Largest Retiree & Veteran COLA Increase In Decades Approved

Overlooked state financial benefits veterans

A major increase in the federal Cost of Living Allowance (COLA) is coming in 2023. The Social Security Administration adjusts government retirement and disability payments each year to account for increases in the cost of living due to inflation. That means both civilian and military retirement and disability pay, so veterans are due for the biggest increase in their checks since the 1980s. Other payments affected by this increase include Social Security.

Who Else Benefits from COLA Increases In 2023?

Military retirees and VA beneficiaries will enjoy higher COLA in 2023 along with Social Security beneficiaries and Civil Service retirees. For both there could be as much as $140 per month in COLA in typical cases.

COLA Increases for Retirees and Veterans by the Numbers

Those who draw military retirement pay or VA compensation for service-connected medical conditions will see their monthly payments increase by 8.7% in 2023. The increase is meant to offset inflation, and it’s the largest increase since 1981 when the COLA increase topped 11%.

How significant is the COLA increase? Compared to the last two years, you can see for yourself:

  • 2021 COLA Increase: 1.3%
  • 2022 COLA Increase: 5.9%

Annually, the increase averages out to 1.9% over the last decade.

What Does the COLA Increase Mean In Dollars and Cents?

For 2023, retired military members may collect an additional $87 per each $1000 of retirement pay for a given month. But not all retirees and veterans drawing disability pay will see the same increases. Why?

Some entered the military in an era when a retirement program called CSB/REDUX was an option. Those who opted into this program (offered from 1986 onward) will have a smaller COLA increase as part of that plan. These veterans will get $77 per $1000 when the new COLA payments begin in 2023.

Retirement Pay / VA Disability Pay Offset Issues

Military retirees who have VA disability ratings may have choices to make when it comes to cost-of-living adjustments. A veteran who draws both VA disability compensation (at 40% or lower) and military retirement pay can only get ONE cost of living adjustment, which is applied to either the disability pay or retirement monthly payment.

The thing making it harder to choose which to apply COLA to? Retirement pay is taxable, but VA disability pay is not. Deciding which to apply the cost of living adjustment is a personal matter, but it pays to compare the numbers before making a decision.

VA Disability Pay COLA Increases 

Disabled veterans will see higher COLA payments in 2023, but the numbers aren’t as impressive as for retirement pay. The same percentages apply; an 8.7% increase in pay means someone with a VA disability rating at 10% will see their checks increase by roughly $13 per month for a 10% disability rating. Those rated at 100% disabled will see a COLA increase of approximately $289 per month.

How Are COLA Adjustments Calculated?

The annual Cost Of Living Adjustment is calculated using something called the Consumer Price Index which measures the cost of living including what it currently takes to purchase goods. This information is compared to the same data gathered the year prior and if there is an increase in those costs, COLA goes up. COLA cannot be revised downward. In years where there is an actual decrease in the cost of goods and services, there simply is no COLA adjustment.

 

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Senate Addresses Coast Guard Pay and Benefits Issues

2022 Coast Guard Authorization Act Introduced by Senate Committee

New legislation proposed by the Senate could change some important benefits for members of the Coast Guard, and may also include eliminating the question of whether Coast Guard troops will get paid during federal government shutdowns.  The new legislation is referred to as the Coast Guard Authorization Act of 2022.

What prevents the United States Coast Guard from being paid during federal budget standoffs? In 2019, Coast Guard members endured a month without pay due to a government shutdown. Why was the pay–and the government shut down– for such a long time?

Because of partisan bickering over the National Defense Authorization Act that year. An agreement on the federal budget could not be reached, the deadline for making funding arrangements for the federal government came and went, and the government shut down in 2019 as a result.

That meant the Coast Guard didn’t get paid until the budget was approved and signed into law. As a result, many were forced to deal with financial setbacks, food insecurity, and worse. But why?

The Coast Guard: Not a Department of Defense Agency

The United States Coast Guard does not fall under the Department of Defense. It is under the jurisdiction of the Department of Homeland Security, so any government shutdown rules that affect DHS also affect the U.S. Coast Guard.

The Senate Committee on Commerce, Science, and Transportation has introduced the 2022 Coast Guard Authorization Act, which features measures that would reach into the following year. Part of that act is a requirement for the Treasury Department to ensure Coast Guard members would continue to be paid during federal funding shutdowns, unlike what happened in 2019.

But that isn’t the only quality of life issue the Act addresses.

This bill seeks to expand the Coast Guard’s child care subsidy program which helps families offset the cost of private child care; there is also language in the bill that would add a new “behavioral health policy”, to help provide care for Coast Guard members with post-traumatic stress disorder.

Coast Guard Parental Rights

The bill also permits Coast Guard Academy cadets to keep their commission and graduate while maintaining their parental rights. Under previous guidance, those attending military service academies operated by the Department of Defense had to resign if they became pregnant.

They were also sometimes required to repay the school for their education, or take a leave of absence followed by a requirement to surrender parental rights in order to return to the service academy.

If that sounds harsh to you, you are not alone. The authors of the 2022 National Defense Authorization Act included rules for new DoD policy in that area–cadets and midshipmen are now permitted to have children and don’t have to sign their rights away; the Coast Guard Authorization Act would add similar policy alterations and requirements.

Other Issues

Other provisions include enhanced Coast Guard oversight over sexual assault and harassment in the maritime industry in general; and expanded protections for marine mammals. But one of the big issues in the Act has to do with expanding diversity within the Coast Guard.

Under the bill, the Coast Guard would not expand its roster beyond its’ current 44 thousand-plus active-duty members but would require steps to improve diversity within the service. The act as written requires a minimum of one Junior Reserve Officer Training Corps (JROTC) operation in all 17 Coast Guard districts. There is also a requirement to develop a 10-year diversity plan to increase representation among women and underrepresented groups in the ranks.

The Coast Guard Authorization Act passed the Senate unanimously. At press time, it must pass a House vote in order to be sent to the President’s desk.

 

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Who Is Eligible for Servicemembers’ Group Life Insurance (SGLI)?

SGLI is an acronym that stands for Servicemembers’ Group Life Insurance. This insurance is a low-cost insurance option provided by the Department of Veterans Affairs.

The federal government purchases group life insurance from “a commercial life insurance company” according to the VA official site. Service members can choose coverage in $50 thousand increments with a maximum benefit of $400 thousand payable to the beneficiaries the servicemember specifies at signup time.

Is SGLI Free?

No, SGLI is NOT free. It is offered at a low cost. The VA official site reminds us, “if you have SGLI coverage, you’ll pay a monthly premium that’ll be automatically taken out of your base pay.” How much? In 2022 the “basic” SGLI premium was charged at a rate of six cents per $1,000 of coverage plus an additional one dollar per month for additional Traumatic Injury Coverage.

In 2022, those who elected the maximum SGLI coverage of $400,000 paid $25 per month. These numbers are always subject to change, and the 2022 amounts are provided as a reference only. Check with the VA for the most current rates and terms.

Who is eligible for Servicemembers’ Group Life Insurance (SGLI)?

SGLI is offered to the service member only. Family members are not eligible for this coverage. To qualify for SGLI as a service member, you must serve in one of the following ways:

  • As a commissioned, warrant, or enlisted member of the Army, Navy, Air Force, Space Force, Marine Corps, or Coast Guard
  • As a commissioned member of the National Oceanic and Atmospheric Administration and the U.S. Public Health Service
  • As a Cadet or midshipman at one of four United States Service Academies
  • As a Ready Reservists scheduled to perform at least 12 periods of inactive training per year
  • As part of the Individual Ready Reserve as a volunteer for assignment to a mobilization category
  • Part-time coverage is available for qualifying Reserve or ROTC members “who do not qualify for full-time coverage” according to the VA official site.

How To Sign Up For SGLI

The headline above is disingenuous; when you enlist or accept a commission you are automatically enrolled in SGLI for the maximum amount ($400 thousand) unless you choose to reduce the amount of coverage or decline it altogether. If you previously declined or reduced coverage but later changed your mind, you will need to visit the SGLI Online Enrollment System available via Milconnect. Select the Benefits tab and choose Life Insurance. You will need to complete  Form SGLV 8286, Servicemembers’ Group Life Insurance Election and Certificate.

Making An SGLI Claim

No one wants to think about the need to make an SGLI claim, but in the event that a policyholder dies or is the victim of a traumatic injury, there are forms that should be completed and submitted in order for the family to make a claim depending on the circumstances of that claim:

  • To receive advance SLGI payments for a terminally ill service member: the family should file an  SGLV 8284, Claim for Accelerated Benefits.
  • To receive an insurance payment after a service member has died, a family member Should file an SGLV 8283, Claim for Death Benefits.
  • To help a service member get short-term financial support while recovering from a traumatic injury, a family member and the service member would file  SGLV 8600, Application for TSGLI Benefits.

SGLI After Military Service Ends?

You cannot continue to carry SGLI after retiring or separating except under specific circumstances. There is an opinion to convert SGLI to a different type of life insurance policy which we will cover below, but what about the exceptions?

For those who have a qualifying disability, an extension of SGLI for up to two years after military service may be possible. This extension is not automatic and must be applied for. At least one of the below must apply:

  • You’re totally disabled at the time of your discharge;
  • You have experienced a total loss of hearing in both ears
  • You have experienced a loss of speech that leaves you unable to talk without the help of an artificial device
  • You have experienced a long-lasting loss of use of both of your hands, feet, or eyes, or one hand and one foot, or one hand or foot and one eye

At least one of the above must apply to qualify for an SGLI extension. Otherwise, servicemembers have two choices when they retire or separate. SGLI coverage may be converted to Veterans Group Life Insurance (VGLI) or choose to take on a different insurance option with a participating life insurance provider.

Contact the Office of Servicemembers’ Group Life Insurance (OSGLI) for additional information: 1-800-419-1473 (inside the U.S.)  or 973-548-5699 (overseas)

 

Military Allowances Guide

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

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

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

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

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

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

Cost Of Living Allowance

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

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

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

Military Clothing Allowance

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

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

Cash Clothing Replacement Allowance And Extra Clothing Allowance

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

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

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

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

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

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

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

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

Basic Allowance For Subsistence

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

BAS Is For The Servicemember

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

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

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

BAS II

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

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

Dislocation Allowance

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

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

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

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

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

Family Separation Allowance

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

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

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

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

Family Supplemental Subsistence Allowance

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

 

VA Home Loan Guide

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

READ MORE: VA Home Loan Basics

What Is a VA Mortgage?

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

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

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

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

READ MORE: How to Apply for a VA Mortgage

What You Can Purchase with a VA Mortgage

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

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

READ MORE: Buying a Condo Unit with a VA Mortgage

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

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

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

VA Mortgage Loan Options

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

The No Down Payment Option

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

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

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

No VA Loan Limits for Qualifying Borrowers

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

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

READ MORE: VA Loan Limits

VA Loan Credit Score Requirements

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

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

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

VA Purchase Loan

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

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

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

READ MORE: VA Loan Questions and Answers

VA Cash-Out Refinancing

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

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

READ MORE: What to Know About VA Home Loan Refinancing

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

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

VA Interest Rate Reduction Refinance Loans (VA IRRRL)

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

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

READ MORE: What Is a VA Streamline Refinance?

VA Native American Direct Loans

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

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

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

READ MORE: VA Native American Direct Loans

VA Loan Eligibility

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

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

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

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

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

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

READ MORE: VA Loan Eligibility Exceptions

The VA Loan Certificate Of Eligibility

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

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

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

READ MORE: The VA Loan Certificate of Eligibility

VA Loan Eligibility for National Guard members

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

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

VA Loan Eligibility for Reserve Members

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

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

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

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

Read More: Who Qualifies For A VA Loan?

VA Loans for Surviving Spouses

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

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

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

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

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

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

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

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

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

READ MORE: VA Dependency and Indemnity Compensation

The VA Loan Funding Fee

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

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

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

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

VA Housing Grants

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

VA Specially Adapted Housing Grants (SAH)

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

The loss (or loss of use) of more than one limb

The loss (or loss of use) of a lower leg along with lasting effects of an organic disease or injury

Blindness in both eyes (20/200 or less)

Qualifying severe burns

The loss (or loss of use) of one foot or leg after September 11, 2001 requiring braces, crutches, canes, or use of a wheelchair

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

VA Special Home Adaptation Grant (SHA)

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

The loss or loss of use of both hands

Certain severe burns

Certain respiratory or breathing injuries

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

VA Temporary Residence Adaptation Grant (TRA)

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

If you qualify for an SAH grant (see above) you may qualify for $40,983 (in FY 2022);

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

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

Things to Know About VA Loans

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

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

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

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

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

 

 

VA Loan Eligibility Exceptions

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

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

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

VA Loan Eligibility Exceptions For Military Members

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

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

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

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

Qualifying For A VA Loan In Other Ways

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

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

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

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

Using A VA Loan

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

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

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

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

 

VA Loans: Why Credit Scores Matter

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

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

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

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

What Are FICO Scores?

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

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

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

What Is A “Good” Credit Score?

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

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

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

What FICO Scores Are Needed To Buy A Home?

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

Shop Around

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

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

How Do I Improve My Credit Scores?

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

Can I Pay Someone Else To Repair My Credit?

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

Your Credit Scores And VA Home Loan Approval

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

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

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

What To Know About VA Home Loan Refinancing

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

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

VA Refinance Options

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

VA Interest Rate Reduction Refinance Loans (VA IRRRL)

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

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

Non-VA Mortgages?

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

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

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

VA Cash-Out Refinancing

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

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

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

VA Funding Fee Required

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

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

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

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

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

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

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

Other Refinancing Loans

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

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

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

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

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

 

Who Qualifies For A VA Home Loan?

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

VA Loan Eligibility For National Guard members

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

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

VA Loan Eligibility For Reserve Members

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

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

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

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

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

VA Loan Eligibility For Surviving Spouses

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

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

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

Others Who May Qualify For A VA Mortgage

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

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

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

 

VA Home Loans Vs. Other Mortgage Options

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

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

VA Mortgages Versus USDA Home Loans

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

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

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

Rules For Occupancy, Rentals

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

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

Loan Fees

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

 

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

 

VA Mortgages Versus FHA Home Loans

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

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

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

Occupancy Rules And Property Types

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

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

VA Loans Compared To Conventional Mortgages

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

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

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

Zero-Down Conventional Home Loans?

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

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

Other Issues

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

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

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

 

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

 

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