May 16, 2021

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More National Guard Members Now Can Get a VA Home Loan. Here’s How

With no down payment required, flexible credit policies, and restrictions on closing costs and fees, the VA home loan is a popular funding option for veterans and active service members, including members of the National Guard.

But in the past there were only guards eligible for the VA loan after six years of honorable service, after 90 consecutive days of service or after discharge from active service due to a service-related disability.

A new law was signed in January – the Johnny Isakson and David P. Roe, MD Veterans Health Care and Benefits Improvement Act – extends the authorization for guard members and shortens the required service days. That means tens of thousands more guards, including many who have performed emergency COVID-19 duties, will qualify for the VA-sponsored mortgages, according to John Goheen, communications director for the United States National Guard Association in Washington. DC

“It was clear that there was a gap between the benefits we offer active staff and the benefits we offer security guards,” said Goheen. “Congress recognized this loophole and tried to remedy it.”

In addition to the COVID-19 response, the new law will enable qualification for VA loans based on other missions on U.S. soil, he said. To qualify, the duty under Title 32 must have been completed under Section 316, 502, 503, 504, or 505 and the Guard must have served at least 90 days of service, 30 of which are consecutive.

“We haven’t deployed as many people overseas as we did a few years ago,” said Goheen. “As a result, many guards have not been able to qualify for a VA loan. This new law is clearly a reward for those who responded to COVID-19 missions, as well as last summer’s riots and the Capitol mission in January. “

The new law is retroactive, meaning Guard members who served years ago but meet the new criteria may now be eligible for VA loan benefit, 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 services for guards mobilized under the instructions of Title 32, which is common in major disasters and other state-level emergencies,” Birk said. “Now tens of thousands of guard members helping on the front lines of the pandemic are likely to receive VA loan eligibility much sooner.”

Ryan Leahy, inside sales manager for Mortgage Network in Danvers, Massachusetts, said a VA loan is one of the sweetest perks offered to veterinarians and the active military.

“It typically takes a lender 20% less to avoid mortgage insurance, but that’s not the case with the VA loan, which is really a no-money mortgage,” Leahy said.

In contrast, FHA loans and conventional loans require a decline of at least 3.5% to 5%, and borrowers of both loans usually have to pay for mortgage insurance. With a traditional loan, that is, a mortgage that can be covered by Fannie Mae and Freddie Mac, a buyer typically needs to deduct 20% to avoid paying for mortgage insurance.

VA loans tend to be more forgiving of the approval process, interest rates are competitive, and VA limits what closing costs can be charged on a VA loan, making it much more affordable, Leahy said.

One disadvantage of a VA loan is that the government does a one-time assessment Sponsorship fee this is equivalent to 0.5% to 3.6% of the amount borrowed, a fee that is usually financed back into the loan amount.

“Another downside is that in a competitive shopping market like the one we currently have, it may be more difficult to take an offer with a VA mortgage,” Leahy said.

Veterans United’s Per Birk, more than 1,200 lenders – including banks, mortgage lenders, and credit unions – issued at least one VA loan last year, but only a relative handful of lenders specialize in those loans. He recommends shopping carefully and choosing a lender who is experienced with VA loans.

Also, keep in mind 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 find the best mortgage financing offer 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 offer similar benefits to borrowers.”

Erik J. Martin is a writer for Three Creeks Media.

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