Without the need for entry, flexible credit guidelines and cost limits and closing rates, the VA home loan is a popular financing option for veterans and active duty members, including National Guard members.
But in the past, Guard troops were just eligible for the VA loan after six years of honorable service, after 90 consecutive days of service, or after being released from service due to a service-related disability.
New legislation enacted in January – the Johnny Isakson and David P. Roe, M.D. – expands eligibility for members of the Guard and reduces required days of service. This means that tens of thousands of members of the Guard, including many who have performed functions related to COVID-19 emergencies, will qualify for VA-backed mortgages, according to John Goheen, director of communications for the United States National Guard Association in Washington, DC
“It was clear that there was a gap between the benefits we offer to active personnel and the benefits we offer to Guard personnel,” said Goheen. “Congress has recognized this gap and is trying to correct it.”
In addition to the COVID-19 response, the new law makes it possible to qualify for VA loans based on other missions on U.S. soil, he said. To qualify, the Title 32 duty must have been performed in accordance with Section 316, 502, 503, 504 or 505, and the Guard member must also have completed a minimum of 90 days of service, including 30 consecutive days.
“We have not deployed so many people abroad at the same pace as a few years ago,” said Goheen. “As a result, many Guard soldiers were unable to qualify for a VA loan. Clearly, this new law is a reward for those who responded to the COVID-19 missions, as well as last summer’s civil unrest and the Capitol mission in January. “
The new law is retroactive, meaning that members of the Guard who served years ago but meet the new criteria can now take advantage of the VA loan, said Chris Birk, vice president of Columbia, Missouri. Veterans United Home Loans.
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“For decades, there has been no early access to the benefit for members of the Guard deployed under Title 32 orders, which are common during major disasters and other emergencies at the state level,” said Birk. “Now, tens of thousands of Guard members helping on the front line of the pandemic are likely to gain eligibility for the VA loan much sooner.”
Ryan Leahy, internal sales manager for the Mortgage Network in Danvers, Massachusetts, said that a VA loan is among the sweetest perks offered to active veterinarians and military personnel.
“A lender typically requires 20% down payment to avoid mortgage insurance, but that is not the case with the VA loan, which is really a cashless mortgage,” said Leahy.
On the other hand, FHA and conventional loans require at least 3.5% to 5% down payment, and borrowers on both loans typically have to pay for mortgage insurance. For a conventional loan, that is, a mortgage qualified to be supported by Fannie Mae and Freddie Mac, a buyer usually needs to pay 20% to not pay for mortgage insurance.
VA loans tend to be more tolerant of the approval process, interest rates are competitive and VA limits the closing costs that can be charged on a VA loan, making it much more affordable, said Leahy.
A disadvantage of a VA loan is that the government evaluates it only once financing rate this is equivalent to 0.5% to 3.6% of the loaned amount, a fee that is usually financed back to the loan amount.
“Another disadvantage is that, in a competitive buying market like the one we have now, it can be more difficult to get an offer accepted with a VA mortgage,” said Leahy.
Per Birk, of Veterans United, more than 1,200 lenders – including banks, mortgage companies and credit unions – made at least one VA loan last year, but only a handful of lenders specialize in these loans. He recommends shopping carefully and choosing a lender with experience in VA loans.
Also, remember that a VA loan is not your only option.
“Given current interest rates, I would suggest that any borrower, including members of the National Guard, do their homework and look for the best mortgage loan available,” said Anne Anderson, professor of finance at Middle Tennessee State University in Murfreesboro . “Many banks and lenders offer VA loans, but they may actually have other loan packages that provide benefits comparable to borrowers.”
Erik J. Martin is a writer for Three Creeks Media.
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