States Step Up Their Efforts to Help Veterans

Uncle Sam has long helped his servicemen and women buy homes.

But a handful of states do even more for their veterans.

In California, for example, veterans buying single-family houses or condos may be eligible for mortgages of up to $250,000 through the state Department of Veterans Affairs at 6.65%. For first-time buyers, the rate is 5.95%.

“We’re not talking about teaser rates, either,” said Robert Washington, a marketing specialist with the Cal-Vet home-loan program in Sacramento. “We’re talking the real McCoy.”

There are 3.3 million former service personnel living in California.

Mississippi does even better by its 230,000 former servicemen. Ex-GIs are eligible for mortgages at 5.5%.

Wisconsin’s 490,000 vets have to pay a somewhat higher rate--6.85%--but a veteran and spouse can borrow as much as 2 1/2 times their combined income up to a maximum of $268,500 if they meet the state’s eligibility rules.

Unfortunately, these programs and similar ones in Texas, Oregon and Alaska aren’t very well known, even among real estate and mortgage professionals.

“We have attended every veterans’ convention in the state for the last 15 years as well as the Realtors’ annual meeting, and we’re still relatively anonymous,” said Sterling Knight of the Mississippi Veterans Home Purchase Board.

“Some people at these meetings look us in the eye and say they don’t know what we’re talking about,” Knight said.

Even the home buyers may not realize where the loan actually comes from.

“Many, many people never come to the realization” that his agency is not the federal Department of Veterans Affairs, said Robert Fleming of Oregon’s Department of Veterans Affairs.

Ditto in Wisconsin, said Steve Olson of that state’s DVA. “They think we’re a subsidiary or a regional office” of the federal agency.

But some states are working hard to become better known and to improve and publicize their benefits.

In California, the Veterans Affairs Department, which processes its loans through 10 statewide offices, has embarked on an ambitious effort to persuade the state’s mortgage brokers to originate Cal-Vet mortgages.

Nationally, mortgage brokers write about 60% of all loans. But in California, they account for four out of every five.

“We’re making a lot of changes in the program,” said marketing manager Wayne Lang. “We’ve always used Realtors to get the word out, but we have come to realize that to reach the market, we really need to use mortgage professionals.”

One improvement said to be under consideration is an increase in the maximum loan amount.

In many California communities, $250,000 for a house or condo and $70,000 for a mobile home ($250,000, if land is included) won’t buy much.

But Washington said there has been some talk in Sacramento about upping the ante.

Another apparent drawback for some borrowers is that the 30-year loans are “flexible,” meaning the interest rate can go up or down. But there is a 7.5% cap, and Lang said “it would take an economic catastrophe” to drive the rate higher.

And even with market rates trending upward, Washington said, “we’re looking for our rate to go down, not up.”

Rates are set every fall by the Cal-Vet board. In the last 25 years, they’ve changed only eight times--four times each way.

Cal-Vet uses the same credit guidelines as the federal VA guaranty program, which are among the most lenient in the business, Washington said.

And eligibility requirements are even more so. For example, all active-duty service personnel qualify as veterans, as do all war and peacetime-era veterans with honorable discharges.

Typically, veterans must have had only 90 days of consecutive active duty. But there are no prior residency requirements, as there are in several other states.

Cal-Vet loans require a 2% down payment, and there is a 1% origination fee. Earthquake insurance is included, and low-cost homeowner’s insurance is available. No private mortgage insurance is charged.

Other states are improving their veterans’ benefits too.

In June, the Texas Veterans Land Board more than tripled the maximum loan amount to $150,000. Previously, the board could loan $45,000, a sum Commissioner David Dewhurst admits wouldn’t “buy many homes on today’s market.”

Now, though, former servicemen who enlisted before 1977 and meet other eligibility standards can borrow up to $215,000--a $40,000 land loan from the state if they are buying a spread of five acres or more, a $150,000 first mortgage through an approved lender and a $25,000 home-improvement loan from the state.

Dewhurst’s next goal is to persuade Texas lawmakers to open up the program to all of the state’s 1.5 million veterans. And the Oregon DVA hopes to convince its legislature to do the same.

“Our brave veterans fought for the freedom we now enjoy, and we shouldn’t take that for granted,” Dewhurst said. “We can never repay them for all their sacrifices, but with a little ingenuity, we can help them buy good homes and keep their payments affordable.”

Not all state officials feel as strongly as those in California and Texas. Though all 50 have agencies to assist vets in one way or another, only the six mentioned here have mortgage programs.

But vets who live in a state that doesn’t offer a mortgage program or who don’t qualify under their state’s rules can always turn to Washington for assistance.

Since 1944, when then-President Franklin Roosevelt signed the Servicemen’s Readjustment Act, better known as the GI Bill, into law, the Department of Veterans Affairs has guaranteed more than half a trillion dollars in mortgage financing for more than 16 million veterans and servicemen.

The VA will back mortgages on behalf of qualified veterans, certain members of the reserves, active-duty personnel and some spouses. More than 29 million people are eligible for VA financing, according to Keith Pedigo, director of the loan guaranty program.

The VA doesn’t make mortgages itself. Rather, it promises private lenders that if the borrower fails to make his payments, the VA will step in. The maximum guarantee is 25% of the loan amount up to $50,750. Thus, most lenders generally limit VA loans to $203,000, though some will go higher.

Veterans often don’t need money of their own to qualify for VA financing. As long as the loan amount doesn’t exceed the value of the property, the VA doesn’t require a down payment.

But for every dollar the loan amount exceeds $203,000, lenders want the borrower to put 25 cents in the deal. So if you want to borrow $213,000 with a VA loan, you’ll need a $2,500 down payment.

The interest rate on VA loans is usually a tad over market, but there is no mortgage insurance--the mortgage is guaranteed, not insured--and the loan can be taken over by anyone who buys your house.

But borrowers are expected to pay a funding fee. Paid at closing, the fee is currently 2% (2.75% for reservists), but it can be included in the loan amount and paid from the loan proceeds.

Even though many veterans have already used their loan benefits, it may even be possible to buy subsequent houses by using their remaining entitlement or by having the entitlement restored.

Generally, full benefits can be returned if the original property is sold and the loan is paid in full. In some cases, moreover, vets can combine both their federal and state benefits to purchase a house.

That’s what Gregory Rhoads did in June when he became the 16 millionth vet to use his VA mortgage privileges.

First-time buyers, Rhoads and his wife, Rosita, used their federal eligibility in conjunction with an interest rate reduction offered under the Texas Veterans Land Board’s Green Builder Program to buy a $103,000, 1,700-square-foot house in Spring Branch, Texas.

And the partially disabled vet, who spent 20 years in the Army, had the new home built on land he bought in 1991 with the help of a Texas Veterans Land Board loan.

To find out more about the federal VA program, call 800-827-1000 or see the agency’s Web site at https://www.va.gov. To learn more about Cal-Vet, call 800-952-5626 or see https://www.ns.net/cadva/.