Tag: Finances

How the Whole VA Loan Process Works

For many borrowers, applying for any kind of mortgage may seem daunting. But, when broken down, this rundown of 6 steps to getting a VA loan is easy to understand.

1. Select a VA-approved Lender

On the surface, it might appear that any lender will do. However, if you dig a little deeper, you may discover that not all lenders are the same. First, only lenders approved by the U.S. Department of Veterans Affairs can originate VA mortgages. Secondly, some lenders focus primarily on conventional loans, while others concentrate almost exclusively on the VA loan program for military clients. Using a VA specialty lender with extensive knowledge about the VA loan process vs. a lender who only funds a few VA mortgages a year may translate into an easier and quicker loan process.

2. Obtain a Certificate of Eligibility (COE)

An experienced lender can help you obtain what’s called a Certificate of Eligibility (COE). The COE will prove that you meet initial eligibility standards for VA loan benefits. It will also let the lender know how much entitlement you can receive, which is the amount the Department of Veterans Affairs will guarantee on your VA loan. To get your COE, you’ll need to give your lender a bit of information about your military service. Usually, a COE can be acquired online instantly through a lender’s portal or through the eBenefits portal on the va.gov website. Those servicemembers or surviving spouses whose COEs cannot be obtained online will have to get theirs by mail. A VA lender or the VA can help direct you to the right resource for your specific situation.

3. Go House Hunting and Sign a Purchase Agreement

The fourth step is usually one borrowers enjoy because they get to look at homes they might consider buying. Working with a real estate professional who specializes in the VA process can help you get the most out of your benefits. This is true because the VA allows certain fees and costs to be paid by the seller (if both you and the seller agree), and a knowledgeable agent will know this and help you negotiate seller-paid fees. Once you’ve got a signed purchase agreement, you can move forward in the VA loan process.

4. Pre-Qualify for Your Loan Amount (optional)

Pre-qualifying is important, but not required. By choosing to complete this step you can save some time and potential surprises later in the process. To pre-qualify for your loan amount, you’ll have a candid conversation with your VA loan professional about your income, credit history, employment, marital status and other factors. Giving your lender complete details during the pre-qualifying step can help prevent surprises later during underwriting.  The pre-qualifying step can also reveal areas that need improvement before you can be approved, such as credit or debt-to-income ratio.  While a prequalification letter gives you a ballpark price range for house hunting, it does not guarantee that you will be approved for a loan, and your lender will later have to verify the information you provide. To get a loan requires later final approval by underwriting once all documents have been received and reviewed (see Step 5).

5. Lender Processes Application and Orders VA Appraisal

A signed purchase contract is the document you’ll need to finish your initial application. Once your lender has the contract, they will order the VA appraisal. Here again, not just any appraiser will do. Only a professional who is certified to perform appraisals to VA standards can evaluate the home being considered for VA financing. The VA appraiser will make sure the price you’ve agreed to pay for the home corresponds with the current value. Another very important part of the VA appraisal is to inspect the home to make sure it meets the VA minimum property requirements (VA MPRs). However, the VA appraisal does not take the place of a home inspection, which focuses on code violations, defects and the condition of the property. While many borrowers have heard horror stories about the length of the VA appraisal process, the Department of Veterans Affairs gives the appraisers 10 days from order to completion barring extenuating circumstances. While you’re waiting for appraisal documents, you’ll be busy submitting documents of your own to your VA-approved lender to show you have the ability to qualify for the loan. If the home passes appraisal for value and VA minimum property requirements, and it’s verified by the lender that you qualify for your loan, the underwriter will give his or her stamp of approval.

6. Close on Your Loan and Move In

After being approved by the underwriter, all that is left to do is close and move in. During closing, the property legally transfers from the former owner to you. Closing is a step that requires you to sign documents that confirm you understand and agree to the terms of the loan. You will need to provide proof of homeowners insurance and, if required, pay closing costs. Once you’ve signed all your closing documents, you’ll get the keys to your new home.

While these steps may not happen in the order above or be a required part (such as prequalification)*, they represent the typical process for the applicant in obtaining a VA purchase loan. Your lender may need to take other steps.

VA Loans: Understanding Occupancy Rules

Most veterans say that some of the more confusing aspects of qualifying for a VA home loan are the occupancy requirements. This usually stems from when a service member gets their PCS orders and has to move. Will they be able to rent the house? Will they be able to get a second VA loan at their new location? Are there penalties or fines for not meeting this requirement?

While it can seem daunting, understanding the occupancy requirements of a VA loan is actually quite simple if you break it down.

1. What is “reasonable time”?

VA loan occupancy requires that the veteran move into the home within a “reasonable time.” But what does that mean? The VA requires that the borrower move into the home within 60 days after the VA loan closes.

As you’ve read, there are exceptions to that rule. The 60-day rule may be waived if you meet both of the following conditions:

  • There is a specific event in the future that will make it possible for you to occupy the property on that date
  • You certify that you will occupy the property at a specific date after your VA loan closes

Generally, the VA does not make exceptions if you want to set an occupancy date for more than 12 months after your loan closes.

2. Primary residence requirements

You must certify that you intend to occupy the property as your home. Second homes and investment properties do not qualify for a VA loan.

3. Spouse occupancy

The occupancy requirement is satisfied if your spouse will be living in the home while you are on active duty or otherwise unable to personally occupy the home. A spouse may also satisfy the occupancy requirement if the veteran cannot due to long distance employment issues.

4. Deployed active duty service members

If you are deployed after purchasing your home, your occupancy status is not affected by the deployment. You are considered to be in a “temporary duty status” and are able to provide a valid intent to occupy certification. This requirement is met regardless of whether or not your spouse will be occupying the property while you’re deployed.

5. Dependent occupancy

A dependent child may occupy the home while their parent or parents are deployed or on active duty away from the home. It’s important to note that just by having the dependent in the home does not satisfy the requirement. You must take additional action by having your attorney or dependent’s legal guardian make the occupancy certification. Please keep in mind that many lenders will not recognize dependent occupancy as satisfying the VA loan occupancy requirement.

6. Retirement occupancy

If you will be retiring within 12 months from the date of your loan application, you must include a copy of your application for retirement and proof of requirement stability. Although the VA requires moving in to the home within a “reasonable time,” retiring veterans may be able to negotiate a later move-in date. You have the option to apply for a delay (up to 12 months) in the occupancy requirements.

7. Failure to meet requirements

If you do not occupy the home as agreed under the terms of your VA loan, what happens next is at the discretion of the Department of Veterans Affairs.

Even though it seems as if there are a lot of “if, then” rules to define occupancy, it’s really not as complicated as it appears. The VA works hard to help borrowers understand how to fit their situation into these guidelines, and help set you up for success. Understanding your rights and benefits is something that a qualified Home Loan Expert is more than willing to help you with. Remember to always work with a lender who is skilled and specialized in the nuances of VA loans.

8. Delayed occupancy

Typically, a delayed occupancy results from property repairs or home improvements. If extensive changes are being made to the property that prevent you from occupying it while the work is being completed, your occupancy requirements will be considered “delayed.” However, you must certify that you intend to occupy the property as soon as the work is completed.

New Rules for VA Loan Limits

The VA home loan benefit is one that most consumers would be thrilled to have; a mortgage loan with no down payment, no VA-required mortgage insurance, and the lower interest rates commonly associated with government-backed home loan programs.

The VA loan program has weathered many difficult times including the housing crisis of 2008, for much of the agency’s existence, the fundamentals of the VA mortgage program have not seen dramatic changes.

VA loan program rules are often adjusted or modified by legislation, changes to the program itself, and to accommodate changes in the industry.

Of the most significant changes to the program, some of the biggest come not as a result of legislation directly aimed at helping veteran mortgage loan applicants, but as a consequence of legislation addressing a need among Vietnam-era service members. One of those was the Blue Water Navy Vietnam Veterans Act of 2019.

VA Loan Program Changes: A Summary

The “Blue Water Act” makes some important changes to the VA home loan program. Some of them are alterations to help pay for some of the measures required by the act, others are procedural changes, while still others are fundamental alterations to the basic structure of VA loans. The changes include:

    • Purple Heart recipients are now exempt from paying the VA loan funding fee the same as those who receive or are entitled to receive VA compensation.
    • No upper loan limit on VA mortgages as of 1 January 2020.
    • An increase in the VA Loan Funding Fee for all non-exempt borrowers.

Agent Orange And “Herbicide Exposure”

The need for the legislation arises from large numbers of claims associated with Agent Orange or other herbicides that may have been used during the Vietnam War.

Agent Orange was used during the conflict as a means to destroy crops, forest cover, and expose North Vietnamese troops (also known as the NVA or North Vietnamese Army) to American forces and those of the Army of the Republic of Vietnam (ARVN).

Agent Orange, and likely other herbicides in use at the time in-theatre, contained a chemical known as dioxin which is known for causing birth defects, cancer, neurological, and even psychological problems.

To give you an idea of how wide-ranging the use of Agent Orange and dioxin was at this time, History.com reports more than 20 million gallons of Agent Orange were sprayed on portions of Vietnam, Cambodia and Laos for a full decade between 1961 and 1971.

The use of Agent Orange created medical and psychological issues for a high volume of cases on both sides of the Vietnam conflict.

What Is The Blue Water Navy Vietnam Veterans Act of 2019?

This legislation, signed into law in 2019 and effective starting in January of 2020, created relief for veterans with medical conditions presumed to have been caused by Agent Orange or “herbicide exposure” during service in Vietnam.

Specifically, “…a veteran who, during active military, naval, or air service, served offshore of the Republic of Vietnam during the period beginning on January 9, 1962, and ending on May 7, 1975, shall be considered to have been incurred in or aggravated by such service, notwithstanding that there is no record of evidence of such disease during the period of such service.”

This means that a veteran who files a VA medical claim “on or after” September 25, 1985, and before January 1, 2020, for a disease (covered by the legislation) and the claim “was denied by reason of the claim not establishing that the disease was incurred or aggravated by the service of the veteran” may be entitled to VA compensation for that claim.

This is true unless “there is affirmative evidence to establish that the veteran was not exposed to any such agent during that service.”

In short, those who served in Vietnam filing certain types of VA medical claims are presumed to have had exposure to Agent Orange or other herbicides and would have those claims approved for financial compensation from the VA.

How The Blue Water Navy Vietnam Veterans Act of 2019 Affects Your VA Home Loan Benefit

The Blue Water Navy Vietnam Veterans Act is also known as House Resolution 299 and addresses a variety of Vietnam-era, Korean War-era, and Gulf War-era issues associated with VA medical claims. But the law also includes other items in the bill including a removal of VA loan limits for approved transactions, and an increase in the VA Loan Funding Fee.

Removal Of The VA Loan Guaranty Limit – No VA Loan Limits!

The Blue Water Navy Vietnam Veterans Act Act amends existing VA program guidelines with changes designed to “expand maximum guaranty amounts for purchase, construction, and cash-out refinance loans greater than the Freddie Mac conforming loan limit”.

That means that if you apply for a home loan using your VA loan benefits, you can apply for a loan for the most expensive home you can find (assuming you have full VA home loan entitlement) and the VA guaranty of the loan is 25% of the loan amount with no down payment.

Essentially, there is no upper limit on the price of the home you wish to purchase using a VA loan as of the law’s implementation date of 1 January 2020. However, if the asking price and the appraised value of the home do not agree, the VA loan amount will be based on the lower of the two amounts.

The borrower cannot be required to proceed with the loan in such cases because when the VA loan amount is lower than the asking price, the borrower must pay the difference in cash and cannot finance that amount. That’s something a borrower may choose to do, but VA loan rules prohibit forcing the borrower to buy the home and pay that difference out of pocket.

VA borrowers who wish to use their entitlement to apply for home loans “equal to or less than $144,000 regardless of Freddie Mac” are not affected by the rule changes and should expect their transaction to be handled in the traditional way.

Loan limits still apply for those who have more than one active VA loan, only partial entitlement available or those who have defaulted on a previous loan.

The Purple Heart Exemption For The VA Loan Funding Fee

The VA Loan Funding Fee is an expense associated with VA mortgages which most veterans must pay unless they receive or are eligible to receive VA compensation for service-connected medical issues.

Thanks to House Resolution 299, those who still serve on active duty and were awarded the Purple Heart are now also exempt from paying the funding fee (as of 1 January 2020) the same as those who receive or are entitled to receive VA compensation for their service-related conditions.

The Resolution also provides for the first increase in the VA loan funding fee program in some time.

A Higher VA Loan Funding Fee Starting In 2020

The VA loan funding fee is on a sliding scale with the lowest fees reserved for first-time VA borrowers, and higher fees for those who have used VA loans before. Prior to the new law, VA loan funding fees for active duty military members buying for the first time were set at 2.15%, with a higher fee for subsequent use set for the same active duty buyer set at 3.3%.

Under the new law, the VA loan funding fee for an active duty first-time borrower is increased to 2.30% and the subsequent use fee set at 3.60%. Other VA loan funding fees are increased too; higher fees may apply for VA refinance loans and other transactions.

What You Need To Know About The VA Loan Limit Rules

VA loan rules under the “Blue Water Act” do remove the loan limits and permit a borrower to potentially buy a house with any price. But VA loan rules cannot compel the lender to approve the transaction in cases where the loan officer feels the borrower cannot realistically afford the mortgage. It will still be required of the borrower and lender alike to prove the loan is affordable and sustainable.

Borrowers will still need to financially qualify for the VA home loan, and lenders must still prove on paper that the loan is affordable. Just because some of the VA loan program requirements have changed does not remove the lender’s need for due diligence.

Understanding Military Pay

Military pay can be hard to understand-at first. There are several types of compensation that may affect a military member’s total pay; some of them are considered “special pay” for duty or qualifications that warrant additional pay in the eyes of the Department of Defense, while other pay may be added for all servicemembers on a yearly basis, or as the result of re-enlisting. There are also allowances, incentive pay, and more.

Basic Pay

Basic pay is the standard, taxable baseline amount a service member earns every month. Basic pay varies depending on three factors: the amount of time spent in the service to date, the time spent in the member’s current rank, and whether or not the military member is an officer or enlisted person. The lowest ranking enlisted member who has served the shortest amount of time in uniform will earn (at the time of this writing) just under $1,500 per month. The highest ranking and longest serving enlisted member will earn just under $8,000 per month.

It’s important to note that Active Duty pay differs from Guard/Reserve pay, and that serving full time offers different terms for pay, allowances, and entitlements than for those in the Guard and Reserve.

For Basic Pay, there is an annual cost-of-living increase that is determined by a variety of factors including Congressional approval.

Military Allowances

According to the Department of Veterans Affairs official site (VA.gov), military allowances are the second most important type of pay available to the service member. Part of the reasoning for this is that allowances are not taxed, and some allowances are quite substantial.

According to the VA, “Allowances are monies provided for specific needs, such as food or housing. Monetary allowances are provided when the government does not provide for that specific need. For example, the quantity of government housing is not sufficient to house all military members and their families. Those who live in government housing do not receive full housing allowances. Those who do not live in government housing receive allowances to assist them in obtaining commercial housing.”

Military allowances include money for housing, uniforms, and meals, depending on rank. The housing allowance is determined in part based on zip code and the rental averages calculated for that area. Uniform allowances are paid annually in most cases. The first clothing allowance is paid to the member during basic training, and other clothing allowances apply beyond that.

When a military member gets orders to a new duty station, a moving truck is usually involved and all the expenses that go with that type of relocation. To help offset the costs of moving, whether overseas or stateside, the Department of Defense provides a dislocation allowance that is approximately $740 for the lowest ranking military member (without dependents). The amount of this allowance is based on the service member’s rank and “with dependents” or “without dependents” status.

Another type of military allowance is the Cost Of Living Allowance, or COLA. In the past, COLA applied mainly to overseas military assignments, but in 1995 new rules allowed those serving at stateside bases to begin receiving COLA based on location. COLA is also calculated based on rank and “with dependents” or “without dependents”.

Incentive, Bonus & Special Pay

There are other types of military pay that are important to get familiar with including special duty pay, incentive pay, sea pay, drill pay, family separation allowance, family subsistence and hazardous duty pay.

 

Tricare: Supplemental Insurance

TRICARE is the United States Military health care program for military members and their families, providing worldwide, comprehensive healthcare coverage including health plans that meet the minimum requirements of the Affordable Care Act, plus prescriptions, dental plans, and special plans tailored for certain types of medical conditions or coverage requirements. The TRICARE system is managed by the Defense Health Agency.

TRICARE requires certain co-pays and there may be health expenses not covered by a particular plan; that is where TRICARE supplemental insurance can help. But supplemental insurance should not be confused with TRICARE itself. The supplemental plan a servicemember and family might choose will not be affiliated with TRICARE but with another agency.

What Kinds Of Out-Of-Pocket Costs Might Require TRICARE Supplemental Insurance?

A service member’s individual out-of-pocket expenses under TRICARE will vary depending on the medical condition and the type of TRICARE plan the service member chooses. There are a variety of coverage options that have varying degrees of out-of-pocket costs.

TRICARE Coverage Options

  • TRICARE For Life
  • TRICARE Young Adult
  • TRICARE Select
  • TRICARE Select Overseas
  • TRICARE Reserve Select
  • TRICARE Prime (including Prime, Prime Remote, Prime Overseas, and Prime Remote Overseas
  • TRICARE Retired Reserve
  • US Family Health Plan

Active duty military members who choose one of the TRICARE PRIME options have no out-of-pocket expenses, no enrollment fees, no network co-pays, and no point-of-service fees. Once the active duty military member starts adding family members, the potential for co-pays and out-of-pocket expenses begins.

Retirees, family members of military retirees, and other beneficiaries are subject to enrollment fees, co-pays, and point-of-service fees.

The non-Prime TRICARE options include more deductibles, co-pays, and other potential cost-sharing expenses. Active duty members typically pay less than other groups eligible for coverage for co-pays, deductibles, etc.

For those enrolled in certain programs such as TRICARE For Life, no enrollment fees apply but the veteran must be covered by Medicare Part A and Medicare Part B.

Not all plans feature the same requirements, co-pays, or deductibles, but it’s clear that once you move down from TRICARE Prime, additional expenses will apply that may make it worthwhile to explore TRICARE supplemental insurance options.

How Does TRICARE Supplemental Insurance Work?

The first thing to know about TRICARE supplemental insurance is that it is not associated with TRICARE at all, but rather provided by a third party. The U.S. government weighs in on supplemental insurance on the TRICARE official site, stating:

“Many military associations and private companies offer supplemental insurance policies. Unlike other health insurance you have in addition to TRICARE, such as Medicare or an employer-sponsored health insurance, which pays first, supplemental insurance pays after TRICARE pays its’ portion of the bill.”

The TRICARE official site warns its’ insured clients to consider supplemental insurance carefully since the cost of the additional plan may exceed the actual out-of-pocket expenses the plan is designed to offset (depending on circumstances).

Does Everyone Need Tricare Supplemental Insurance Coverage?

The short answer is no. Active duty members are fully covered under TRICARE Prime options, and those with special circumstances may not necessarily need to resort to additional coverage thanks to a set of special TRICARE programs such as the Extended Care Health Option (ECHO).

The Extended Healthcare Option is open to TRICARE beneficiaries diagnosed “with moderate or severe intellectual disability, a serious physical disability, or an extraordinary physical or psychological condition” according to the TRICARE official site. Those beneficiaries include:

  • Transitional Compensation Program
  • Active duty family members;
  • Family members who are covered under the Transitional Assistance Management Program
    Children or spouses of former service members who are victims of abuse and qualify for the
  • Family members of deceased active duty sponsors (while still considered “transitional survivors.”)
  • Family members of activated or ordered to active duty service for more than 30 days in a row including the Army National Guard, Army Reserve, Navy Reserve, Marine Corps Reserve, Air National Guard, Air Force Reserve, U.S. Coast Guard Reserve;

TRICARE Policy Changes May Affect Your Coverages

Some who started out not interested in TRICARE supplemental insurance may, due to policy changes and other factors, wind up needed supplemental coverage. A good example of this was the 2013 TRICARE policy changes that resulted in certain military retirees losing access to TRICARE Prime and needing to switch to TRICARE Standard.

That policy change affected military retirees, their dependents, surviving dependents, and TRICARE Young Adult members who live outside a reasonable commuting distance to the nearest military medical facility or base closure site.

The switch to TRICARE Standard in those cases resulted in changes to co-pays and other expenses, and likely sent some former TRICARE Prime enrollees affected by that change in search of supplemental insurance.

TRICARE reserves the right to change its’ policies in the future, so knowing your options for additional covered if and when needed is definitely a good idea if future medical expenses are anticipated for chronic conditions, recurring issues, etc.

Dual Military Couples: What Benefits Are There?

When one military member marries another, the couple becomes a “dual military” couple, also known as mil-to-mil marriages. Different branches of service may use other terms.

Dual military couples are common, and the number of same-service couples may be larger than those who marry someone from a different branch of service. Army spouses, Air Force husbands and wives, Navy couples, Marine Corps families, and Coast Guard couples know there are more pay and higher allowances offered to married couples.

Here are some ways dual-military couples can benefit:

Double Retirement Pay For Dual Military Couples

This does NOT refer to a special program offering to double military retirement pay for mil-to-mil couples; at the time of this writing, such a program does not exist.

However, assuming both military members choose to remain in uniform until retirement-eligible, it’s easy to see that when both spouses draw military retirement pay, that effectively doubles the amount assuming the time-in-service, time-in-grade, and other variables match up.

Mil-to-mil couples who do not retire at the same rank and time-in-service (among other variables) may not draw the exact same amount of retirement pay.

Child Care Issues For Mil-To-Mil Couples

The military does not have a specific policy that offers childcare benefits to married couples.

All families are required by their branch of service to provide documentation outlining a childcare plan for contingencies such as deployments, TDY, etc.

One of the biggest advantages of being a military parent is the ability to use on-base childcare options such as Child Development Centers, Family Child Care offered in regulated private on-base homes, etc.

Childcare expenses are huge challenges for families, and CDC costs are based on rank among other factors. Lower-ranking (and lower-paid) enlisted service members won’t carry the same financial burden their more experienced and higher-ranking co-workers will.

In this area, the dual military couple has a distinct advantage. DoD school centers may prioritize dual-military family enrollment. There may be other resources DoD might offer as well. Check with your Family Readiness Group or Work Life Program for information to support you and your children’s transition.

When You Cannot Be Assigned Together As A Mil-To-Mil Couple

Plenty of military blogs discuss the benefits of the Join Spouse assignment option, but not everyone gets to take advantage. The mission comes first and the needs of the military may not include letting a mil-to-mil couple be reassigned to the same base.

In such cases, there is a Family Separation Allowance you may qualify for as a married service member (even if you are not a dual military couple). However, there are specific rules for claiming this allowance as a dual military couple:

  • You must be sent away from your family for more than 30 days due to receiving military orders.
  • The couple must be living together as a couple before the duty begins.
  • Only one person in the dual military couple can receive the allowance.
  • A dual military family that receives orders for each spouse is paid only once, to the highest-ranking service member of the couple.

Better Housing For Married Troops

The housing situation for Airmen, Sailors, Soldiers, and Marines can be much improved over life in the barracks; married couples are not subject to the same kinds of living quarters inspections and communal living considerations that single service members have to deal with.

And the higher your rank, the better options you may have open to you depending on location and other factors.

Consider a typical military assignment to a new base where there is plenty of on-and off-post housing to choose from. An enlisted service member in the ranks of E1 through E3 (and in some cases E4s with less than four years of service or some similar standard) is not permitted to live in the local community. These troops are usually required to live in the barracks.

Married couples in the same rank/time-in-service situations are not subject to these requirements unless they are sent to an unaccompanied assignment where the family will not live.

Married troops (dual military or not) have choices that include privatized, on-base housing, as well as housing in the local community. Dual military couples don’t get any additional consideration in this area, but as it stands the housing situation is greatly improved for the married couple.

It should be pointed out here that the “better housing for couples” is not an intentional effort or policy by Defense Department leaders to offer married service members a better lifestyle, but in many areas, married couples do reap the benefit of their situation and the military’s willingness to provide higher allowances, better housing, etc.

A “Hidden” Mil-To-Mil Couples Benefit

Assuming both halves of a dual-military spouse situation have put in the required time-in-service requirements to qualify to apply for a VA home loan, a dual military couple has some unique alternatives that a single service member does not have quite the same access to. What does this mean?

VA loans require you to have full VA loan entitlement for the loan. Generally, if you have never used your VA loan benefits before, you have 100% of your entitlement remaining once you have your VA Certificate of Eligibility.

Dual military couples have a choice to make when it comes time to apply for a VA mortgage. They can both use their entitlement for the loan, and the borrower’s financial commitment to the loan is matched by the amount of entitlement. If two members apply and both use their VA loan entitlement, they are both charged half of that entitlement.

But a dual military couple has the option to use only one person’s VA loan entitlement, which means the other spouse has the ability to apply for another VA mortgage later on (assuming the borrower is financially qualified to do so).

The option of two VA home loans is a definite advantage.

Join-Spouse Or Joint Spouse Assignments

Military members often get reassigned to a new military base, installation, or even a deployment without the option to bring families along (i.e., military duty in parts of South Korea are “no dependents” tours, and all deployment situations are strictly “no dependents”.)

When a dual military couple faces the next round of PCS orders, they have the option to apply for a Join Spouse or Joint Spouse (the preferred term of the Air Force) assignment so that both can be given PCS orders to the new gaining base.

This is not always possible, and some reassignments involving mil-to-mil couples have them assigned to different bases roughly within a 100-mile radius or less. There are instances of mil-to-mil couples who have been deployed to war zones together or those who wind up in the same country at the same time but have to commute to be together.

Military couples must keep in mind that they are subject to the needs and whims of the military assignment system and it is best to have a detailed conversation with your detailer, Senior Chief, Chief of Personnel, or any other position that may have a direct effect on where you are assigned next as a couple or as an individual.

Ask the advice of your current assignments person to learn how to apply for joint assignments, but also talk to your unit orderly room to discuss how to claim the higher rates or added allowances if you are soon to be married, or recently married and in need of an update to your military records.

Food Allowances: Basic Allowance For Subsistence

Depending on where you are assigned, the cost of living in the area, and other factors, you and your dual military spouse may qualify to draw an allowance known as BAS, the Basic Allowance for Subsistence. BAS is intended to aid meal costs for service members. Both halves of the mil-to-mil couple can draw this allowance, effectively doubling it.

BAH Benefits For Married Troops

Consider the “with dependents rate” for BAH (the military housing allowance–a higher amount of housing money paid to the service member with one or more dependents. For this purpose, a spouse is considered a “dependent”, technically speaking). The single service member does not get this elevated rate, only married couples (dual military or not).

When a mil-to-mil couple draws BAH, a table is required to determine the couple’s BAH rates (per individual). Federal regulations governing BAH are found in the government publication Joint Travel Regulations, Chapters 8 through 10, which includes guidance on how BAH is paid to dual-military couples.

In mil-to-mil couples without dependent children, both spouses are paid without the dependents rate. If the couple has children, one spouse receives the with-dependent BAH rate, the other gets the single-rate BAH.

Other Factors You Should Know

The benefits of being a dual military couple can include being assigned together, drawing higher allowances (the “with-dependents” rate), getting better housing options, and better retirement pay numbers (assuming both spouses retire from military service).

But being a dual military couple has downsides, too–it’s important to anticipate these as much as it is to know your benefits and making sure you take everything you are entitled to.

Some military-related blogs have encouraged dual-military couples to do things like apply for reassignment to the highest-cost-of-living areas possible to maximize BAH payments and other benefits.

Helpful Tips For Doing Military Taxes

There are many tax provisions that military members and their families can take advantage of.  Here are some top tax tips to consider before filing taxes:

Free Tax Filing Services and Consultants

Military members and their families can get help at many installations through the Voluntary Income Tax Assistance program (VITA). The legal center on base should be able to confirm if this service is available at the installation.  Additionally, through H&R Block and Military One Source free tax filing is available.

Tax Filing & Deadlines

The IRS extends many options for military members and their families if a soldier is overseas and in a combat zone. For example, the deadline for filing a return is automatically extended if a soldier is in a combat zone or has a qualifying service outside of a combat zone.

Gross Income Exclusion & Deductions

Service members receive many types of pay and allowances. The Internal Revenue Service requires that some of these be included in the gross income calculation while others are excluded from a soldier’s gross income. The following are excluded items from gross income according to the IRS:

Living Allowances

BAH (Basic Allowance for Housing), BAS (Basic Allowance for Subsistence), Housing and cost-of-living allowances overseas and OHA (Overseas Housing Allowance) compensation are excluded from gross income according to the IRS.

Moving Expenses

Traveling from one workplace to another or overnight travel is excluded. Traveling to and from work is not.  Benefits received for dislocation, military base realignment, and closure can also be excluded. Other types of moving expenses that can be deducted or excluded depending if the expense was a benefit or out-of-pocket un-reimbursed cost include move-in housing, moving household and personal items, moving trailers or mobile homes, storage, temporary lodging, and temporary lodging expenses.

Combat Zone Exclusion

The Combat Zone Tax Exclusion allows service members to exclude certain pay from gross income if they are in a combat zone. Typically the pay must be earned in a month that a service member served in a combat zone.

Types of pay include:

  • State bonus pay for service in a combat zone
  • Pay received for duties as a member of the Armed Forces in clubs, messes, post and station theaters, and other non-appropriated fund activities.
  • Active duty pay earned in any month served in a combat zone
  • Imminent danger/hostile fire pay
  • Reenlistment bonus
  • Awards for suggestions, inventions, or scientific achievements.
  • Student loan repayments
  • Pay for accrued leave

Miscellaneous Pay Allowances

There are variety of pay allowances that IRS excludes from income including defense counseling, disability, group term life insurance, professional education, ROTC educational and subsistence allowances, survivor and retirement protection plan premiums.

Family Allowances

Military family dependents are extended some exclusions from gross income as well including certain educational expenses for dependents, emergencies, evacuation to a place of safety, and separation.

IRS Military Tax Tips Video

The IRS addresses many tax provisions for military members and their families in this short video including:

  • Filing taxes and postponing for members of the military who are on duty overseas
  • Military uniform deductions
  • Out-of-pockets travel expenses
  • Tax deadlines
  • Military specific tax deductions
  • Travel expenses

Death gratuity

Any death gratuity paid to a survivor is excluded from gross income.  Un-reimbursed dependent travel and burial services are also deductible.

In-kind Military Benefits

The military provides many in-kind benefits, some of which do not need to be included as gross income, such as:

  • Space-available travel on government aircraft
  • Legal assistance
  • Dependent-care assistance program
  • Commissary/exchange discounts
  • Medical/dental care

VA Loans: Why Are They So Powerful Today?

The VA home loan program has been around for seven decades. This long-cherished benefit has backed more than 24 million military mortgages since 1944.

But in many ways, it’s more important today than ever before.

Many lenders tightened their lending requirements after the housing market collapse. Access to credit is starting to loosen, but it’s still tough for many service members and veterans to secure a conventional mortgage.

That’s a big reason why the historic VA loan program is experiencing a resurgence. VA purchase loans have increased eight years in a row, with younger veterans and service members leading the way.

To be sure, VA loans aren’t automatically the best fit for every veteran. But they feature significant benefits that can make homeownership possible for those who might otherwise struggle to secure financing.

Here’s a look at four reasons VA loans are so powerful in today’s housing market.

1. Flexible requirements

VA borrowers don’t need a sky-high credit score to secure a mortgage. Lenders are generally looking for a credit score of about 620, which is considerably lower than what you’ll typically need for conventional financing.

VA lenders can also have flexible benchmarks when it comes to your debt-to-income (DTI) ratio, which looks at the relationship between your monthly income and major expenses. While the VA wants to see a DTI ratio of 41 percent or less, some lenders may allow a higher percentage for otherwise qualified borrowers.

VA borrowers can typically look to secure a new mortgage just two years removed from a foreclosure, short sale or bankruptcy.

2. No mortgage insurance

On top of that, all FHA borrowers and conventional buyers who can’t put down 20 percent are required to pay for mortgage insurance. That can add a couple of hundred dollars to your monthly mortgage payment.

Conventional borrowers can often get out from under their mortgage insurance once they’ve built up about 20 percent equity in the home. But FHA borrowers now pay their mortgage insurance for the duration of their mortgage term, which is often 30 years.

Despite the $0 down payment, VA loans don’t come with or require mortgage insurance. That’s a huge benefit that helps veterans stretch their buying power.

3. Rates and closing costs

Contrary to common misconception, interest rates on VA loans are competitive with conventional mortgage rates, if not consistently lower. That’s another potential cost-savings benefit for VA homebuyers. Lower rates can mean lower monthly payments.

The VA also limits what veterans pay in closing costs. In fact, VA borrowers are flat-out barred from paying some costs. Sellers can pay all of a buyer’s mortgage-related closing costs and up to 4 percent of the purchase price in concessions, which can cover things like prepaid property taxes and homeowners insurance.

There’s no guarantee a seller will pay some, all or any of your closing costs. But these protections and benefits help put VA borrowers in a great position to get the most from this increasingly powerful loan option.

4. Zero down payment 

Being able to purchase a home without making a down payment is a tremendous benefit for military borrowers.

Many homebuyers must spend years saving enough money to cover the usual minimum down payment for conventional (5 percent) or Federal Housing Administration (FHA) loans (3.5 percent). On a $300,000 purchase, you’re talking about a nest egg of $15,000 for conventional and $10,500 for FHA.

VA borrowers don’t need to come to the closing table with that kind of cash. That allows veterans and service members to get into homes sooner.

Military Pay Allotments

An allotment is a designated amount of money that is automatically distributed for you, from your pay. There are many reasons to have an allotment, including setting aside funds for family, paying off a loan from the military, or paying for your life insurance premiums. The following summarizes what you need to know about allotments:

There are two types of allotments: discretionary and non-discretionary. You can have up to six discretionary allotments per month, and any number of non-discretionary allotments, as long as the total allotments per month is 15 or less.

Your allotment is evenly divided between your semimonthly paychecks. For example: If you have an allotment of $100 it will reduce your take-home pay on the 1st and 15th by $50.

All active duty service members, midshipmen, cadets, and reservists on EAD are eligible to make allotments from their pay. In addition, to help servicemembers transition from active duty to retired status, retirees are eligible to continue all existing authorized allotments.

Discretionary Allotments

A discretionary allotment is a voluntary allotment that is setup by a member and may be stopped, started or adjusted at will. Members are authorized no more than six discretionary allotments.

Examples include, but are not restricted to, the following:

  • Payment of premiums for commercial life insurance on the member, the member’s spouse or children.
    • Eligible allotters are:
      • U.S. Government Life Insurance and National Service Life Insurance
      • Commercial insurers
      • Navy Mutual Aid
  • Voluntary payment to a dependent or other relatives.
  • Deposits to a financial institution, mutual fund company, or investment firm.
  • Payment of mortgage or rent.
  • Deposits into the DoD Savings Deposit Program.
  • Payments to the Air Force Enlisted Members Widow’s Home for Air Force members only.

Non-Discretionary Allotments

Non-discretionary allotments may be voluntary or involuntary and they cannot be started or stopped at the member’s will. Non-discretionary allotments of military pay and allowances by members in active military service are limited to the following:

  • Government Indebtedness
    • Voluntary liquidation of indebtedness to the U.S. including those incurred due to defaulted notes insured by the FHA or guaranteed by the VA or payment of amounts due under the Retired Serviceman’s Family Protection Plan.
    • Any other indebtedness to any department or agency of the U.S. Government (except to the military departments that pays the member).
    • Any repayment of debts owed to an organization for funds administered on behalf of the U.S. Government and any such debts assigned to a collection agency.
  • Purchase of U.S. savings bonds
    • The purchase of U.S. savings bonds is by Class B allotment. One year bond purchases cannot exceed $15,000. Series EE and I bonds are available.
  • Relief Repayments
    • Repayment of loans to the Army Emergency Relief, Navy and Marine Corps Relief Society, Air Force Aid Society, and American Red Cross.
  • Charity
    • Members are authorized to make charitable contributions by allotment to the Army Emergency Relief, Navy and Marine Corps Relief Society, or affiliates of the Air Force Assistance Fund.
  • Child and Spousal Support
    • When the member on extended active duty has failed to make support payments, a cognizant DFAS site with proper notification will start a statutorily-required child or child and spousal support allotment from the members pay and allowance.
  • Debts for Non-Discretionary Allotments
    • Payment of delinquent federal, state or local income or employment taxes.
    • Commercial Debt -When a member fails to pay debts owed to a commercial creditor, the creditor can make application for recovery of this debt.
    • Delinquent Travel Charge Card Debt -When a member fails to pay debts due on their charge card, the heads of agencies have authority, upon written request of a federal contractor, to collect the debt.
  • Assistance Funds
    • The Post-Vietnam Era Veteran’s Educational Assistance Program provides education assistance on a contributory basis to those eligible members entering the Armed Forces on or after January 1, 1977, and before July 1, 1985, who might otherwise be unable to obtain a higher education.

Restrictions:

  1. Power of Attorney – A general power of attorney is not allowed to establish, change or stop an allotment. A member must specifically designate a special power of attorney to make changes to allotments.
  2. Minors – Allotments (except bonds) are not made payable to children under 16.
  3. Mentally Incompetent Persons – Appointed guardians or the institution can receive an allotment where the mentally incompetent person is confined.
  4. Member Awaiting Trial by Court-Martial – Members cannot register allotments between the date that a court-martial is ordered and the date of the approval or disapproval of the sentence. Standing allotments are discontinued when it is necessary to permit the collection of the forfeiture in the monthly amount specified and the time limitation stated by the court-martial, or if the member is sentenced to forfeit all pay and allowances. Prisoners are able to register allotments if the amount of the pay and allowances not forfeited is sufficient to cover the deductions.
  5. Returned Absentee, Deserter, and Prisoner – Allotments are not registered for a returned absentee or deserter unless DFAS has verified the member’s pay status.
  6. Fraudulent Enlistment – Pay and allowances are not allotted when pay is suspended pending final action on determination of fraudulent enlistment.
  7. You cannot have discretionary allotments to purchase, lease, or rent personal property. Personal property includes vehicles, appliance, household goods, electronics, and all other consumer items that are tangible and movable.
  8. Reduced Pay of Allotter – Allotments are discontinued when a reduction in grade or stoppage of pay does not leave sufficient funds for allotments in force.

If you have an allotment question or problem, you should visit your local pay office with the question first. If your pay office can’t resolve the problem, it should officially refer your question to DFAS.

Troops Get Another Big Pay Raise in 2021 Budget Request

The proposed military pay raise for fiscal 2021 in the Defense Department’s budget request, released Monday, is 3%, the second-highest pay raise for troops since 2010.

The 3% raise, following 2020’s 3.1% bump, ensures that the troops will be “well compensated” and underlines DoD’s recognition that military and civilian personnel “are our most valuable resource” in carrying out the 2018 National Defense Strategy to counter China and Russia, according to the Pentagon’s budget overview. The total Pentagon budget request for fiscal 2021 totals $705.4 billion, part of a defense spending package with a $740 billion topline.

The overview said the raise is aimed at giving the military a “competitive compensation package” to offset the drain of highly-trained personnel to the civilian sector “even as the Department prioritizes funds toward the NDS.”

The raise is part of an $8.7 billion increase over the fiscal 2020 budget for wages and benefits, DoD said, and is expected to survive protracted and heated negotiations on the overall budget between Congress and the White House. If passed, the raise would go into effect next Jan. 1.

Although one-tenth of a percentage point below the 3.1% raise in fiscal 2020, the 2021 proposed raised still ranks as the second-highest pay increase since the 3.4% hike in 2010. Other pay increases since 2010 have ranged from 1% to 2.6%.

The bump is also in line with the 2.9% increase for civilian workers indicated by the latest quarterly report on the U.S. Employment Cost Index (ECI), put out by the Labor Department’s Bureau of Labor Statistics.

That figure does not limit the president, Congress and DoD in the final military pay raise proposal, but has traditionally served as a major factor in the final decision.

Last year’s pay raise meant about $815 more a year for junior enlisted troops. For senior enlisted and junior officers, the raise was about $1,500 more. For an O-4 with 12 years of service, the raise meant about $2,800 more.

The 2021 proposed raise would bring with it similar paycheck increases.

However, the latest pay raise could signal the last of the big pay increases as overall defense budgets are expected to enter a phase of leveling off or even declining, as Defense Secretary Mark Esper and other top DoD officials have warned.

“We have to brace ourselves that at best, defense spending will be level” in future years, Esper said last Thursday at the Johns Hopkins School for Advanced International Studies.

The requested increase would keep the pay for military personnel in line with increases in the civilian sector and serve to aid retention, said retired Air Force Col. Dan Merry, vice president of government relations at the Military Officers Association of America.

“Whatever the baseline increase” for the military, “it should be no less than that of the civilian population,” Merry said.

The raise would send a positive message to troops thinking of making a career of the military, and also to troops retiring next year, Merry said.

Retirement pay is based on the last year of service, and Cost of Living Increases (COLA) increases for retired personnel are then based on the Consumer Price Index, Merry said.

Here are the basic military pay raises going back to 2007, according to the Defense Department:

  • Jan. 2007: 2.2%
  • April 2007: 0.5%
  • 2008: 3.5%
  • 2009: 3.9%
  • 2010: 3.4%
  • 2011: 1.4%
  • 2012: 1.6%
  • 2013: 1.7%
  • 2014: 1%
  • 2015: 1%
  • 2016: 1.3%
  • 2017: 2.1%
  • 2018: 2.4%
  • 2019: 2.6%
  • 2020: 3.1%
  • 2021: 3%