VA Home Loans and the SCRA



VA Loan Basics and SCRA Protection

Very few individuals, beyond veterans, active duty service members, and their families, know the military lifestyle and financial situation. Military members receive Permanent Change of Station (PCS) orders, on average, every three to four years. The instability of frequent moves and deployments can take a toll on one’s finances and savings, making it nearly impossible to finance a home with a conventional loan program.

Good thing there is the VA home loan program. This program first originated in 1944 under the Servicemen’s Readjustment Act, which authorized the VA to guarantee or insure a home, farm, and business loans to help veterans readjust back to civilian life. Over the years the program has changed some, but the premise remains the same-provide servicemembers with the means to finance a home.

So What Benefits Does a VA Loan Provide?

 

The VA loan program has helped more than 20 million service members receive financing since its inception and has provided unmatched benefits that cater directly to military families, such as the zero-down payment option. Qualified service members can purchase a home with putting little to nothing down, and when a down payment is required, it is generally below 5 percent. Other notable benefits include:

  • No private mortgage insurance
  • High loan limits starting at $417,000 with even higher limits in high cost counties
  • Competitive interest rates
  • Lax eligibility requirements

At this points you may be asking, how are lenders able to provide this? This is attainable due to the fact that the VA guarantees up to a quarter of each loan made. This gives lenders more confidence in making loans and can result in lower interest rates and payments. However, don’t think this program comes out of taxpayers wallets. The VA loan program is a self-sustaining program due to the VA funding fee, a one-time fee paid to originate the loan and keep the program alive for future generations.

Eligibility of the Program

 

To be eligible, a veteran or service member must have served on active duty during wartime for 90 days consecutively or 181 consecutive days during peacetime, served in the Reserves or National guard for at least six years, or be the wife of a service member who died due to a service related injury.

If a service member meets one of the previous requirements, then they are eligible to move on and request a Certificate of Eligibility (COE) from either a VA-approved lender or the VA itself. VA approved lenders will expect a credit score around 620 to secure financing; however, all are encouraged to apply since it is possible to obtain a VA home loan after a bankruptcy or foreclosure.

Deployed with a Home Loan

 

VA loans are both eligible to veterans and active duty members, which means there is a chance that an active duty member may be deployed while he or she has an outstanding loan. In this instance, the Servicemember’s Civil Relief Act (SCRA) jumps in to help.

SCRA provides a financial umbrella to those who are deployed by postponing or suspending certain civil obligations to relieve stress on family members and keep the service member focused on the task at hand. A few examples of protections are:

  • Mortgage payments
  • Pending trials
  • Taxes
  • Outstanding credit card debt
  • Terminations of leases

Service members should remember that these protections are available and you should talk to your bank or lease holder to enact your protections. It’s also important to keep in mind that these protections only suspend payments, they don’t wipe debt away.

The VA loan program may offer great benefits to those serving; however, it is important for active duty members to make sure they do not rely solely on SCRA protection and can handle the responsibility of home ownership. For more information on the VA home loan program or SCRA protection, contact a VA approved lender!

Author – Kevin Pearia

Kevin Pearia is a mortgage commentator for Veterans United Home Loans, the nations leading dedicated provider of VA Loans.

 

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**This communication is provided to you for informational purposes only. Keffer Realty is not a mortgage lender. You should contact your lender directly to learn more about mortgage products and your eligibility for such products.

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