessary to provide BAS.

BAS Is for Service Members Only

BAS is offered to the servicemember only. Family members (spouses included) do not qualify for BAS as this is an allowance designed to offset any associated food costs with a new duty station, deployment, duty-related travel, etc.

BAS is based on the most current food cost estimates made by the federal government via the USDA Food Cost Index, and the rate of payment is based on your status as an officer or enlisted member.

BAS is one of the rare cases where military pay and allowances are actually higher for enlisted members. Officer pay is considerably higher than enlisted pay; officers are thought to be better able to afford their day-to-day living expenses as a result. That is why enlisted members get more food dollars. Like most military allowances, BAS is subject to annual adjustments based on the anticipated increases in food costs from year to year. But the BAS increase you get is not tied to the same factors used to determine military pay raises each year; these are separate processes.

Read more: Military Allowances Guide

GI Bill

The GI Bill is one of the most important and most-used military benefits. This option is open to currently serving, retired or separated, Guard and Reserve members and even some dependents. GI Bill options for active duty service members include the ability to transfer the GI Bill to a spouse or school-age dependent child.

You are required to serve a minimum time in uniform before you can apply for GI Bill benefits. For those on active duty today, the minimum is typically 90 days, but that may vary depending on when you joined the military.

Read More: Am I Eligible for VA Education Benefits?

The GI Bill pays tuition, fees, and other expenses at participating schools. You may find the entire cost of your basic education is covered in some cases, and in others, you may need supplemental assistance from options like the Yellow Ribbon Program, state veteran education resources, etc.

Read More: The Yellow Ribbon Program and how it can enhance your GI Bill.

Not all GI Bill options are the same. If you signed up for the Montgomery GI Bill, for example, you do not have the option to transfer your benefits to a spouse or school-age dependent. If you signed up for the Post 9/11 GI Bill you may have the option to do so but there may be an added service commitment required in exchange. Some may be offered the opportunity to switch from the Montgomery GI Bill to the Post 9/11 version. Once you make the switch, it is irreversible.

Read More: GI Bill Facts and Fiction

There were many changes to the GI Bill thanks to a piece of legislation known as the Forever GI Bill, which is a law and not a separate, new GI Bill option all by itself. The Forever GI Bill changes the way benefits may be transferred and used, how Post 9/11 GI Bill housing stipends are paid, and more.

Read More: How the Forever GI Bill Changed Your Military Education Benefits

There are GI Bill options for members of the Guard and Reserve, and the requirements for these troops differ from those on active duty. It’s good to know your options long before you want to use them as a member of a Reserve component.

Read More: Veteran Education Benefits Guide

Other Military Education Benefits

Military Education Benefits

Branch-specific tuition assistance programs and on-base education options include:

  • Air Force Tuition Assistance
  • Army Tuition Assistance
  • Navy Tuition Assistance
  • Marines Tuition Assistance
  • Coast Guard Tuition Assistance
  • National Guard Tuition Assistance
  • Reserve Tuition Assistance

These programs are offered to those who meet minimum time-in-service requirements and other criteria. For example, the Air Force paid 100 percent of tuition, up to $250 per semester hour, and $166 per quarter hour for accredited off-duty courses.

The rules for each Tuition Assistance program will vary depending on the branch of service; in the case of the Air Force, no more than 124 semester hours may be funded toward an undergraduate degree and no more than 70 semester hours may be funded toward a graduate degree. Some military tuition programs specify that only one degree per degree level (undergraduate, graduate, etc.) may be funded.

All military tuition assistance programs have minimum grade point average requirements and those who fail to maintain satisfactory progress may be required to pay back some or all tuition assistance depending on circumstances. This type of assistance may not be offered to troops with disciplinary issues, failed fitness tests, or other problems.

Read More: How To Use Military Tuition Assistance

Education Benefits for Disabled Veterans

There are also military education benefits offered specifically to help disabled veterans. These are typically offered at the state and local levels. You may find that these programs are administered in some cases by veteran service organizations and in others by a state government agency such as a state-level Division of Veterans Affairs or Department of Veterans Affairs (not the federal agency).

The features, qualifications, and application requirements of these programs are NOT standardized and will vary depending on the state, the agency, and other factors. In some programs, it may be the veteran and/or dependents who benefit, in others, it may be the veteran only, or the spouse alone. In others benefits may be offered only to dependent children of qualifying service members.

Read More: Education Benefits For Disabled Veterans

Healthcare

The basic rule of thumb for military healthcare: those currently serving on active duty enroll in TRICARE for health coverage for themselves and immediate family members. In general, active duty service members and their families do not receive care from the Department of Veterans Affairs, though some service members are encouraged to begin working with the VA as soon as they have obtained retirement or separation orders.

Active duty members and their families may be treated at an on-base medical facility or an off-base facility that is within the service member’s TRICARE network. Overseas your options may be more dependent on the on-post treatment options provided, but this is not necessarily true in all cases. Much depends on where you are stationed, for how long, and the nature of your assignment.

  • TRICARE
  • On-base medical care is an option for servicemembers and their families.

There are a variety of TRICARE options including:

  • TRICARE Prime
  • TRICARE Select
  • TRICARE Prime Overseas
  • TRICARE Select Overseas

TRICARE may be an option for some qualifying military retirees. Those who are retired or separated have the option of applying for VA healthcare options which may depend on the applicant’s medical condition, any VA-rated service-connected medical issues, and more. When you are an active duty military member transitioning out of military service you may have the option to get temporary TRICARE coverage when separating, dependent care included.

Read More: TRICARE Benefits: A Comprehensive Guide

Life Insurance (SGLI)

If you are currently serving, you are eligible to apply for Servicemembers Group Life Insurance or SGLI. This benefit does require you to make a minimum monthly payment that is set based on the amount of life insurance coverage you opt into up to $400,000.

At press time, the highest monthly payment is listed as $25 per month for the maximum coverage for $400k. SGLI payments are automatically deducted from your base pay amount each month. You must meet eligibility requirements to sign up for SGLI. This benefit is for service members only and does not provide life insurance coverage for any member of your family. This is a “contingency” type benefit that provides a life insurance payout to your surviving beneficiaries if you die while covered.

Read More: Who Is Eligible For SGLI?

If you are retiring or separating from military service, you have the option to continue this life insurance coverage under a different program called Veterans Group Life Insurance or VGLI.

You become eligible to apply for VGLI within a year and 120 days from your date of discharge. You may apply for an amount up to the same coverage you had through SGLI.

Travel Benefits

  • Space-A Travel (active duty Space A)

Space-A travel is an option for active duty military members, family members, and retirees. Short for “Space-Available”, Space-A is an option that lets you apply for empty seats on military aircraft flying missions approved for extra passengers.

Space-A flights originate from military bases and you sign up for seats on these flights at the base military passenger terminal or online at the official site for that terminal or command. You may be permitted to sign up via e-mail or online.

Some Space-A flights are dedicated back-and-forth trips between military bases in a specified area, others may be added to the Space-A roster last minute based on changes to a mission or its requirements.

Signing up for Space-A travel means you must have authorized leave paperwork if you are a military member, and there is seating priority on all Space-A flights requiring mission-essential travel to be prioritized first, followed by passenger categories from Category I (those on Emergency Leave orders) all the way down to Category Six, which includes:

  • Retirees
  • Dependents
  • Reserve members
  • ROTC, NUPOC, CEC
  • Veterans with a total Permanent Service-connected Disability
  • Surviving Spouses of Service Members who died on duty

Space-Available travel is a great perk of military service but seats are never guaranteed to non-mission-essential personnel. You must be prepared to fully cover the cost of a commercial flight back to your duty station if you cannot get a seat on a Space-A flight.

Space-A flights typically originate and end at an on-base airport or runway. You won’t fly into a commercial airport, and you’ll be responsible for your own travel once you are shuttled off of the runway or allowed into the passenger terminal.

Read More: Space-A Travel: Everything You Need To Know

Paid Vacation/Military Leave

You’ll earn 30 days a year plus some holidays, starting in your first year. Servicemembers accrue leave at a rate of 2.5 days per month and you can carry a maximum of 60 days of leave into the new year. Any amount above 60 days is considered “use or lose” time. In some circumstances, additional leave accrual beyond 60 days may be authorized such as during COVID-19 when travel and movement became severely restricted.

Military members may, on a case-by-case basis, be permitted by their chain of command to take leave in excess of what they have saved up. For example, if you have 30 days of leave and take 35 days (with prior authorization) you may be permitted to do so with the caveat that you cannot take MORE leave until you have earned it in full. This is sometimes known as “advance leave” and functions a bit like an advance in your pay (in spirit, not in practice).

Advance leave is commonly reserved for those who need to “resolve urgent, personal, or emergency situations” according to the DoD.

Advance leave is limited to the minimum necessary and is typically limited to the lesser of the following:

  • 30 days
  • The amount of leave that can be earned during the remaining period of active service
  • If serving on an extension, accrued prior to the member’s date of separation.

Read More: How Military Leave Works

AAFES, Commissary Access

Military members and their families have access to many perks of military life including the ability to shop on base or on-post tax-free at Army/Air Force Exchange Service (AAFES) outlets, base commissaries, “Class Six” liquor stores where available, gas stations, and much more. Depending on which branch of service is responsible for a given post or installation, you may find options including:

  • AAFES (Army and Air Force Exchange Service)
  • MCX (Marine Corps Exchange
  • NEX (Navy Exchange Service Command)
  • CGX (Coast Guard Exchange)

Exchanges are basically like big-box retailers like Target or Walmart. You’ll find a similar variety of options there including clothing (military clothing sales, too!), electronics, household items, and sometimes even motor vehicles.

Not all amenities are offered at all installations, but the bigger the base the more elaborate the options are likely to be. To enter an on-base commissary, Base Exchange (BX), Post Exchange (PX), or other facilities you must show a current military ID card, dependent ID card, etc. You may be carded for all purchases on post to verify your status as an authorized user but that is a small inconvenience.

Read More: Commissaries And Exchanges: What You Need To Know

Tax Support

There are a number of free tax support options for military members and their families. MilTax is a military-centered tax software program that walks you through a list of questions to determine which military-related tax issues may be present for the current year’s tax filing. You access MilTax through the DoD-funded Military OneSource official site.

There is also an option you can use on-post if offered there; the VITA Program, also known as Volunteer Tax Assistance. While this is not offered at every single military base in the DoD, it is offered at many of them and you can use a VITA locator to see which bases closest to you offer the option.

Read More: Free Tax Support For Military Members

Military Benefits for Spouses And Dependents

Some military benefits for spouses and dependents are available regardless of the involvement or status of the service member. Others may require the participation of the service member (transferring GI Bill benefits, for example) or require troops to apply through the chain of command or other processes on behalf of the spouse or dependent.

In other cases, such as with medical care, you may only have to provide your current military spouse or dependent ID to get, use, or continue to use the benefit.

  • Education Benefits (including GI Bill transfer)
  • Home loans
  • TRICARE
  • Career assistance
  • Spouse Employment Preference On Base

Education Benefits for Military Spouses and Dependents

There are a variety of education benefits for military spouses. Some benefits are not provided by the military, but by private enterprises, Veteran Service Organizations, or other non-government entities. This section features military education benefits for spouses provided by the federal government.

They include Post 9/11 GI Bill benefits which must be transferred from the servicemember’s name to the dependent or spouse. This can only be done while the servicemember is still under a military service commitment and a new service commitment must be made for the GI Bill benefits to be transferred.

Spouse Education and Career Opportunities (SECO) is a DoD-funded resource military spouses can use if they want to plan a return to academia. SECO features a variety of resources including a scholarship finder and there is a MyCAA Scholarship worth up to $4,000 for qualifying spouses looking to return to school. You’ll find SECO at the MilitaryOneSource official site.

The Marine Gunnery Sergeant John David Fry Scholarship is offered to qualifying spouses and children who are survivors of one of the following circumstances:

  • Active-duty service members who died in the line of duty on or after September 11, 2001;
  • Selected Reserve members who died from a service-connected disability on or after September 11, 2001

Discuss the Fry Scholarship with a representative of your selected school or institution. Not all schools are approved for this program and you’ll need to determine if the opportunity is available before you discuss applying for the Fry Scholarship with your admissions counselor

The VA Survivors’ and Dependents’ Educational Assistance (DEA) is a federal program offering education and training to qualified dependents of vets who are either permanently disabled due to military service or who died on active duty as a result of military service.

  • Are permanently and totally disabled because of a service-related condition, or
  • Died while on active duty or as a result of a service-related condition

Discuss VA DEA with a representative of your selected school as not all schools are approved for this program. It’s best to determine if DEA is an option option to you before you discuss applying for DEA with your admissions counselor

Read More: VA Survivors’ And Dependents’ Educational Assistance

Home Loans for Military Spouses

The VA Loan program offers no-money-down, low-interest home loans to qualifying servicemembers. It also allows service members and spouses to apply for a VA mortgage together, treating the loan application differently than if a veteran and a non-veteran who is not a spouse were to apply together.

There is no VA home loan option for the spouse alone. There are exceptions in cases where the service member has died. In such cases, the qualifying criteria include at least one of the following:

  • The Veteran is a prisoner of war (POW)
  • The Veteran is missing in action (MIA)
  • The Veteran died while in service or from a service-connected disability and you didn’t remarry, or
  • The Veteran died while serving, or from a service-connected disability. In such cases you must not have remarried before you were 57 years old or before December 16, 2003, or
  • The Veteran had been totally disabled and passed away.

If you are claiming VA home loan benefits as a surviving spouse, you will need to contact the Department of Veterans Affairs directly if you assist with the application, VA Form 26-1817 Request for Determination of Loan Guaranty Eligibility—Unmarried Surviving Spouses.

Read More: Questions and Answers about VA Home Loans

TRICARE Benefits for Military Spouses and Dependents

Active duty service members are required to enroll in a TRICARE plan that is based on the location of their duty station. TRICARE Prime and TRICARE Remote are the stateside plans, and TRICARE Prime Overseas and TRICARE Prime Remote Overseas are the basic plans the servicemember can choose to enroll their spouse and/or dependents in.

Read More: TRICARE Basics

Family members also have the option to select other TRICARE options based on the location they are in. Those options include, but may not be limited to:

  • TRICARE Select is described as a “self-managed preferred provider organization (PPO)” plan offered to those in the United States
  • US Family Health Plan is offered in select locations only. This is described on the TRICARE official site as “an additional TRICARE Prime option available through networks of community-based, not-for-profit health care systems”.
  • TRICARE For Life is described as “Medicare-wraparound coverage for TRICARE-eligible beneficiaries who have Medicare Part A and B.”
  • TRICARE Select Overseas offers “comprehensive coverage” for those in overseas locations.

There are more flexible options offered to spouses and dependents, likely because it’s understood that some may already have health care options through an employer or school; the additional healthcare options for spouses and dependents are designed to accommodate this depending on the plan and the nature of your coverage.

Read More: TRICARE For Spouses And Dependents

Career Assistance For Military Spouses

There are multiple types of career assistance for military spouses, starting with spouse hiring preference. The Department of Defense has a federal hiring preference program aimed at military spouses, but if you have not explored your options for this preference recently you may not be aware of certain changes to the program that benefit all applicants.

Prior to 2019, the DoD used something called the Priority Placement Program to register military spouses so they may claim their federal hiring preference. But that program entered the sunset phase in 2019 and no longer operates. Does that mean there is no longer a preference program? No.

The replacement option, known as Military Spouse Preference or MSP, is described by the Defense Department as a “special federal hiring authority that allows spouses to be noncompetitively considered” for federal positions. MSP does NOT require an in-person appointment to get started, unlike the previous PPP option.

Now, military spouses simply identify themselves as candidates for MSP when they apply for federal work using USAJobs.gov. This is an advantage for spouses who know they will be going overseas soon but don’t know what assignment yet.

MSP also eliminates a past requirement limiting applicants to a single “occupational series”. You can now choose any job that offers MSP, rather than being limited to a specific area of expertise.

This is not the only career assistance type benefit offered to military spouses. Other options include the USO Pathfinder Transition Program which offers professional development options for military spouses that can be used “throughout the duration of military service as well as in preparation for life post-military” according to the USO official site.

The U.S. Department of Labor offers TEAMS or Transition Employment Assistance for Military Spouses and Caregivers. This typically consists of employment workshops to help military spouses meet their career goals.

TEAMS workshops are instructor-led virtual training, provided as stand-alone training. modules. You can take all of the workshops or just a few and they can be taken in any order that fits your availability and schedule.

There are also options for military spouses who accompany active duty service members to overseas duty locations, including spouse hiring preference. To apply for preference at an overseas base, contact the Human Resources office at the base and explain that you need information on spouse hiring preference policy for that installation.

Read More: Overseas Military Spouse Career Options

Child Care

The Department of Defense offers affordable child care access to military and DoD-affiliated families. These programs are offered at military bases around the world, and while not every single base has child care options (forward deployed, remote assignments, and hardship assignments for example) the majority of troops and their families may be able to take advantage of these DoD child care options.

Options include:

  • Child Development Centers
  • Family Childcare
  • “24/7 Centers”
  • School Age Care facilities
  • The “Military Child Care in Your Neighborhood” program

Who Is Eligible for Military Child Care?

Military affiliation is one of the requirements for military child care. Children enrolled in a DoD program must be the dependents of “eligible sponsors” including parents who are active duty military, DoD civilians, Guard/Reserve members who are on orders, Gold Star spouses, and many others.

Childcare costs are assigned based on household income, which makes this a benefit that can make a big financial difference for junior enlisted troops. Signing up for military child care means contacting the base Child Development Center where you are stationed or where you will be reassigned to.

You can use a DoD search tool at MilitaryChildCare.com to locate military child care options anywhere offered in the world, and you’ll want to do this as soon as you get PCS orders as demand for military child care is high and waiting lists typically apply.

The sooner you get your name on the waiting list the sooner you can get access to affordable military child care.

School Age Care facilities are offered on many military installations; these programs are for those in kindergarten through sixth grade. Care is available before and after school, and even for non-school days and summer vacations. Many of these programs are run from base youth centers or Child Development Centers, and all are certified and accredited.

Many military bases feature other after-school options and other programs for school-age children who are too old for Child Development Center care. These programs vary depending on the base but in general, you may find options including:

  • Installation youth center programs
  • 4-H Military Partnerships
  • Defense Department summer camps
  • Military Kids Connect (a website designed to celebrate military youth and help them cope with military life)

Read More: Military Childcare Basics

Military Benefits for Guard and Reserve Members

Some benefits require a minimum time in uniform to access, others may take effect immediately. The benefits for members of the Guard and Reserve differ from active duty benefits for a number of reasons, including the fact that these jobs are essentially part-time during much of the year unless there is a deployment, field training, unit activation, etc.

  • Pay and Allowances
  • Education benefits
  • Home loans
  • TRICARE
  • Job Certification
  • Retirement

Guard/Reserve Component Pay And Allowances

There are special pay and allowance options that may be offered to you depending on your rank, your career field, and other variables. When you join the National Guard or the Reserve, you make a part-time commitment to military service. That means your time commitment isn’t the same as an active duty soldier, sailor, airman, Guardian, Marine, or Coast Guard member.

That also means your pay is part-time, too. Naturally when a member of the Guard or Reserve is deployed, activated, or otherwise called to active service, the pay changes to active duty, too. But while you serve under “normal conditions” during peacetime, your service is limited to weekend drills, active duty for training, and other activities as required.

If you need to know your state’s National Guard pay rates, you can check the official site of your state’s National Guard, or you can check by branch of service. For example, the Air National Guard official site features a pay calculator to help you estimate your National Guard earnings in advance. (Scroll down to Pay Calculator.)

Guard/Reserve Education Benefits

The Montgomery GI Bill is an option that was offered at one time to all new recruits. Today that program has been replaced by the Post 9/11 GI Bill but some may still qualify to use the MGIB-SR:

You may qualify for the MGIB-SR if you’re a member of one of the following Reserve Components:

  • Army Reserve
  • Navy Reserve
  • Air Force Reserve
  • Marine Corps Reserve
  • Coast Guard Reserve
  • Army National Guard
  • Air National Guard

The following must all be true for you to qualify:

  • You have a six-year service obligation in the Selected Service OR;
  • You are an officer in the Selected Reserve serving six years (that is in addition to your initial service obligation) AND;
  • You meet what the VA calls “ other requirements” which may include finishing initial active duty for training (IADT), and you are in good standing in a Selected Reserve Unit.
  • Your obligation must have started after June 30, 1985, or for some types of training after September 30, 1990.

If you qualify for the GI Bill under any of these circumstances, you’ll want to learn more about your options to use these benefits–you can make an appointment with a college admissions counselor or contact the VA directly to learn more about what is possible.

In addition to the GI Bill, you may also qualify for Military Tuition Assistance from the Guard/Reserve, though not all branches of service offer the benefit to reserve component members. Where offered, you may find that 100% of your tuition expenses are covered for classwork totaling $250 or less per semester hour or the equivalent.

Read More: GI Bill Facts and Fiction

Guard/Reserve VA Home Loan Benefits

VA home loans are offered to those who serve enough qualifying time in the Guard or Reserve (see below). There are major advantages to using a VA home loan as a Guard member or Reservist. One of these is the no-money-down mortgage option. Another is the fact that you cannot be penalized for early payoff of the mortgage (including refinancing) and you cannot be required to purchase a home that appraised lower than the asking price even if you have paid earnest money.

Who qualifies for a VA mortgage among members of the Reserve Components? Those who:

  • Served for 90 days or more on active duty during a wartime period, OR
  • Were discharged or released from active duty for a service-connected disability, OR
  • Have six years of service in the Selected Reserve or National Guard, AND were honorably discharged, placed on the Standby list or transferred to Standby Reserve or Ready Reserve, or who continue in the Selected Reserve.

Read More: Best Practices for the VA Loan Process

Guard/Reserve Health Care and Insurance

Members of the Guard and Reserve may be eligible for TRICARE. You are required to create or maintain an account on the Defense Manpower Data Center or MilConnect to verify eligibility for TRICARE Guard/Reserve plans such as Line of Duty Care, Active and Inactive care, and options for those who are retiring.

Read More: TRICARE for Guard and Reserve Members

Furthermore, members of the Individual Ready Reserve (IRR) may have the option to purchase dental coverage but typically do not qualify for other TRICARE benefits unless on active duty orders OR recently deactivated.

Read More: Guide To TRICARE

Guard/Reserve Job Certification

Depending on the branch of military service, the nature of your career field, and whether you serve in the National Guard or the Reserve, you may be offered job certification that is related to your military job. For example, the Army National Guard offers certification in areas that include:

  • Certified Defense Financial Manager (CDFM)
  • Six Sigma Black Belt (SSBB)
  • CompTIA Security+
  • Certified Information Systems Security Professional (CISSP)
  • Microsoft Certified Professional (MCP)
  • EMT/Paramedic
  • Pharmacy Technician Certification Board (PTCB)

The nature of military service in the National Guard means that the state where you serve plays an important part in the nature of your benefits in this area. Not all states offer the same funding or certification options.

The situation is different for Reservists as these troops operate on the federal level rather than the state level. That means benefits for Reservists are more standardized. They also depend on the branch of service you are in; Air Force Reserve job training is more focused on mission-essential needs but you may find that the AF Reserve offers help with student loans and other civilian-based opportunities.

Guard and Reserve Retirement Benefits

Those who serve enough “creditable years” of military service in the Guard or Reserve may become eligible to apply for a military pension and become military retirees.

Unlike those who serve on Active Duty for 20 years who get to start enjoying retirement pay immediately once they have “dropped papers”, members of the Guard and Reserve must wait until they reach a certain age to start receiving military retirement pay.

Read More: Retirement Pay for Guard and Reserve Members

Military retirement for National Guard and Reserve members has changed thanks to laws passed in the 2008 National Defense Authorization Act. The Act in part reduced the age those in the Ready Reserve can start receiving retirement pay.

Normally the retirement age is 60, but now, your retirement age is lowered by three months for every 90 days of active duty after 28 January 2008. Further changes in 2015 allow that 90-day period of active duty to stretch over two successive fiscal years.

Drawing retirement pay is NOT automatic. You must apply for it and be approved for it.

Benefits for Those Who Have Retired or Separated from Military Service

There are benefits for military retirees, and benefits for veterans who have separated from the military without retiring. Those who retire typically have more options than those who separate but that doesn’t mean a lack of certain options for those who separated before getting enough time in service to apply for retirement.

Military retirees draw a pension after performing the minimum amount of military service, which is 20 years at press time. Military retirees in the Guard and Reserve have different rules for “getting their 20” or earning 20 “creditable years” toward military service but a retirement check is definitely possible for those who serve part-time.

Read More: Retirement Pay for Guard and Reserve Members

Those who separate from the military without hitting their 20-year service mark are typically not offered retirement pay unless they have taken an early retirement offer that is sometimes provided in times when the military is trying to “draw down” or reduce its troop numbers.

But those who separate but do not retire still have certain benefits offered to them. Both retirees and those who return to civilian life without retiring may be eligible for a variety of benefits from the Department of Veterans Affairs. They can include, but may not be limited to:

There are other benefits. One important one for some? Those who have retired or separated are now permitted to live with their families in private on-base housing in the United States. Overseas locations are not included, but for those using this option in the USA, you will pay rent at a rate based on the local Basic Allowance For Housing.

Why is this allowed? More and more on-base housing is being privatized or has already switched to a public/private arrangement.

Government housing contractors are permitted to rent these homes to those who have retired or separated when sufficient vacancies exist. This option is not available at all bases, and the contracts may be limited to a year, depending on circumstances.

VA Disability Compensation for Military Retirees

VA disability compensation for military retirees works the same as for those who did not retire but separated from military service. You must make a claim with the Department of Veterans Affairs, and submit medical records, service records, and supporting documentation.

There is no separate track for military retirees for this process. But being eligible to draw a military pension has in the past been problematic for those who also seek VA compensation for service-connected disabilities. Why?

Because until 2004, retirees were not allowed to draw both military retirement and VA compensation. Those eligible for both had to choose which to receive. Starting in 2004, there was a VA transition that eventually ended in 2014. Today you are permitted to receive both payments concurrently. 

There is no need to apply for approval to receive both, those eligible to do so get both payments automatically once the paperwork for each is completed and approved.

Military retirement pay is NOT the same as a VA pension, which is described below.

VA Pension

Regardless of whether you retired or separated from the military, you may qualify for a VA pension if you meet certain requirements. You must meet some basic requirements to be considered, which include not having a Dishonorable discharge and meeting basic income and net worth limits.

There are other considerations. To be approved for a VA Pension, you must have:

  • Started active duty before September 8, 1980, and you served 90 days or more on active duty with at least one day served during a wartime period. OR;
  • Started on active duty (enlisted) after September 7, 1980, and served at least 24 months OR the full period you were ordered to serve on active duty with at least 1 day during wartime. OR;
  • Started as an officer on active duty after October 16, 1981, and you had not served previously on active duty for at least 24 months.

And finally, to qualify for a VA pension at least one of the following must apply to you:

  • You are 65 years old or older.
  • You have a permanent and total disability.
  • You’re a patient in a nursing home for long-term care due to a disability.
  • You’re getting Social Security Disability Insurance.
  • You’re getting Supplemental Security Income

Eligible wartime periods for the VA Pension include, as described on the VA official site, the following:

  • Mexican Border period: May 9, 1916, to April 5, 1917
  • World War I: April 6, 1917, to November 11, 1918
  • World War II: December 7, 1941, to December 31, 1946
  • Korean conflict: June 27, 1950, to January 31, 1955
  • Vietnam War era: November 1, 1955, to May 7, 1975,  August 5, 1964, to May 7, 1975, for Veterans who served outside the Republic of Vietnam.
  • Gulf War era: August 2, 1990, through a future date to be set by law or presidential proclamation.

If you need to register for a VA Pension, fill out the online forms at the VA official site. The Department of Veteran Affairs offers a “pre-filled” form that populates some (but not all) of the application fields with information based on your account information with the VA.

You can save the application as you go but there is a time limit; you have 60 days from the start of your application process to the time you submit–after 60 days your application is deleted and you must begin again.

To apply you must gather any supporting medical evidence needed for your claim, and you will need to supply your medical records, financial information, history of military service, your Social Security Number, and any supporting evidence to reinforce your claim.

VA Pension Versus VA Compensation

The Department of Veterans Affairs offers qualifying veterans a choice between drawing a VA pension and collecting VA compensation for service-connected medical issues.

The basic differences include the fact that VA pension benefits are for those who served during wartime and the pension is need-based, where VA disability pay is offered to all who have qualifying service-connected medical issues no matter when they occurred in peacetime or wartime. Eligibility is not need-based, but is determined by the nature and severity of the medical issues.

The VA official site reminds in no uncertain terms: you cannot qualify for VA pension payments and disability compensation at the same time. The Department of Veterans Affairs will pay you whichever amount is greater, but not both.

VA Medical Benefits

Whether you have retired or separated, if you intend to make a claim with the Department of Veterans Affairs for compensation due to a service-connected injury or medical condition, you will need to formally apply with the VA.

There are procedures you will need to follow, evidence to collect, and records to gather. The basic claim process does not change based on your status as a retiree or as someone who has simply separated from military service.

Read More: Five Tips for Applying for VA Disability Benefits

VA Home Loans

Like some other VA benefits, the opportunity to apply for a VA loan is not contingent on you being a retiree versus having separated from the military without retiring. We mention this frequently in this section; it would be easy to assume that since military retirement pay is contingent on serving 20 years, other benefits might be as well. This is NOT true of VA loans.

VA mortgages require a minimum amount of time in uniform. They do not require a 20-year military career and junior enlisted qualify for the same VA mortgage options after they have served the required time the same as high-ranking career military members.

Retirees and veterans who did not retire are free to explore their VA loan options. VA loans allow you to use your military retirement pay, VA compensation for service-connected medical issues, and your civilian job where applicable to qualify for the mortgage.

What you cannot do, regardless of your status as a currently serving military member, veteran, or military retiree, is to use the Post 9/11 GI Bill housing allowance as qualifying income. We mention this only because some don’t realize this is true and make their immediate post-military plans based on potential income that won’t be counted toward VA loan approval.

Read More: Questions and Answers about VA Home Loans

VA Counseling And Career Support

The Department of Veterans Affairs offers a Transition Assistance Program or TAP aimed at those who are about to retire or separate from military service. The VA official site notes that about a quarter of a million service members make the switch from serving to civilian life each year.

TAP includes help one year from your retirement or separation date and there is a full day of VA-specific transition assistance offered through the program VA Benefits And Services. The VA official site describes this training as including “interactive exercises, real examples, and covers topics important to you like family support, disability compensation, education, and health care benefits.”

Transition Help For Women Veterans

There is also a health-related VA TAP program specifically for women veterans through an online, self-paced option called Women’s Health Transition Training. Offered to those currently serving and retired/separated alike, this option is available online and you can subscribe to the VA Center for Women Veterans emails for more information and updates about upcoming Women’s Health Transition Training course opportunities.

Chapter 36 Benefits

The Department of Veterans Affairs offers veterans and military retirees a program called Personalized Career Planning and Guidance (PCPG). Also known simply as VA Chapter 36 benefits, you may qualify for educational and career guidance, planning, and resources under this program.

If you qualify for the GI Bill, you may qualify for Chapter 36 benefits. Other requirements include:

  • Being discharged under “conditions other than dishonorable” from active duty within six months. OR;
  • Being separated from active duty under conditions other than dishonorable not more than 1 year ago. Or;
  • You are a Veteran or service member eligible for VA educational assistance. Or;
  • You are a service member, Veteran, or dependent eligible for VA education benefits.

Under Chapter 36, you may qualify for career counseling, help finding a new path of study, and readjustment counseling that can help you make the transition from military member to veteran student. There is also resume support and career planning help offered under Chapter 36.

You can apply for these benefits in three ways; in person at a VA office, online using VA Form 28-8832, or you can apply online at the VA official site via Login.gov.

Applying online requires you to complete an initial questionnaire to determine the proper form for you as a veteran, active duty service member, retiree, etc.

Veteran Readiness and Employment (Chapter 31)

Military retirees and other veterans with service-connected disabilities that affect the ability to hold or find a job may qualify for the Department of Veterans Affairs Veteran Readiness and Employment program.

These benefits are sometimes referred to as Chapter 31 benefits or VR&E. You can apply for VR&E through the VA official site; to qualify you must have a VA disability rating of at least 10% and you must not have received a Dishonorable discharge.

Being approved for a VR&E program requires you to have at least one day of Post 9/11 GI Bill benefits remaining. Using VR&E benefits does not count against your GI Bill benefits.

Apply for VR&E benefits online, in person at a VA office, by calling the VA, or use a Veteran Service Organization.

Read More: What Are Veteran Service Organizations?

Veteran Healthcare Readjustment Services

The Department of Veterans Affairs offers transition care including mental health services for qualifying veterans who are transitioning from military to civilian life. The VA official site says it assigns VA Liaisons for healthcare at all major military medical treatment facilities to help in transitioning from military care to civilian care.

VA.gov says that since 2003, “VA Liaisons for Healthcare will meet with you early in your transition to ensure access to VA health care at the appropriate time in your recovery and rehabilitation process” where applicable. Not all veterans may need or require this support but it is available when needed at VA facilities nationwide.

 

 

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.

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.

 

 

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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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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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.

 

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

 

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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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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Getting Started With VA Loan Benefits

VA Loan Benefits: Getting Started

Are you wondering how to get started with your VA home loan benefits? The most important thing to do starting out is to determine whether you are currently eligible to receive a VA Certificate of Eligibility (VA COE). Those who are eligible may apply for it may do so in a variety of ways, but you cannot apply until you have met the minimum time-in-service requirements needed.

These time-in-service requirements will vary depending on when you started earning credit for military service.

The specific requirements for becoming eligible for a VA COE are in their own separate article since there are many variables including whether you are Guard or Reserve, Active Duty, or a qualifying surviving spouse of a military member who died as a result of active duty.

For this article, the most important thing you need to know is that you’ll have to check your time-in-service against the requirements based on the “service era” when you joined (Vietnam War, for example, Desert Storm/Gulf War era, etc.).

Getting Started With Your VA Loan Benefits

Can you get a head start on your VA home loan benefits by starting the application process before you have officially been granted a VA COE?

Those who have just joined the military as either an active-duty recruit or a Guard or Reserve member may be tempted to get a jump on the process, but the VA Lender’s Handbook, VA Pamphlet 26-7, says this cannot happen.

“The lender must ensure the applicant is an eligible Veteran before an appraisal is ordered, the loan cannot be processed or closed. Lenders should never close a loan before they establish eligibility. VA cannot guarantee a loan for an ineligible Veteran”.

Your loan officer’s hands are tied for much of the application process until she can obtain your VA COE. One thing to keep in mind? Your loan officer may be able to help you get your COE when the time is right, so don’t think you can’t talk to a loan officer about your options. It’s just that you can’t begin the application process in earnest without the COE.

Counting Down Toward VA Loan Eligibility As A New Service Member

A common question at this state? When does the clock start counting down toward VA loan eligibility?

In this context, we are not talking about the minimum time you must serve (see above) but rather when the waiting period begins and when it ends before. Some mistakenly assume the clock starts the moment you are committed to military duty. But this is not true.

 

>> 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.

 

In general, if you have not graduated from basic training and you have not graduated from any required technical training programs for a career field or military specialty, your clock has NOT started ticking yet. You must exit the initial training phase of your first months on duty first.

To be absolutely clear: your time-in-service countdown begins AFTER basic training, technical school, A-school, AIT, etc. Once you have met the requirements, apply for your COE with the Department of Veterans Affairs online, by mail, or via the lender.

After You Receive Your VA COE

The Certificate of Eligibility establishes you as being eligible for the VA loan program, but it does not guarantee loan approval. You’ll need to prepare for a home loan like you would for any major credit application:

  • Work on your record of on-time payments for all financial obligations at least one year in advance of any home loan application;
  • Begin budgeting and saving for your home loan closing costs and expenses
  • Consider the type of home you want to buy
  • Plan for the future: are you subject to deployment? Are you a retired military member planning to settle in one place for a long time? Are you starting a family or increasing one?
  • Consider the type of property you want to buy (condo, townhome, farm residence, manufactured home, suburban house, etc.)

The fact that the VA loan program does not automatically approve all borrowers for home loans should convince some applicants to work on their financials a year or better before applying. However, not all do. While it is true that there is no VA-required minimum FICO score range for VA loan approval, your lender may require a credit score in the 600 range or better for more competitive rates and terms.

When you are ready to start looking for a lender you’ll want to shop around for the right one–not all participating VA lenders are alike and VA loan rules do NOT require all participating lenders to offer all VA loan products.

That means if you want to buy a mobile home and lot, for example, with a  VA mortgage, but the housing market where you are searching doesn’t support such loans, you may have a hard time finding a VA lender who can help. The same is true for condo loans and other types of homes–if a housing market doesn’t have enough demand for a certain kind of property, a loan for it might be harder to locate.

Knowing Is Half The Battle

It pays to do some research on the property types you can and cannot purchase with a VA mortgage. For example, you may be allowed to purchase a farm residence with a VA loan but that loan will ONLY be issued for the residential value of the property.

Another thing worth knowing when you start out with a VA mortgage? Occupancy is required. You are not permitted to use your VA loan to buy a vacation home, a timeshare, or a bed-and-breakfast. You are required to occupy the home you buy with a VA loan or arrange to have eligible immediate family members occupy the home on your behalf.

But occupancy rules do NOT mean you are in trouble with your VA mortgage if you are deployed, reassigned, sent on temporary duty or TDY, etc.

Occupancy has more to do with your intent for the property at purchase time and far less to do with your miliary duty requirements. If you intend on buying a primary residence, the VA loan program can work for you even if you deployer or get stationed elsewhere.

VA home loans are also ONLY for properties that can be classified and/or taxed as real estate even if they are not taxed as such in the state they are located in. You cannot use a VA mortgage to buy an RV, houseboat, or any property that will not or cannot be fixed on a permanent foundation.

For Those Getting Started With A VA Loan Upon Retirement or Separation

The timing of your VA loan application may be very important if you are retiring or separating from military service and have never used your VA mortgage benefits before. One issue to keep in mind? Your income and employment. The lender is required to verify your employment situation as part of the application. Do you plan to rely on your retirement pay and investments only after you return to civilian life? Or do you plan to re-enter the workforce?

Your lender may have a harder time approving your loan if you apply in the downtime between your last job and your next job unless you have income and cash reserves that allow the lender to justify the mortgage.

VA loan rules state that the lender must verify your employment including how long you have been in your current position.\

Applying for a VA mortgage after you have successfully re-entered the job market makes more sense than trying to convince the lender that you can afford the loan without the new job. Naturally, the rules are different when a military retiree does not intend to come back to the workforce and supplies their financials to the lender to show how they can afford the mortgage in retirement.

And you will be required to do so if that’s applicable to you. And that’s not just a condition of the VA home loan program, that’s fairly standard operating procedure for home loans in general.

What To Do Next

Once you know you are eligible to apply for a VA Certificate of Eligibility, it’s smart to shop around for a lender while you are also shopping around for a home. Treat them the same; compare prices, terms, and other variables. Once you have found a lender you can either get help obtaining your COE or apply for it yourself. There is no VA-required home loan private mortgage insurance and no VA-required down payment for typical VA loans.

But you may be able to save even more money upfront on your VA home loan if you are eligible to receive or currently do receive VA compensation for service-connected medical issues.

In such cases, you may be eligible to apply for a VA Loan Funding Fee Waiver. This can save you thousands of dollars on out-of-pocket costs and you should be sure to tell the lender that you want to apply for this exemption. Some veterans find that the VA experiences delays in issuing their VA disability ratings (the disability rating is crucial to the VA Loan Funding Fee exemption) and may actually close the mortgage without being assigned a VA rating. Does this mean the borrower must pay the VA loan funding fee?

Yes, it does, but the VA makes a provision to apply for a refund in such cases. The veteran is not entitled to an automatic funding fee refund. It must be applied for, but be sure to inform your lender in advance if you think the funding fee exemption may (or may not) get approved before the loan closes.

You’ll need to ask the lender about the specific procedure for paying, or being approved for the waiver of the funding fee.

 

>> 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 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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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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VA Expands Housing Grants for Disabled Veterans

In a recently released entry into the Federal Register, the Department of Veterans Affairs (VA) amended the regulations regarding grants for Specially Adapted Housing (SAH) Program. 

The Specially Adapted Housing Program

Within this program there are two major sources of assistance:

  1. Specially Adapted Housing Grant
  2. Special Housing Adaptation Grant

The assistance provided by the SAH Program can be used to purchase, construct, or adapt a home that meets the needs of the disabled Veteran. The funds can also be used to reduce the debt from buying a home that has already been adapted.

The amount of SAH assistance a disabled Veteran can receive is based on a few things:

  • The nature of the Veteran’s disability
  • The scope of the project
  • The amount of SAH assistance already received

RELATED: VA Adapted Housing Grants: An Overview

SAH for Blindness

The new change provides SAH eligibility for Veterans with blindness in both eyes. Previously, there had to be a “loss or loss of use” of another extremity in order for blindness to be considered for SAH funding.

As such, the loss or loss of use of one lower extremity is no longer a criterion for receiving SAH benefits for blindness in both eyes.

Additionally, “blindness in both eyes” has been changed from having only light perception to “having central visual acuity of 20/200 or less in the better eye with the use of a standard correcting lens.”

This means that Veterans who are blind in both eyes are now eligible for SAH assistance and can receive up to $100,896 for the year. These changes apply to applications received on or after August 8, 2020.

 

More SAH/SHA Grants Available

Previously, an eligible disabled Veteran was permitted three separate grants from the SAH program. The new amendment now allows for a maximum of six (6) grants of assistance. 

These changes apply to all applications submitted on or after October 1, 2020.

Furthermore, the amendments increased the annual number of SAH applications the VA is authorized to approve, from 30 to 120 applications. These funds are available to Post-9/11 Veterans who are entitled to VA disability compensation for permanent service-connected disabilities.

To be eligible, “the disability had to be incurred on or after September 11, 2001, and must be due to the loss or loss of use of one or more lower extremities which so affects the function of balance or propulsion as to preclude ambulating without the aid of braces, crutches, canes, or a wheelchair.”

RELATED: VA Auto Allowance for Adaptive Equipment

Increased Money for SAH Grant Programs

On October 1, 2021, the max amount for the Specially Adapted Housing Grant increased to $101,754.

The max amount for the Special Housing Adaptation Grant  jumped to $20,387.

They sound almost identical, right? So, what’s the difference?

The Specially Adapted Housing (SAH) Grant helps disabled Veterans construct or modify a home to meet their adaptive needs. These are generally larger projects that require more drastic changes to a structure.

The Special Housing Adaptation (SAH) Grant is designed to make specific, smaller changes within a home to increase the mobility of a disabled Veteran.

 

Applying for an SHA/SAH Grant

To apply for either the Specially Adapted Housing or Special Home Adaptation Grants, you must go to the VA’s eBenefits website. You will need a DS Logon to access your basic or premium account.

You can also apply by mail

  1. Fill out the Application in Acquiring Specially Adapted Housing or Special Home Adaptation Grant (VA Form 26-4555)
  2. Mail the completed form to the nearest regional loan center.
  3. If you need assistance, call 877-827-3702, M-F, 8am to 9pm ET.

Or, if you’d prefer to submit your application for assistance in person, then fill out VA Form 26-4555 and bring it into the nearest VA regional office for processing.

 

Time to Live in Freedom

You have served your country with Honor and Courage. You wear the wounds brought on by your service. It’s time to live free from limitations in your home.

So, if you are eligible, apply for these amazing grants and make your home, your life, into something you deserve.

(Image courtesy of oneinchpunch via Shutterstock)

 

 

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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Moratorium Extended on Evictions & Foreclosures

Extension for Renters and Homeowners Until June 30th

The Department of Veterans Affairs (VA) announced in February that it will extend the existing moratorium on evictions and foreclosures until June 30, 2021 due to COVID-19. The previous extensions were set to expire on March 31, 2021. 

“We will do everything in our power to help Veterans, their families, survivors and our caregivers get through this pandemic,” said VA Secretary Denis McDonough. “The department’s moratorium and forbearance extensions support President Biden’s Jan. 22 Executive Order to deliver economic relief to Americans amid the COVID-19 crisis by addressing economic hardships the Veteran community faces, through no fault of their own, during the ongoing pandemic.”

This extension also applies to VA loan forbearance requests.

What Does That Mean?

If you’ve been unable to pay rent, under normal, non-pandemic conditions, you’d likely be evicted. If you’re unable to pay your mortgage, the bank would usually foreclose on your home, which means they become the legal owner of the property. The result is you’d be legally forced to leave.

However, the moratorium on evictions and foreclosures has prevented countless veterans and citizens being removed from their homes during this pandemic. This extension will allow homeowners and renters the ability to have the missed payments held in forbearance.

A “forbearance” allows the Veteran to get back on a regular, monthly payment schedule by giving them time to resolve the reason that they can’t make the payments. The missed payments, which are due at the end of a forbearance period, do not have to be settled in a single payment. However, if Veterans can make up all the payments in a lump sum and resume making regular payments, then it is highly encouraged.

The VA hosts a podcast called “Borne the Battle”, and in a recent bonus episode, they addressed questions that many veteran-borrowers are facing. They discussed topics like homeownership, borrowing, forbearance, VA Loans, complaint filing, and financial decision making.

Getting Help

The following resources are available to you if you needs help navigating this difficult time:

  • Consumer Financial Protection Bureau (CFPB) – the CFPB hosts a “Find a Counselor” tool to help find agencies approved by the Department of Housing and Urban Development (HUD).
  • The HOPE Hotline – Veterans can call (888) 995-HOPE (4673), 24/7, for personalized advice related to their housing situation.
  • VA borrowers who are experiencing financial hardship due to COVID-19 can review “VA Guidance for Borrowers”, or call 877-827-3702 for information.
  • Other mortgage and financial resources are available at: https://www.consumerfinance.gov/coronavirus
  • The Veterans Crisis Line – While this resource is not housing-specific, the thought or experience of losing a home can be traumatic. If you are Veteran in crisis or concerned about one, contact the VA’s qualified responders for confidential help:

Having a place to live is a basic human right, and homeownership strengthens our veterans and our communities. Therefore, if you need assistance to stay in your home, please reach out to any and all of these resources. Homelessness should not be an option!

 

>> 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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VA Benefits for Family Members, Survivors, and Family Caregivers

Military Family Members, Survivors, and Family Caregivers VA Benefits

Do you know about all of the VA benefits you and your loved ones may qualify for? This list can help you make sure you’re not missing out on health care, life insurance, or financial assistance. If you’re receiving benefits, there are resources to help you learn more about how to manage those benefits.

Healthcare Benefits

TRICARE

If you’re the family member of an active-duty, retired, or deceased service member, National Guard soldier, Reservist, or Medal of Honor recipient, you may qualify for the TRICARE program which includes comprehensive health coverage, including prescription medicines. Learn more by clicking here.

The Civilian Health and Medical Program of the Department of Veterans Affairs (CHAMPVA)

Are you the current or surviving spouse or child of a Veteran with disabilities or a service member who died in the line of duty? If you don’t qualify for TRICARE, you may be able to get health insurance through the  CHAMPVA cost-sharing program.

Find out if you qualify for CHAMPVA and how to apply.

The Program of Comprehensive Assistance for Family Caregivers

This program offers support and services for family caregivers of eligible Veterans who were seriously injured in the line of duty during certain time periods and meet other eligibility requirements. Learn more about eligibility and how to apply

The Camp Lejeune Family Member Program

If you lived in either U.S. Marine Corps Base Camp Lejeune or Marine Corps Air Station (MCAS) in North Carolina with an active-duty Veteran who was your spouse or parent of these places for at least 30 cumulative days from August 1953 through December 1987, you may have had contact with contaminants in the drinking water there which led to the development of certain diseases later on. If you now have one of the related conditions, you may qualify for health care benefits through VA. Find out if you qualify for this program and how to apply

The Spina Bifida Health Care Benefits Program

If you’re the biological child of a Korean or Vietnam War Veteran and you’ve been diagnosed with spina bifida, you may qualify for benefits. Find out if you qualify and how to apply

The Children of Women Vietnam Veterans Health Care Benefits Program

If you’re the biological child of a woman Vietnam War Veteran and you’ve been diagnosed with certain birth defects, you may qualify for VA health care benefits.Find out if you qualify and how to apply

Pharmacy Benefits

If you qualify for CHAMPVA or the Spina Bifida or Children of Women Vietnam Veterans programs, you can get prescription benefits through your local pharmacy or through our Meds by Mail program. Click here to learn more.

Education

Find out if you’re eligible for VA education benefits for dependents and survivors (also called Chapter 35 benefits) by clicking here.

RELATED: States Offering Free College to Dependents

 

>> Need money for college?  Find scholarships for military spouses and dependents with the CollegeRecon Scholarship Finder.

 

Home Loans & Financial Counseling

To get a VA-backed home loan as the surviving spouse of a Veteran, you’ll need a Certificate of Eligibility (COE) to show your lender that you qualify for this benefit. Click here for more info.

 

>> Sign up today for a free VA loan consultation with absolutely no obligation to learn more.

 

Life Insurance

Learn how to find out if you’re eligible for Life Insurance, explore your options, manage your policy, and file claims by clicking here.

Burial Benefits

You can apply to find out in advance if you can be buried in a VA national cemetery. This is called a pre-need determination of eligibility—and it can help make the burial planning process easier for your family members in their time of need. Click here to learn more and/or apply.

Survivor’s Pension

If you are a surviving spouses or an unmarried dependent of a wartime Veteran, you may be eligible for a survivor’s pension. Click here to learn more.

Survivors’ Compensation

If you’re the surviving spouse, child, or parent of a service member who died in the line of duty, or the survivor of a Veteran who died from a service-related injury or illness, you may be able to get a tax-free monetary benefit called VA Dependency and Indemnity Compensation (VA DIC). Click here to find out if you’re eligible.

Support and Services For Caregivers of Veterans

Comprehensive Assistance

Find out if you may be eligible and how to apply for the Program of Comprehensive Assistance for Family Caregivers (PCAFC). Click here.

General Caregiver Support

The Program of General Caregiver Support Services (PGCSS) provides resources, education and support to caregivers of Veterans. The Veteran does not need to have a service-connected condition, for which the caregiver is needed, and may have served during any era. No formal application is required.  Get the details here.

Benefits for those Supporting a Veteran or Servicemember

VA Fiduciary Program

Find out how to become a fiduciary who manages finances for a veteran who can’t manage their own because of injury, health conditions, or age. Click here.

Fisher House Program

Learn more about receiving temporary accommodations to be near a veteran or active duty service member receiving medical treatment in a VA health facility far from home. Click here.

Coaching into Care

Learn how to get help for a veteran who is readjusting to civilian life from a licensed Psychologist or Social worker. Click here.

 

>> Stay up-to-date on all the latest military and veteran benefits info for you and your family!  Sign up today for the free MyMilitaryBenefits benefits update newsletter!

 

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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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VA Loan Eligibility Expanded for National Guard

Expansion of VA Loan Eligibility to Include National Guard, COVID-19 Vets

The National Guard’s COVID-19 response has created some additional benefits, in the form of veteran home loans, or VA Loans. The latter was activated during the pandemic, thanks to a provision in the Veterans Health Care and Benefits Improvement Act. Lawmakers from both parties and chambers have joined forces on legislation that would credit service under federal Title 32 toward Department of Veterans Affairs home loans eligibility.

 

>> 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.

Who’s Eligible?

When the legislation becomes law, National Guard troops who have served at least 90 days of qualifying Title 32 active-duty service, including a stint of at least 30 days, will be newly eligible for the loan.  The expanded eligibility is applied retroactively, too.

Thousands of National Guard members logged qualifying service in 2020 as part of the massive nationwide COVID-19 response. According to National Guard Bureau data report shared with Military Times, 47,100 Guard troops were on Title 32 orders for the pandemic response at the mission’s peak.

According to the VA website, National Guard troops could only become eligible for the VA loan benefit in one of two ways:

  • 90 days consisting of federal active-duty service (Title 10)
  • 6 years of retirement-verifiable service in the National Guard or another reserve elements of the Armed Forces.

Exclusively Title 10 orders –– which occur in response to an event, rather than a federal mobilization for deployment –– counted towards the 90-day criteria.

The National Guard Association of the United States or NGAUS previously stated that the home loan eligibility expansion was a legislative priority for the association, which advocates on behalf of Guard troops on Capitol Hill.

What’s in the Legislation?

According to the legislation, the qualifying Title 32 service criteria consists of active-duty periods served within 316, 502, 503, 504, or 505 sections of the national federal law governing the use of active-duty forces.

At a minimum, one of the periods of service must have been for more than 30 days, as well. Most of the National Guard coronavirus activation has been umbrellaed within Title 32 502(f) orders, with thousands of troops passing the 90-day window needed to qualify under the new law and thousands more recording at least 31 days or more.

Time periods served on orders for initial military training does not count even under the new law, but other schools do matter, so long as the orders were issued within the applicable sections of Title 32. The eligibility expansion also means those time periods consisting of annual training orders (AT) –– most of which are within section 503 of Title 32 –– can count towards the VA loan if the guardsman or reservist has finished at a minimum, one order longer than 30 days.

Using this example, so under the new law, a Guard member who has started and finished an 89-day Title 32 order for COVID-19 response — as some did, due to a political issue overextending Title 32 orders in the summer of 2020 — is eligible and verified for the new VA home loan benefit if they have finished or completed even one day of AT in their career.

Benefits Gap Continues to Close

In recent years, the benefits gap between Active-Duty branches and their National Guard or reserve counterpart has drastically closed thanks to the realization that the mission has changed for the guardsmen and reservists. More and more members of the Guard and reserve are being called to active-duty status regularly due to the strategic and domestic needs of the nation and its allies, often filling roles that at one time only Active-Duty units could fulfill.

“VA is ready to ensure that members of the National Guard who qualify with expanded eligibility requirements will have access to their home loan benefits,” said Susan Carter, director of the VA’s office of media relations.  For more information on VA loan eligibility, visit this link.

 

>> 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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Buying a Home Remotely for Military and Veterans

Buying a Home Remotely

The military life makes people resilient, up to any challenge. They’ll go off to war for a year, let the whims of fate send them to their next installation—they’ll even buy a house sight unseen.

It’s old news that mortgage rates are lower than rental rates these days. A military family may want to capitalize on that if they can see themselves putting down roots at an upcoming posting, or for the sake of diversifying their investments (a wise step in the face of the stock market’s current state of flux), or maybe it’s time to settle down after retirement.

Covid-19 Real Estate Market and Shopping

The housing market is also in a period adjustment in adherence to social distancing rules, even with clients who already live in the area they’re buying their home in. This means remote buying and closings are more easily accommodated, and tools like 3D or Virtual tours are making the process of shopping for a home from afar even easier.

According to this article from The Washington Post, in the current housing market climate amidst COVID-19:

  • Interest rates for loans are at “rock-bottom lows”
  • Sales are slowing due to COVID-19, which means prices will lower
  • This will lead to the switch from a seller’s to a buyer’s market
  • The National Association of Realtors estimate 10% price drop in home sales this year

6 Steps to Successful Home Purchase Remotely

With all this in mind, here are six steps to follow to a successful remote purchase of a home:

Discover Your Budget

Consult with your current bank or other providers to see what size loan you are eligible for, using local BAH rates as a reference. Shop around for interest rates, and be picky with the mortgage loan officer you get paired with. Communication is key. They will be your touchstone on an intimidating amount of paperwork brimming with legalese, and only one part of what can be a stressful process.

 

>> 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.

 

Identify Needs & Wants

Everyone has a different list of things in their head that would make their dream home a reality. Do you want a newly constructed, never-before-lived-in home, a fixer upper that you can bring up to your tastes, or something in between? A pool sounds nice in theory, but what might you have to give up in your house to stay within budget? Make a list of things you consider must-haves (ex. three bedrooms and two bathrooms, in a good school district) and a second list of things that would be nice to have (ex. a fireplace, marble countertops).

Do Your Own Research

Take your needs and wants lists and look into what’s on the market in the area you’re hoping for, at the price point your loan can cover. You may have to adjust your expectations if the results are slim. Sites like Trulia, Zillow, and Realtor.com offer more than images of the interior of the homes. A listing page holds a vast amount of information on the homes and their neighborhoods, like: previously listed sale prices, walkability/commute score, ratings of nearby schools, and local crime rates.

Find a Great Realtor

So, you know what you want, what you need, what you can spend, and you’ve got a pretty good understanding of what is available in your area. Now’s the time to bring in an expert. Finding the perfect realtor is always important—they identify promising properties, guide you through the (staggering amount of) paperwork upon selecting your home, and are present for inspection and closing. In the case of buying a home remotely, you need to have even more trust in this person.

Interview at least three realtors, and ask them these questions:

  • What is their experience with remote sales?
  • What is their daytime availability? Compare this to your availability (and timezone).
  • Have they worked with military before?
  • Ask for references, in particular from past remote buyers and military buyers

Share your wants and needs lists with the realtor you choose, and link them to some of the more appealing homes you found in your own research. Giving them all this information right out of the gate will save valuable time which is bound to be wasted when you’re communicating across different time zones, or even continents!

Realtors will likely know of homes to present to you that aren’t yet on sites like Trulia or Zillow. The realtor will need to be your eyes on these properties, either taking photos themselves or taking you on a virtual walkthrough—preferably both of these things. Realtors can also show you comparisons, or comps, which are recently sold homes in the area you’re interested in, with the equivalent or near equivalent to what you’re looking for.

Don’t Forget to use Your Community

Always remember, the world is big, but the military is small. By nature, military life scatters you, your family, and any friends you make along the way, across the globe. Odds are, there is a military base fairly near to where you’re looking to buy a home. Ask a friend or a family member who live in the region to do a walk through of your favorite properties. If you’re PCSing to the local base, utilize your branch’s Sponsorship Program, which is designed to help you integrate to your new installation. There is always support to be found.

Remember, YOU Have the Final Say

Buying a home is an overwhelming process, even when everything goes according to plan. You are making a significant investment, not just financially, but in your future. You may need to compromise here and there, but don’t forget that you are the one in charge. This is your time and money on the table. There is a shocking amount of paperwork and things to review, from information on the house’s history to inspections to closing costs. It can be tempting to leave it all to the people you’ve employed along the way—like your mortgage loan officer and your realtor— but no matter how good they are at their jobs, they are not you. Do not sign anything without reading and completely understanding it. Ask every question. Ask them twice. In doing so, you take responsibility and ownership of this momentous occasion.

 

>> 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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Preparing to Purchase a Home as a Military Family

Purchasing a Home as a Veteran or Military Family

For many people, buying a home will be the biggest money-decision they make in their lives. Some families save for years to feel fully prepared for the big leap while others dive into a 15 or 30-year mortgage without making a game plan. No matter if you’re in the market for a home now or sometime in the near future, there are a number of things can do to align yourself and your finances to get the most home at the best price.

Here is a list of things you can do the prepare for your home purchase:

Get Your Finances Under Control

Credit Score

The better your credit score, the lower your home loan interest rate and down payment. Typically, lenders are looking for an excellent score in the 700+ range – dropping into the 600’s makes you seem like a potential risk.

You will want to check your credit history and score through one of the three major credit reporting agencies (Equifax, Experian, and TransUnion). If you see negative-standing accounts, work to get those neutral or positive. This can be done by disputing them if there are errors. If negative entries are not errors, you have a few options. You can send in a ‘pay for delete’ offer to the creditor that owns the debt; you are basically negotiating that by giving them all (or a portion) of the debt, they will agree to remove the negative details from your record. Another option is to request a ‘goodwill deletion’ by pleading with the creditor to remove the negative detail because of your otherwise good standing. And your last option is to simply wait out the reporting limit, which is typically seven years.

There are a number of ways to gain and maintain a positive credit score. Pay all bills by the due date, even if it’s the minimum payment. Keep balances on credit cards and other revolving credit low. Don’t open and close credit frequently; you only want to open new accounts as needed, and you shouldn’t close them too quickly as length of credit history accounts for 10% of your score.

 

>> 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.

 

Debt

Less debt means you can make more of your money work for you. Reducing and eliminating debt lessens amounts of stress in all facets of life and helps to increase your credit score. There are a number of ways you can work to get rid of your debt. You can find ways to earn extra money that would be earmarked solely for paying debt down. You can also adopt one of a number of proven methods, like the “debt snowball,” “avalanche,” or “balance transfers.”

 

Savings

Creating “homeownership accounts” can work in your favor in various ways. The best way to allocate funds into one of these accounts is by choosing a budget plan that works best for your family and financial situation. Potential items you can include in the plan could be:

  • Utilities: If you’re moving to a new area, the cost of water, electricity, gas, internet, etc. can be unknown. To avoid the potential surprise, research and build a fund specifically for these expenses.
  • Home Maintenance: There are aspects of a home that age out, like appliances, roofs, HVAC systems, plumbing, etc. There are also regular actions a homeowner must take, like pest control, chimney sweeping, gutter clearing, and more. All of these add up, so it’s a good idea to have an established means of paying for it set up.
  • Emergency: What about things that are completely unexpected, like a natural disaster, job loss, or fire? A good rule of thumb is to have anywhere from 3 to 6 months’ worth of living expenses.
  • Remodel: Perhaps you’ve planned to retrofit and renovate your kitchen with the newest equipment and most modern fixtures. Before making the move to start the upgrade, it’s best to make sure you can afford it without putting yourself in a financial hole.
  • HOA Fee: If you are required to pay a monthly Home Owners Association fee, don’t forget to include this in your budget, also.
  • Property Taxes/Homeowners Insurance: Typically an expected, yearly contribution, these can still come as a large blow to personal finances. By saving a little bit each month throughout the year, the effect of paying such a large lump sum can be eased significantly.

Determine How Much House You Can Afford

DTI

A large preapproval amount does not mean it’s what you can (or should) actually borrow. To calculate how much you can actually afford, you need to determine your DTI or debt-to-income ratio (or use one of many online tools available that calculate it for you). A better credit score typically means you can qualify for a higher ratio, but it is generally a good idea that your housing expenses alone do not exceed 28% of your monthly income.

Down Payment

To lower your monthly loan payments, you should also consider how much of a down payment you can make. A VA loan has a 0% requirement for a down payment, while conventional loans require 3% down, and FHA loans require 3.5% down. However, an ideal down payment is considered 20% because it lowers lenders’ potential risk.

Closing Cost

Coming in at roughly 2% to 5% of the home’s purchase price, closing costs should rate in the affordability determination. As a final responsibility of home-buying, there are a number of fees, referred to as closing costs, that a buyer must pay. This consists of fees for appraisal, credit report, origination, application, and underwriting, as well as title search, and title insurance; some cities and states can also charge additional fees, like a transfer or mortgage tax. It should be noted that while there is no closing cost for a VA loan, there is a funding fee of 1.4% to 3.6% of the loan amount.

The 1% Rule

You may still have years of PCSing ahead of you.  In that case, you may decide to turn your home into a rental property. If so, keep in mind the 1% rule.  This rule gives a rough estimation of value. If you can comfortably charge a monthly rent of 1% (or more) of the home’s purchase price, you have a good deal. This will allow you to earn money off the property or pay off your home loan quicker by easily doubling-up on payments.

Consult Lenders

Since every family’s financial situation is different, there are no cookie-cutter loans. It’s best to find a loan that meets your financial needs by shopping around for a mortgage lender that gives you the best and most personally-tailored option. Potential loans to investigate:

  • VA Loan: Government-backed loans with competitive interest rates for military-affiliated families; does not require a down payment, but must be primary residence for specified term.
  • FHA Loan: ‘Federal Housing Administration’ loan backed by the government; designed for lower income families, requiring a lesser minimum down payment and credit score
  • USDA Loan: ‘US Department of Agriculture,’ government-backed loan for lower income families offered with below-market interest rates and requiring no down payment
  • Conventional Loan: Not secured by the government, with higher interest rates and requiring a higher credit score to quality; can be a good option if you don’t meet other loans’ eligibility requirements.
  • State-specific Loans: There are a number of states that offer first-time buyer assistance programs, helping with down payments, closing costs, interest rate reductions, and more. Check out this website for a list of states and their available programs.

 

>> 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 Loan: Can You Borrow More Than Your House is Worth?

Can You Borrow More Than Your House is Worth With a VA Loan?

Here’s a scenario.  Let’s say you want to buy a $250,000 home.  You qualify for a VA loan and know that it will be a $0-down mortgage.  The problem is, you want to replace all of the kitchen appliances, and that carpet in the master bedroom has to go.

Then you determine that the total additional amount you’ll need to accomplish all these upgrades is around $6,000.

There is also the matter of the funding fee.  This is a one-time payment that is paid to help keep the cost of funding VA loans down for taxpayers.  In 2020, it’s anywhere between 2.3 – 3.6% of the total loan amount.

You also realize that you don’t have that in savings and wonder, can I roll all of this into the total loan amount?

 

>> Have more questions about the VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

Yes or No?

Unfortunately, the answer isn’t a simple yes or no.

Technically, there is no maximum amount for a VA loan. Since it can sometimes be difficult for those who serve to meet the typical requirements of a standard mortgage, the VA loan with a $0-down requirement was established. While it is an advantage, it also has some peculiarities to it.

How Much Is the VA Loan Entitlement?

A loan amount is determined by comparing the estimated monthly mortgage payment amount versus your monthly income plus the amount you are entitled to and qualify for. In most areas of the country, basic entitlement is $144,000, but with potential bonus entitlements, you could be eligible for up to a total of $417,000. But just because that’s potentially what you could receive, the amount you would actually get is based on market value.

Back to Our Scenario: The Appraiser

The seller accepts your offer of $250,000 and then the VA lender comes in to appraise. The appraiser will look at recent sales of houses in today’s market that are similar to yours – in square footage, location, and other property characteristics – and provide at least 3 sales within the previous 6 months to a year that support the amount agreed upon

Sometimes these numbers align, sometimes they are a bit higher, but unfortunately they can also be lower.

If the appraiser comes back and agrees with $250,000, you move to the next phase. If he/she comes back and says that the property is actually valued at $260,000 – it doesn’t mean you get that extra equity; but it does mean that you got a good deal.

And  if the appraiser comes back and says the property is only worth $230,000, you have to come up with a solution, either by asking the seller to lower their asking price, agreeing to split the difference with the seller, or funding that difference entirely on your own.

So, what about that extra $6,000 and the funding fee?

The funding fee, fortunately, can be financed in the total loan amount, meaning you wouldn’t have to come up with that additional money on the spot. And it’s also important to note that not everyone has to pay this fee. It is normally waived for unmarried surviving spouses and veterans who receive disability compensation.

But that additional $6,000? There’s only one potential loophole there – can the improvements you’re wanting to make be considered energy efficient? According to the VA’s website “by supplying the VA with a completed energy analysis detailing where the savings to your utility expenses will exceed their current expenses, you can add $3,001 to $6,000 to your VA Home Loan.”

Which Improvements are Eligible?

Eligible improvements that are considered:

  • Water heater
  • Ceiling, attic, and floor insulation (new or additional)
  • Caulking and weather stripping
  • Insulated garage doors on an attached garage
  • Clock thermostats
  • Insulation for water heater
  • Windows and doors
  • Heat pumps
  • Permanent air conditioning units
  • Solar heating and cooling systems
  • Furnaces
  • Vapor barriers

Ineligible Improvements According to the VA

The VA points out specifically that the following improvements are ineligible for inclusion with this program:

  • Appliances
  • Window air conditioner units
  • New roofing
  • Vinyl siding
  • Glass block windows

Do We Qualify?

So in this scenario, no – you cannot add that $6,000 onto your VA loan. We would suggest asking the seller to lower their asking price to compensate for the additional spending that will take place. Or you can see if you qualify for something called a VA Alteration and Repair Loan ( also known as a Rehab or Renovation Loan).

Depending on your qualifications, an additional loan like this can be rolled into your VA home loan and has the potential to help with at least one of the desired changes in this scenario. There are limitations and downsides, just like with any major money decision, so shop all options available to you before committing.

 

>> Have more questions about the VA home loan?  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

 

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What Do You Need to Know About VA Loans?

What Do You Need to Know About VA Loans?

Homeownership remains at the heart of the American Dream. That is especially true for Veterans and the military community, who continue to own homes in greater numbers than their civilian counterparts. To assist Veterans and Service Members in purchasing a home, the Department of Veterans Affairs (VA) created the VA Home Loan program. The program is for American Veterans, Military Members currently serving in the U.S. military, reservists and select surviving spouses (provided they do not remarry) and can be used to purchase single-family homes, condominiums, multi-unit properties, manufactured homes and new construction. The VA does not originate loans, but sets the rules for who may qualify, issues minimum guidelines and requirements under which mortgages may be offered and financially guarantees loans that qualify under the program.

 

>> 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.

 

The basic intention of the VA home loan program is to supply home financing to eligible Veterans and to help Veterans purchase properties with no down payment. The loan may be issued by qualified lenders. Today, the VA Mortgage is more important than ever. In recent years, lenders nationwide have tightened their lending requirements in the wake of the housing market collapse, making the VA loan a lifeline for Veterans and active Military homebuyers, many of whom find difficulty when faced with tough credit standards and down payment requirements. Like all home loans, VA Mortgages have considerable details and information that the Service Member needs to understand prior to starting the VA Loan Process. Below is a closer look at some of the important areas of the VA Loan process.

VA Loan Eligibility Requirements

To be eligible for a VA loan, you or your spouse must meet the basic service requirements set by the Department of Veterans Affairs, have a valid Certificate of Eligibility (COE) and satisfy the lender’s credit and income requirements.

How to Apply for a VA Home Loan Certificate of Eligibility

Applying for your COE is only one part of the process for getting a VA direct or VA-backed home loan. Your next steps will depend on the type of loan you’re looking to get—and on your lender (for most loans, the lender will be a private bank or mortgage company; for the Native American Direct Loan, the VA will be your lender).

VA Home Loan Limits

A VA home loan limit is the maximum amount of money you can borrow using a VA-backed home loan, without paying a portion of the home’s total sale price up front (called a down payment). It is not a cap on the maximum amount you can borrow. If you qualify for a VA-backed home loan, you will receive a home loan entitlement. This is the maximum amount the VA will guarantee the lender that they will pay if you default on your loan.

As long as you qualify for a loan based on your income and credit history, and the property’s value matches its asking price, your lender will likely agree to loan you up to 4 times the amount of your entitlement without a down payment. This is your loan limit. A Service Member may qualify for two types of entitlement:

Basic entitlement: As your basic entitlement, the VA will guarantee to your lender that they will pay up to at least $36,000 or 25% of your loan amount, whichever is less, if you default on your loan. So, your loan limit would be $36,000 X 4 = $144,000.

Bonus entitlement: You may want to buy a home that costs more than $144,000. To help you do this, the VA offers what is called bonus (or Tier 2) entitlement. To determine your bonus entitlement, the VA will look at the Federal Housing Finance Agency’s (FHFA’s) current national conventional financing confirming limit and your state’s county loan limits. They will guarantee 25% of your loan amount, based on these loan limits.

What is the Difference Between VA’s Appraisal Process and a Home Inspection?

Video

Often when buying a home, the appraisal process is one of the most stressful moments of the purchase. The VA strongly recommends that you get an inspection to check for any major defects before you purchase your home. A VA-approved appraiser will also appraise the house to make sure it meets basic property condition requirements (called minimum property requirements, or MPRs), and will provide an opinion of value on the house. Please note that an appraisal is not the same as an inspection and a VA appraisal will assess areas differently compared to a standard appraisal. If the property does not appraise at a value that is high enough to get the loan, you have a few options. You can:

Request a Reconsideration of Value (ROV)

You can ask your real estate agent to provide the lender with valid sales data showing the property is worth more than its appraised price. The lender will ask the appraiser to reconsider based on this information.

Renegotiate the Sales Price

Ask the seller to lower the price to match the appraised value.

Pay the Difference Between the Appraised Price and the Sales Price

To do this, you will need to pay this cost at closing.

Owning a home is so much more than just having a place to live, it is about having part of the American Dream. Even though the event of buying a home can be stressful, the VA offers a checklist, to ensure that no steps are missed during the process. The VA home Loan Program has guaranteed more than 24 million VA loans, and continues to remain the most powerful home loan program on the market for many veterans, service members and military families.

 

>> 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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VA Adapted Housing Grants: An Overview

An Introduction to VA Adapted Housing Grants

Our military community is amazing! They are frequently away from home, missing anniversaries and birthdays, to answer the call of the nation. Many honorable men and women have sacrificed their lives in the service of our country. Many others have suffered and become disabled as a result of their service. Learning to live with these disabilities is challenging, but there are programs to help. 

The Department of Veterans Affairs has a number of housing grants that are funded to help veterans regain independence in their daily lives. These programs are:

  • The Specially Adapted Housing (SAH) grant
  • The Special Home Adaptation (SHA) grant
  • The Temporary Residence Adaptation (TRA) grant
  • The Home Improvements and Structural Alterations (HISA) grant

 

>> 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.

 

Specially Adapted Housing (SAH) Grant

The purpose of this grant is to allow a wounded and disabled veteran to live in an environment that grants more independence in daily living. It is available to those veterans with a service-connected disability for the following conditions:

  • Loss or loss of use of both legs requiring the use of wheelchairs, crutches, canes, or braces
  • Blindness in both eyes, plus the loss or loss of use of one leg
  • The loss or loss of use of one leg along with,
    • Residual effects of disease or injury (like cancer, or its treatment)
    • The loss or loss of use of one arm, affecting one’s balance, and requiring the use of wheelchairs, canes, etc.
  • The loss or loss of use of both arms at or above the elbow

Starting in 2020, the grant is limited to $90,364 and can be used for the construction of an adapted home or the modification of an existing home to meet the adaptive needs of the veteran. The installation or construction of a wheelchair ramp is one example of a home modification for which this grant is commonly used.

Special Home Adaptation (SHA) Grant

The SHA Grant is used to assist veterans with the adaptation of their existing home to meet the needs of their disability. This includes mobility adaptations. You are eligible for this grant if you are:

  • 100%, permanently disabled with a service-connected disability related to blindness (vision not better than 5/200 with corrective lenses)
  • Suffering from the loss or loss of use of both hands or arms below the elbow

This grant differs slightly from the SAH grant in that it is specifically blindness related and that it covers those diabled vets who have injuries below the elbow. It is provided to assist veterans whose disabilities are not as severe as others. It has an $18,074 cap.

Temporary Residence Adaptation (TRA) Grant

If you are eligible for the SAH or SHA grants described above, but you do own or live in your own home, you can use a portion of the money from those grants to modify a family member’s home to fit the needs of your temporary shelter.

  • For the SAH grant, the TRA allowance is $39,669, meaning you can use almost $40k of your grant to modify the home where you’re living.
  • For the SHA grant, the TRA allowance is $7,083.

If you are living with a loved one who is taking care of you, these TRA grants can greatly assist with modifications that benefit the veteran and the caregiver.

Home Improvement & Structural Alterations (HISA) Grant

This HISA grant is available to veterans with service- and non-service connected disabilities. It is designed for home improvements that are needed to facilitate continued treatment or to improve access to the home and bathroom facilities. Examples are:

  • Roll-in showers
  • Lowering of sinks or counters
  • Improving entrances with ramping
  • Improving plumbing or electrical systems to accommodate medical equipment

The VA also makes it very clear that HISA will not pay for:

  • Walkways to exterior buildings (sheds, greenhouses, etc.)
  • Spas, hot tubs, or Jacuzzis
  • Exterior decking
  • New construction

A VA physician must indicate that you need improvements and/or structural alterations to your home that would appropriate effective treatment of your disability. For service-connected disabilities the lifetime cap of the grant is $6,800. It is $2,000 for veterans having non-service-connected disabilities.

Great! But how do I apply?

To take advantage of the SHA, SAH, or TRA housing grant benefits you deserve, you must login to the VA’s eBenefits website using a DS Logon basic or premium account. If you don’t have a DS Logon account, don’t worry. You can register for one on their site. To register for a housing grant online, you need to fill out an “Application in Acquiring Specially Adapted Housing or Special Home Adaptation Grant” (VA Form 26-4555). Make sure you have your Social Security number available as well as your VA file number or claim number.

If you wish to apply by mail, you can download the VA Form 26-4555 (PDF) and mail the application to the regional loan center nearest you. If you have issues downloading or printing out the form, call 1-800-827-1000, Monday thru Friday, from 8:00 a.m. to 9:00 p.m. EST, and ask to have a claim form mailed to you.

If you need assistance filling out your application, or you have questions regarding any portion of the application or application process, call an SAH staff member at 877-827-3702, or email them at sahinfo.vbaco@va.gov

For the HISA grant, it’s a little different. You HISA application package will include:

  • A prescription written or approved by a VA physician that includes:
    • Name, address, and telephone number of beneficiary
    • Identity of the improvement or structural alteration
    • Diagnosis and medical justification for improvement
  • A completed and signed VA Form 10-0103, the Veterans Application for Assistance
  • FOR RENTERS: a signed and notarized statement from the owner authorizing the improvement or structural alteration
  • A written and itemized estimate of the costs relating to labor, material, permits, and inspections for the project
  • A color photograph of the unimproved area

Please note that the VA may deem an inspection of the site is warranted before processing your application. They’ve also published a HISA Roadmap to visualize the steps of the application process.

Follow this link to read the PDF version of the VA’s Handbook for Design, that guides you through the process of adaptive housing projects.

(Photo by Waldemar Brandt on Unsplash)

 

>> 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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CARES Act and What It Means for Your VA Loan

Key Points for CARES Act and Your VA Loan

The Coronavirus Aid, Relief, and Economic Security (CARES) Act was signed into law by President Trump on March 27, 2020. Its purpose is to address the effect of the COVID-19 pandemic on the U.S. economy by “providing fast and direct economic assistance for American workers and families.” For most Americans, that has resulted in the receival of stimulus checks, additional unemployment payments, an extension to file taxes, and insurance coverage of virus-related treatments, to name a few. But for service members and veterans with a VA home loan, there are some additional benefits the CARES Act provides.

VA Loan Forbearance

Provisions within the CARES Act give VA (and other government-backed) loan borrowers the ability to request a special forbearance. If you are paying your mortgage with a VA loan, you are eligible to request either a delay in payments or the ability to pay only partial payments for a specified period of time. This specialized agreement is made between you and your loan servicer, not the VA, and can differ from person to person.

 

>> 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.

 

The Key Points for Borrowers with VA/Federally-Issued Loans

  • Borrowers have the right to request a forbearance for up to 180 days.
  • You have the right to request an extension of up to an additional 180 days before your first forbearance ends.
  • You MUST contact your loan servicer to request this – it does not apply automatically.
  • There are no additional fees, penalties, or interest added to your account, but regular interest will still accrue.
  • If approved and utilizing the CARES Act borrower relief, your lender cannot report you delinquent during the pandemic or for up to 120 days after.
  • You won’t need to submit additional documentation to qualify, but you will need to signify that this request is due to a COVID-related hardship

If you are struggling to make ends meet, this is an option that can provide you some relief.

For a visual summary, check out this video by Consumer Financial Protection Bureau.

 

RELATED: Moratorium Extended on Evictions & Foreclosures

 

A Few Additional Points to Keep in Mind

  • When you call, it’s possible you may be met with longer-than-normal wait times. There are many people in similar circumstances, and due to the virus impacting working numbers, your servicer could be under-staffed.
  • If you can keep up with your payments, you should continue doing so. Underreporting your income has the potential to result in foreclosure if a servicer determines you can’t afford your loan. Forbearance is not something to take advantage of simply because you don’t want to pay right now.
  • Putting your loan in forbearance does not change how much you owe. Make sure you ask how you are expected to pay back the amount owed once your ‘pause’ is lifted.
  • Entire unpaid amount in one lump sum immediately after the forbearance period ends?
  • Entire unpaid amount in one lump sum at the end of the loan term?
  • Will loan term be extended and missed payments added to the end of the mortgage?
  • Once un-paused, will monthly payments be higher for a specified period of time to make up missed amounts? In the case of VA loans, if you cannot afford higher monthly payments, you can request a loan modification. There are specific regulations with this, which you can read here or by reaching out to your lender.
  • Watch out for scams – always make sure you are dealing directly with your mortgage lender and not someone posing as them.

As with any situations of financial hardship, if you’re experiencing any difficulty in making your payments – even those not related to COVID-19 – you should always reach out to your lender right away.

 

>> 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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Is a VA Loan Right for You?

How to Determine if a VA Loan is Right for You?

VA loans are mortgage loans that are readily available for service members, veterans, and eligible surviving spouses. These loans are supported by the federal government and are provided by private lenders such as banks and mortgage companies. The VA guarantees a portion of the loan, enabling the lender to provide you with more favorable terms.  But how do you know if a VA loan is right for you?

 

>> 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.

 

There are many benefits of obtaining a loan through the VA such as no down payment, lower interest rates, and lenient standards for credit scores. Although there are many benefits, it may not always be the right choice. Before you continue with the VA loan process, it’s best to consider all of your options and goals that you have in mind.

Benefits of a VA Loan

Down Payment and Mortgage Insurance

Unlike conventional loans, the VA doesn’t require a down payment nor mortgage insurance. Conventional loans generally require a down payment which can be as low as 3%. Although this is low, if your down payment is less than 20%, mortgage loans require private mortgage insurance (PMI).  Since no down payment or mortgage insurance is necessary, you can save thousands of dollars with a VA loan.

Credit Score

There is no minimum credit score requirement by the VA. Instead, the VA requires a lender to review the entire loan profile. The private lenders who issue the loans may have their own minimum credit score which can range from 550-620. Usually, lenders are more lenient with their credit qualifications if the mortgage payment is reasonable compared to your total income.

Rates and Costs

VA loans tend to have lower interest rates and closing costs than conventional loans. The average VA loan rate is about 0.25% lower than conventional loans. The VA also sets limits on the amount lenders may charge for specific closing costs and fees which help to minimize costs.

Property and Improvements

You’re not limited to a single-family home and can purchase different types of property. These properties can include condominiums, a home of up to four units, or you can build a home. If you already have a home, the VA loan allows you to refinance your existing mortgage and make repairs or improvements.

Disadvantages of a VA Loan

Funding Fees

You can use your benefit more than once, however, you will be charged a funding fee. This is a fee that helps to offset the cost of the loans for U.S. taxpayers. It is due at the time of closing and changes depending on how many times you have used your benefit. Although it’s more of a minor disadvantage, the funding fee can go up to 3.6% the second time you use your loan.

Down Payment

If you have enough money for a 20% down payment, the VA loan may not be your best option. With this down payment, you can be exempt from the PMI on a conventional loan as well as avoid the funding fee that is required on all VA loans.

Investment Property

Those who are looking to purchase an investment property will not find this ideal. Although you can buy a multi-family unit of up to four units, one unit must be occupied by the veteran. VA loans are to be used on a home you are planning on living in and not for a purchase investment property.

Occupancy

The VA requires you to move into your new home within 60 days after closing. A spouse can satisfy the occupancy or if you are retiring then you have 12 months to move into your new home. If you do not meet these criteria and you don’t plan on moving into the residence any time soon, then it may be best to either wait or choose another option.

In order to receive a VA loan, you need to meet the requirements to be eligible. These requirements depend on your service history or status. To make sure you’re eligible, please visit the VA website.

 

>> 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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Best Practices for the VA Loan Process

VA Loan Best Practices

If you are an active service member, spouse, or dependent, the chances are great that you have heard of VA Loans. You may have even looked into them or read about them somewhere on the internet. Awhile back, we published an article explaining why you should consider using this fantastic military benefit to purchase your next home. Today, I’d like to offer some further insights into this benefit and offer you some VA Loan best practices when using this benefit that you’ve earned.

Determine Your Home Needs

It is important to understand first that not all vendors are equal when it comes to using your VA loan benefit. When looking for a vendor, first identify the type of home you are looking to buy or build. Some vendors specialize in the purchase of a condominium and do not deal with manufactured homes. Some vendors are willing to lend for new home builds, while others do not. So, identifying what you want is step one.

RELATED: Preparing to Purchase a Home as a Military Family

 

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

VA Loan Purchase, My Story

When we purchased our first home, a new build, in 2008, I used my VA loan through our bank, USAA. The process, while longer than we expected as first-time homebuyers, was pretty straight forward. We got a good rate and I think that was because USAA does a lot of business in home loans. They are a large and well established bank.

By contrast, we just purchased a home in northern Virginia a few months ago. Our first stop was USAA because we have a very long history of banking with them. While they gave us a rate better than the last one, we shopped around and found a local bank that was able to beat USAA’s rate. Because USAA was larger, they did not have the flexibility to match the rate of the smaller lender.

When you do find a vendor that suits your home buying needs, make sure you ask them how many VA loans they’ve processed and handled in the past. Some banks do not like to deal with VA loans because they feel the gateway to becoming a qualified buyer, i.e. your Certificate of Eligibility, is lower and therefore more risky. My wife and I have encountered that before.

The Realtor

An easy solution to this problem is using the right realtor. We’ve used realtors for both of our home purchases, and I can not tell you enough how valuable their expertise comes in, especially when dealing with lenders.

In our story above, where one of the lenders we contacted refused to work with VA loans, our realtor gave us a list of local lenders he had dealt with in the past that were friendly to the VA loan option. We were already approved by USAA, so shopping around was not going to hurt us.

It was one of the lenders from his list that we ultimately used to finance our home. We would not have considered them because they are a smaller financial institution from this area. It was a pleasant surprise to learn that they preferred the VA loans to other traditional finance options.

Need a Lender?

If you are looking for a lender, here are some that have a solid history working with the military community to maximize your VA loan benefit.

 

>> 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.

 

  1. USAA – I’ve mentioned above that USAA is our go-to financial institution for almost all of our banking needs. They have a streamlined process that allows you to get pre-approved online, and they assign you a loan officer that stays with you throughout the entire process. For VA loans, they offer a 15 and 30-year option, as well as a 30-year VA Jumbo loan for financing amounts larger than $510,400.
  2. Pentagon Federal Credit Union – This is another bank that is extremely popular within the military community, and for good reason. They also offer the standard 15/30-year VA loan, but they also highlight 15-year Fixed Rate Conforming loan, which offers a fixed-rate and 97% financing for first-time homebuyers. This loan adds the benefit of a faster payoff with predictable payments.
  3. Navy Federal Credit Union – I’m not a Navy guy, but I am impressed with this financial institution. Like the other two, Navy Federal offers both conventional and VA loans, but they specialize in VA loans. While VA loans do not require private mortgage insurance (PMI), Navy Federal makes that clear up front. They have a cool feature called Freedom Lock, which locks in your rate for 60 days. So, no matter what happens with the economy, your rate will not change at all during the buying process. Finally, if you need a realtor but don’t know how to find one, they offer a RealtyPlus program, which matches you to highly-rated realtors in your area; but, you must become a member.

Questions to Ask Your Lender

When working with your lender, make sure you ask questions about anything that confuses you. They want your business, so it serves them best to make sure you get your answers. Here are a few to start:

  • How many VA loans do you process compared to conventional loans?
  • Do I qualify for zero down?
  • Will you help me get my VA Certificate of Eligibility? (They’re supposed to help you with this if you need it.)
  • Am I exempt from the VA Funding Fee?
  • Do you match offers from other lenders?

 

The Best Banking Site

It is extremely easy to find VA lenders via the internet. A quick internet search for “VA Lenders” at the time of this writing brought back over 180 million results. However, that doesn’t mean they’re all the same. Don’t you wish there was a place you could go and find a collection of highly rated mortgage lenders, specific to your location? Well, there is.

In 1999, I was looking for information on financial products and I found Bankrate. Originally, I just needed help finding the best CD rates because I was a young, unmarried soldier, and I wanted to park my money in places that would net me a return.

The website has come a long way over the past twenty years, and one of its coolest features is the mortgage lender reviews. On this page, you can sort by state and they will display the highest rated mortgage lenders in your area. These ratings aren’t given by Bankrate, they are the opinions of customers. Using this tool may lead you to a lender, and ultimately into your new home!

Next Steps – VA Loan Best Practices

Okay, so let’s break this article down. Here’s what you need to do if you’re in the market for a home:

  1. Decide. What kind of home do you want, and where do you want it?
  2. Find a Realtor. We use realtor.com to find agents when we rent or buy.
  3. Get your Certificate of Eligibility. Log into the eBenefits site to apply.
  4. Secure lending. Knowing you’re pre approved for a home is a good feeling and can make the process so much easier. Many realtors can recommend lenders they’ve worked with, but if you want to compare rates, use Bankrate to shop around.  For a no-obligation, free consultation regarding your VA Loan eligibility, please go here.

It’s time to find your home! Happy hunting, and thank you for your service.

(Image courtesy of Merio from Pixabay)

 

>> 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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The VA Loan, A Military Benefit You Should Use

The VA Loan, A Military Benefit You Should Use

As a service member or veteran, you have a very important benefit you can use to help your family, the VA loan. The VA Home Loan program has been available for more than 75 years now. And can be a good way to get into a home of your own.

About the VA Loan

The VA Home Loan program started in 1944 as a part of the original Servicemen’s Readjustment Act. The goal of the VA loan was to level the playing field for those who served our country during WWII.

The loan can be used to buy, build, or refinance a home. It can save the veteran or service member a lot of money and allow them to purchase a home before they might otherwise be able to do so.

 

>> 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.

Finding a Good Realtor

It’s important with a VA loan that you find a good realtor that knows about VA loans and has worked with plenty of people who have had them in the past. You also want your lender to be comfortable with them too. Going with a realtor or lender with that knowledge as well as being familiar with military life means they can point out things in a house that could disqualify you from a VA loan as well as understanding your unique needs because of your military life.

No Down Payments

One of the benefits of a VA loan is that you don’t need to have a down payment. At least in most cases. As of January 1, 2020, the Blue Water Navy Vietnam Veterans Act of 2019 made changes so that there will no longer be loan limits.

VA Loan limits are the maximum amount of money you can borrow using a VA backed loan without having to pay a portion of the home’s total sale price upfront which is the down payment. The limit is not a cap on how much you can actually borrow. This change allows veterans and service members in higher-cost markets to buy the home of their choice, no matter the price, without needing a down payment.

There will however still be loan limits for those with more than one active VA loan, those who only have partial entitlement available, or those who have defaulted on a previous loan.

RELATED: Can I Use Crypto for a VA Loan Down Payment?

VA Funding Fee

There were also some changes with the VA Funding Fee as of January 1, 2020. For active duty service members, and veterans, it increased by .15%, making the total of the funding fee 2.3% of the loan. The funding fee will be higher for those on their 2nd or subsequent use of the benefit. You can roll this into your mortgage but in most cases will have to pay this fee.

If you make at least 5% of a down payment on your loan, your funding fee will be lowered to 1.65% and if you make at least 10% or more of one, it will be lowered to 1.4%. Veterans who receive VA compensation for a service-connected disability do not have to pay the funding fee. And, as of 2020, active duty service members who have received a Purple Heart can avoid the fee as long as they close on a home while they are still active duty.

Other VA Loan Tips

  • You won’t need to buy PMI (private mortgage insurance) even if you don’t have a down payment, or your down payment is less than 20% like you do with typical loans.
  • It is important to know what a VA loan is and what it isn’t. Know that the VA doesn’t make the loan. You would get your VA loan through a bank or financial lender. The VA guarantees the loan. You also need to meet different qualifications to get the loan and be able to afford the payments.
  • Your VA loan benefit doesn’t expire.
  • You can use your VA loan benefit multiple times.
  • Don’t be afraid to ask questions about your VA loan, before, and during the process.

The VA loan is a benefit you should use if you qualify for it. You can use it at your next duty station or on a forever home. The VA loan will allow you an easier path into homeownership.

 

>> 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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Military Benefits Changes for 2020

2020 Military Benefit Updates Changes

For the latest military benefit changes for 2022, please go here.

Changes announced so far.  Please keep checking back, as we will continue updating new changes to your military benefits for 2020.

TRICARE Drug Costs To Increase By Over 40%

Every year on January 1st, TRICARE has its regular cost increases. In 2020, we will see updates on prescription drug costs. According to an article on Military.com, we could see an increase of as much as 42%. This could be quite a change for some people.

As of January 1st, 2020, prices of all generic drugs, as well as the brand-name and non-formulary drugs that you purchase either through mail-order or at in-network, or at out-of-network pharmacies will increase. If you continue to get your prescriptions filled at on-base or on-post pharmacies, the cost will remain free and you will not see the increase.

These changes should be kept in mind if you are used to getting your prescriptions away from the on-base or on-post pharmacies.

2020 Rates for Vision and Retiree Dental Insurance

The rates for vision and retiree dental insurance will be increasing in 2020. If you are enrolled in FEDVIP, which is vision insurance for military dependents, retirees, and their families and dental insurance for retirees and their families, you will need to decide if you will change plans or stick with what you have based on the new 2020 rates.

Dental premiums will increase by 5.6% on average over current rates, with vision premiums increasing by 1.5% on average, according to TRICARE. The Federal Benefits Open Season begins on November 11th and ends December 9th. If you want to change your plan, you must do so during open season or following a FEDVIP qualifying life event. You can use the FEDVIP plan comparison tool to see what these changes mean for you and if you should choose another plan. In 2020, FEDVIP will offer 10 dental and 4 vision carriers you can choose from.

COLA Increases

COLA will have an increase of 1.6% in 2020 which is lower than the 2019 increase of 2.8%. COLA increases are based on the increase in the CPI-W, from the 3rd quarter of 2018 through the third quarter of 2019. Increases can change year to year. The last few years have seen, 0.0% in 2016, .3% in 2017, 2.0% in 2018, and 2.8% in 2019. Military retirees, those who receive disability payments, or other benefits from the Department of Veterans Affairs, federal retirees, as well as Social Security recipients will all see the 1.6% increase in their monthly payments.

Retirement Pay

When it comes to retirement pay, it is important to keep in mind that since the increase for the year is calculated differently than active duty pay, the raises can seem a little different based on the year. Based on the 1.6% increase, in 2020 you would receive $16 for every $1,000 in government benefits you receive. If a veteran is receiving around $2,000 a month as retirement pay, they would see an increase of $32 a month.

A veteran who entered military service after July 31, 1986, has had the option of going with the “Career Status Bonus” or (CSB)/REDUX instead of the “High 3-year average” option with regards to retirement pay. This means that they would have received $30,000 during their 15th year of service and will see a reduced retirement rate until they are 62 years old. This also means that their COLA increase is reduced by 1%, which would change the amount of the increase they would see in 2020.

VA Disability

VA Disability payments would also increase in 2020. A veteran with a 60% rating would see about an $18 a month increase, while a veteran with a 100% rating would see a $49 a month increase. The amount they would receive depends on their rating as well as their veteran dependent status. The rate for 2020 would be 1.6% and is based on COLA rates. Rates are effective as of December 1st, 2019.

Social Security Payments

Beyond veteran payments are social security payments. According to the Social Security Administration, the average monthly Social Security benefit in June 2019 was $1,471 for the retired worker. Based on this, the average beneficiary would see an increase of $24 in 2020.

3.1% Military Pay Increase

In March of this year, the White House proposed a 3.1% pay increase for service members to take place on January 1, 2020. Both the House and Senate approved the 3.1% pay raise. For junior enlisted, this would be an increase of almost $1,000 a year and up from 2.6% in 2019, and 2.4% in 2018.

The main guideline for determining military pay raises comes from the quarterly report of the US Employment Cost Index (ECI) which is put out by the Bureau of Labor Statistics (BLS).

The fiscal 2020 NDAA passed and the 3.1% raise will take effect as of Jan 1, 2020.

RELATED: Military Pay Charts

BAH 2020 Rates

BAH is the Basic Allowance for Housing. The 2020 BAH rates have been posted and the DOD’s BAH calculator has been updated. You can use this to find out how much you will be bringing home for BAH in 2020. Remember, if your rate goes down you are grandfathered into the old rate unless you move or change rank.

BAH is based on your rank, dependent status, and geographic location. BAH is intended to cover 95% of your housing costs. This % can change each year and was 99% just a few years ago. They did not change this from last year. Your rates are based on your duty station zip code.

Your new BAH rate will go into effect on January 1st and you will see it in your January 15, 2020 paycheck.

The proposed BAH increase is 2.9% for this year and will need to be approved by Congress and the President. That being said, individual rates are based on the cost of living in your exact location. In 2018, the proposed rate was also 2.9% and 2.55% was approved. In 2018, it was .7%.

BAS 2020 Rates

BAS (Basic Allowance for Subsistence) has a proposed increase of 2.4% for 2020. This is a change from the 3.4% that is normally proposed. Rates have not changed all that much in the last few years since they are based on the cost of food.

The BAS Rates for 2020 should be:

Enlisted: $372.71 per month

Officers: $256.68 per month

BAS is meant to be used to pay for food for enlisted and officers. It is only intended to help pay for food, not to cover all the costs. The rate also does not change based on dependents because the money is not meant to cover food for family members.

The increase will take place on January 1st and you will see it on your January 15th, 2020 paychecks.

We will update as more 2020 military benefits changes are announced!

 

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No More VA Loan Limits In 2020

Starting on January 1st, 2020, there will be changes to the VA loan limits. Because of the Blue Water Navy Vietnam Veterans Act of 2019, VA loan limits will be eliminated and VA loan fees will rise. This new law was signed into law by President Trump earlier this year.

This bill has been a decades-long fight so that certain veterans can receive health care benefits for diseases related to Agent Orange exposure. The changes with the VA loan will help finance these benefits.

What Are VA Loan Limits?

VA loan limits are the maximum amount that the VA can guarantee without the borrower having to put anything down as a down payment. The limits have been based on the Federal Housing Finance Agency On Conforming Loans.

In 2019, the limit for most average counties was $484,350 with being as high as $726,525 in high priced areas. The limits are not a cap on the price of a home you can buy, but if you go over the limits, you would have to pay a down payment. That would be 25% of the difference between the county loan limit and the loan amount.

 

>> 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.

 

VA Loan Limits 2020 Changes

After this change in 2020, borrowers would still need to have enough income to qualify for the price of the home and meet their lender’s credit requirements. Lenders might also have their own limits.

In addition, loan limits will still apply for those who have more than one active VA loan or those who have defaulted on a previous loan. So basically, just because there will be no VA loan limits, that doesn’t mean you can get whatever amount loan you want to get. 

VA Loan Funding Fees To Go Up

With the VA funding fee, a borrower can either pay that out of pocket or roll the amount into the loan. The fees for first-use, zero down payment loans will be 2.3% of the loan in 2020, up from 2.15% in 2019. Fees for subsequent-use loans will be up to 3.6% from 3.3% in 2019. These fees will stay the same for two years until 2022 when they will go back down to current levels.

VA Funding Fees To Remain Same for Some

Also, in 2020, VA funding fees will be the same for regular military, the National Guard and the Reserves. Previously, they have been higher for the National Guard and the Reserves. Active duty with Purple Hearts will also be exempt from the funding fee.

Currently, veterans receiving VA compensation for a service-connected disability, or veterans who would be entitled to receive compensation for a service-connected disability if they did not receive retirement or active duty pay, or a surviving spouse of a veteran who died in service or from a service-connected disability do not have to pay the funding fee.

The VA loan was created in the 1940s and this change in 2020 will allow more veterans to buy a home without needing a down payment, regardless of the price of the home.

 

>> 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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VA Loan Requirements: What You Need to Know

Requirements for VA Loan Borrowers

When it comes to buying a home, many military families use a VA loan, which is one of the benefits of serving in the US Armed Forces . This type of loan can save a lot of money and can allow families to buy their own home before they would otherwise be able to do so.

VA Loan Uses

You can use the VA loan to:

  • Buy a home
  • Buy a condo unit in a VA approved project
  • Build a home
  • Simultaneously purchase and improve your home
  • Improve your home by installing energy related features or make energy efficient improvements
  • Buy a manufactured home and or lot
  • Refinance an existing VA guaranteed or direct loan for the purpose of a lower interest-rate
  • Refinance an existing mortgage loan or indebtedness secured by a lien of record on a residence owned and occupied by the veteran

VA Loan Requirements

With the VA loan you will need to have a an independent VA appraiser come and look at the residence. The VA will need to approve your house before the loan can go through. Safety, sanitation, and structural integrity is important and there are minimum property requirements that need to be abided by in order for your loan to be approved. The MPR’s help and insure that the property is constructed according to building codes and federal regulations as well as HUD requirements.

Well this might seem like an extra step in the process or a frustration but it is in the best interest of those buying the residence with their VA loan so that they do not end up in a home that has too many issues or that is unsafe for them to live in.

 

>> 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.

 

So what does a home need in order to be approved by the VA? Here are some MPRs VA appraisers look for:

VA Loan Minimum Property Requirements

  • Properties must be single, readily marketable real estate. If there is non-residential use of the property it must be subordinate to it’s residential use and character. The non-residential use can not impair the residential character of the property, and cannot exceed 25% of the total floor area. In making this calculation, the total non-residential area must include storage areas or similar spaces that are integral parts of the non-residential portion.
  • Space requirements-There must be enough space for suitable living, sleeping, cooking and dining accommodations, and sanitary facilities.

RELATED: VA Loan Limits

Mechanical Systems

Mechanical systems must be safe to operate, be protected from destructive elements, have a reasonable future utility, durability and economy and, have adequate capacity and quality.

Heating

  • The home must be able to stay warm so that you can live comfortably. You may have a wood-burning stove as your primary heating source but you also need to have a conventional heating system installed that can maintain a temperature of at least 50°F.
  • If the home has a solar system for domestic water heating and or space heating it must meet certain standards and be backed up 100% with a conventional thermal energy sub system or another backup system which will provide the same degree of readability and performance as a conventional system.
  • If you do live in a climate that does not get very cold, the VA can determine that you don’t have to abide by these exact conditions.

Water Supply and Sanitary Facilities

Each unit must have domestic hot water, a continuing supply of safe and potable water for drinking and other household uses, and sanitary facilities and a safe method of sewage disposal. There are extra requirements regarding individual water supplies and individual sewage disposal systems.

The Roof

The roof must not leak and provide reasonable future utility, durability, and economy of maintenance. If a defective roof with three or more shingles must be replaced, all old shingles must first be removed.

The Crawl Space

The crawlspace must have adequate access, be clear of all debris, and be properly vented. The floor joints must be sufficiently above the highest level of the ground to provide access for maintenance and repair of ductwork and plumbing. If there is any excessive dampness or ponding of water in the crawlspace it must be corrected.

Ventilation

Attics and crawl spaces must be adequately ventilated to reduce the effects of excess heat and moisture.

Electricity

There must be electricity for lighting and necessary equipment.

Shared Facilities and Utilities

  • If you have laundry and storage space or heating areas in two-to-four living unit buildings, they can be shared under a single mortgage. Utility services must be independent for each living unit. However, there are exceptions to this such as living units under a single mortgage or ownership may share water, sewer, gas, or electricity as long as there are separate service shut offs for each unit. Living units under separate ownership may share connections from the main to the building line when those connections are protected by easement or covenant, and have a maintenance agreement acceptable to the VA.
  • Individual utilities serving one living unit shall not pass over, under, or through another living space unless there’s a legal provision to do so.

Access to Property, Living Unit, Rear Yard, and Exterior Wall Maintenance

  • There must be a safe and adequate pedestrian or vehicular access from a public or private street. The private street must be protected by a permanent easement, and maintained by the homeowners association or joint maintenance agreement. All streets must have an all weather service.
  • There must be access to the living unit without having to pass through any other living unit. Each living unit must be able to be used and maintained individually without trespassing through joining properties.
  • There must be access to the rear yard without passing through any other living unit. If there is a situation of a row type dwelling then access must be made by means of an alley, easement, passage through the subjects dwelling, or other acceptable means.
  • There must be adequate space between buildings to permit maintenance of the exterior walls.

Hazards and Defective Conditions

  • The property must be free of hazards which may adversely affect the health and safety of the occupants, adversely affect the structural soundness of the dwelling and other improvements to the property, or impair the customary use and enjoyment of the property by the occupants.
  • There are conditions which impair safety, sanitation, or structural soundness of the dwelling unit. These conditions will cause the property to be unacceptable until they are fixed. They are but not limited to, defective construction, poor workmanship, evidence of continuing settlement, excessive dampness, leakage,decay, and termites.
  • There must be proper drainage away from the perimeter walls of the dwelling and drainage that prevents ponding of water on the sight. Appraisers will also look for and report any evidence of wood destroying insects, fungus growth, and dry rot in addition to any VA requirements for an inspection of the property by a wood destroying insect inspector.

Lead Based Paint

There cannot be any lead based paint on any interior or exterior walls at the property, and if there is it will need to be corrected. Appraisers will assume that any defective paint condition on a property that was built before 1978 will involve lead based paint.

Party Walls

A building that is constructed to the property line must be separated from the adjoining building by a wall extending the full height of the building from the foundation to the roof. The wall may separate row type townhouses or semi detached units.

Gas and Petroleum Pipelines

The residential structure cannot be located within a high-pressure gas or liquid petroleum pipeline easement. This includes being partially in the easement as well.  There are special conditions for property close to the easement.

High-Voltage Electric Transmission Lines

No part of the residential structure may be located within a high-voltage electric transmission line easement to include partially being in the line easement.

Water and Sewage

  • There must be a connection to a public or community water/sewage disposal system when feasible and the water quality must meet the requirements of the health authority that has jurisdiction or the maximum levels that are established by the EPA if there is not.
  • Water treatment systems are not acceptable for wells which do not meet the VA quality standards do to insignificant depth or a contamination source near the supply. There are certain circumstances where the property can be eligible for a VA loan if the lender provide certain documents.
  • Shared wells can be allowed under certain requirements.
  • Springs or cisterns are permitted where such facilities are customary and the only visible means of water supply as long as they are installed in accordance with the recommendations of the local health authority and the veteran puts in writing his or her awareness of the situation. If the local health authority has no requirements then US public health service requirements apply.
  • Sewage Disposal system-All domestic waste must be disposed of in a manner which will not create a nuisance or in anyway in danger the public health. Individual pit privies are permitted where such facilities are customary and the only visible waste disposal option provided they are installed in accordance with the recommendations of the local health authority or the US public health service requirements if there is no local health authority.

Manufactured Homes

If a manufactured home has a fully completed foundation and the manufactured home unit has been installed, the home would be considered existing construction. The site, the manufactured home unit, and other on-site improvements must meet the VA MPR’s requirements for existing structures. The manufactured home unit must be properly attached to a permanent foundation system which is constructed to withstand both supporting loads and wide overturning loads and be acceptable to the building authority that has jurisdiction.

If the foundation for the manufactured home has not been fully completed and the unit has not been installed, the home is considered to be proposed or under construction. The site and on-site improvements but not the unit must meet requirements. The manufactured home unit must be properly attached to a permanent foundation system which is constructed to withstand both supporting loads and wide overturning loads and be acceptable to the building authority that has jurisdiction.

If you would like to start the process of looking for a home with your VA loan one of the best things you can do is find a realtor that has plenty of experience with VA loans. That way, when you were out looking at homes, they will be able to tell you what may pass and what might not pass when it comes to VA approval. Having someone that knows ahead of time what to look for will save you a lot of trouble as you start your home search.

Keep in mind that having a VA appraiser is different then a home inspection and that you should also pay for your own home inspection. That way, you know exactly what is going on with the home and repairs can be done before you move in.

 

>> 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.

 

RELATED:

 

 

VA Loan Limits 2019

2019 VA Loan Limits

One of the benefits of serving in the US Armed Forces is the ability to get a VA loan in order to buy your own home.  There is no cap on how much you can borrow to finance your home with the VA.  However, there are limits on the amount of liability that the VA will assume.  This is why there are limits on how much you can borrow. The VA loan limits are the amount a qualified veteran with full entitlement may be able to borrow without making a downpayment.

LATEST: VA Loan Limits

The loan limits do vary by county, because the value of homes is different based on where you are.

About the VA Loan

The VA loan was created in 1944, part of the original Servicemen’s Readjustment Act known as the GI Bill of Rights. It allowed members of the military, coming home from World War II, a chance to buy their own home as still does today.

There are some stipulations when it comes to the VA loan. Your property has to pass a VA inspection and their are loan limits. Here is what you need to know about how much of a VA loan you can get.

 

>> 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.

 

About The VA Loan Benefit

The VA’s 2019 loan limits are the same as the Federal Housing Finance Agency’s limits. You can find the full list of 2019 limits on the Federal Housing Finance Agency website but here are some examples.

For many states, and parts of states, the VA loan limit for a one-unit (which is the column that is used for determining VA guaranty) would be $484,350. For states such as Hawaii, Alaska, and parts of CA, as well as other high cost areas, the amounts are higher, even up to $726,525. Learning about what the limit is for where you want to buy your home is important but the limits should line up and allow you to buy the home that you want within reason, even in high cost areas.

Can You Use the VA Loan More than Once?

If a veteran has used a VA loan and has not met the limit, they still might have remaining entitlement to use for another VA loan. Most lenders will require that the combination of the guaranty entitlement and any cash down payment be equal to at least 25% of the reasonable value or sales price of the property, whichever is less. If a borrower needs to, they can combine a down payment with the remaining entitlement in order to get a larger loan amount.

VA loan limits can be updated each year so make sure you are checking the 2019 VA loan limits when doing your research.

For many states, and parts of states, the VA loan limit for a one-unit (which is the column that is used for determining VA guaranty) would be $484,350. High Cost Area Amounts can vary with $726,525 being the maximum. Here are the locations and those amounts.

VA Loan Limits 2019

The VA Loan Limit for 2019 is $484,350.  This applies to all states/counties not listed below.  Those appearing below are an exception to the limit where real estate prices are higher on average.

VA Loan Limits for High Cost Counties

StateCountyVA Loan Limit
AlaskaAll of Alaska$726,525
CaliforniaAlameda$726,525
Contra Costa$726,525
El Dorado$552,000
Los Angeles$726,525
Marin$726,525
Mono$529,000
Monterey$652,050
Napa$726,525
Nevada$486,450
Orange$726,525
Placer$552,000
Placer$552,000
Sacramento$552,000
San Benito$726,525
San Diego$690,000
San Francisco$726,525
San Luis Obispo$667,000
San Mateo$726,525
Santa Barbara$625,500
Santa Clara$726,525
Santa Cruz$726,525
Solano$494,500
Sonoma$704,950
Ventura$713,000
ColoradoAdams$561,200
Arapahoe$561,200
Boulder$626,750
Broomfield$561,200
Clear Creek$561,200
Denver$561,200
Douglas$561,200
Eagle$696,900
Elbert$561,200
Garfield$718,750
Gilpin$561,200
Jefferson$561,200
Lake$625,500
Park$561,200
Pitkin$718,750
Routt$625,500
San Miguel$625,500
Summit$625,500
ConnecticutFairfield$601,450
District of ColumbiaWashington, DC$726,525
FloridaMonroe$529,000
GeorgiaGreene$515,200
GuamGuam$726,525
HawaiiAll of HI$726,525
IdahoBlaine$625,500
Camas$625,500
Lincoln$625,500
Teton$726,525
MarylandAnne Arundel$517,500
Baltimore$517,500
Baltimore City$517,500
Calvert$726,525
Carroll$517,500
Charles$726,525
Frederick$726,525
Harford$517,500
Howard$517,500
Montgomery$726,525
Prince George's$726,525
Queen Anne's$517,500
MassachusettsDukes$726,525
Essex$688,850
Middlesex$688,850
Nantucket$726,525
Norfolk$688,850
Plymouth$688,850
Suffolk$688,850
New HampshireRockingham$668,850
Strafford$668,850
New JerseyBergen$726,525
Essex$726,525
Hudson$726,525
Hunterdon$726,525
Middlesex$726,525
Monmouth$726,525
Morris$726,525
Ocean$726,525
Passaic$726,525
Somerset$726,525
Sussex$726,525
Union$726,525
New YorkBronx$726,525
Dutchess$726,525
Kings$726,525
Nassau$726,525
New York$726,525
Orange$726,525
Putnam$726,525
Queens$726,525
Richmond$726,525
Rockland$726,525
Suffolk$726,525
Westchester$726,525
North CarolinaCamden$625,500
Pasquotank$625,500
Perquimans$625,500
Northern Mariana IslandsNorthern Island$524,400
Saipan$529,000
Tinian$532,450
PennsylvaniaPike$726,525
TennesseeCannon$534,750
Cheatham$534,750
Davidson$534,750
Dickson$534,750
Hickman$534,750
Macon$534,750
Maury$534,750
Robertson$534,750
Rutherford$534,750
Smith$534,750
Trousdale$534,750
Williamson$534,750
Wilson$534,750
UtahSalt Lake$600,300
Summit$726,525
Tooele$600,300
Virgin IslandsSt. Croix$726,525
St. John$726,525
St. Thomas$726,525
VirginaAlexandria$725,525
Amelia$535,900
Arlington$725,525
Caroline$535,900
Charles City$535,900
Chesterfield$535,900
Clarke$725,525
Colonail Heights$535,900
Culpeper$725,525
Cumberland$535,900
Dinwiddie$535,900
Fairfax$725,525
Fairfax IND$725,525
Falls Church$725,525
Fauquier$725,525
Fredericksburg$725,525
Goochland$535,900
Hanover$535,900
Henrico$535,900
Hopewell$535,900
King and Queen$535,900
King William$535,900
Loudoun$725,525
Louisa$535,900
Manassas$725,525
Manassas Park$725,525
New Kent$535,900
Petersburg$535,900
Powhatan$535,900
Prince George$535,900
Prince William$725,525
Rappahannock$725,525
Richmond IND$535,900
Spotsylvania$725,525
Stafford$725,525
Sussex$535,900
Warren$725,525
WashingtonKing$726,525
Pierce$726,525
Snohomish$726,525
West VirginiaJefferson$726,525
WyomingTeton$726,525

 

>> 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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