From the outbreak of the Mexican-American War in 1846 to the campaigns today in many countries around the world, New Mexico’s military has bravely defended the American Constitution and way of life. Along with this service came a long list of benefits, one of which is the VA home loan guarantee. The third most popular benefit was used by 746,090 U.S. veterans in fiscal year 2022 (Oct. 1, 2021 through Sept. 30, 2022), according to the U.S. Department of Veterans Affairs. A total of 5,259 of these loan guarantees were issued to veterans in New Mexico. Of those, 801 were used to buy, refinance or upgrade a home in Doña Ana County, according to Jesus Rodriguez, public information officer for the VA’s Phoenix Regional Loan Center in Arizona.
“The purpose of the VA Home Loan Guaranty program is to assist eligible veterans, active duty personnel, surviving spouses, and members of the Reserves and National Guard to purchase, maintain, and adapt homes in recognition of their service. to the nation,” according to the VA website at https://www.benefits.va.gov/homeloans/.
The the website also gives details the Native American Veteran Direct Loan Program, which “helps Native American veterans or Native American non-veterans finance the purchase of homes on federal trust lands. The VA has memorandums of understanding with 110 participating Native American tribes. In fiscal year 2022, VA entered into 40 loans under this program. Since its inception, VA has issued 1,205 loans to Native American veterans.
The concept behind the program is simple. Veterans with decent credit and a stable source of income can use their allowance to purchase a home in Doña Ana County without a down payment. There is no longer a maximum purchase price for veterans wishing to use a VA loan. Veterans can get a loan for any amount they can qualify for based on their credit and income. Major loan criteria include no maximum debt ratio, no minimum credit score, and no mortgage insurance, although VA requires lenders to ensure the veteran has the ability to repay the ready. Most banks, credit unions, and mortgage companies in the Las Cruces area offer VA loans.
With the exception of disabled veterans and their surviving spouses, the VA charges the veteran a one-time “finance fee” for purchase loans between 1.4 and 3.6 percent of the loan amount, depending on whether the buyer chooses to use a deposit. This fee helps pay for the administrative costs of the program.
A secondary benefit of a VA loan is that it is assumable, meaning a qualified buyer can assume the veteran’s loan. Buyers who take on VA loans do not need to be veterans and are not required to live in the home. Unfortunately for the veteran, his eligibility remains tied to the home until the new borrower repays the loan. However, Veterans can retain their eligibility if another Veteran assumes their loan. Veterans who take on a VA loan and substitute their eligibility for the original borrower’s eligibility free up the original veteran’s benefit for reuse. The veteran who assumes the loan must occupy the house as their principal residence.
VA loans can add value to a property in the future. Let’s say a veteran with an existing 3.5% VA loan decides to sell his home after living there for 5 years. Let’s also say that the value of the house appreciated by 4.0% each of those years, resulting in an equity value of about 20%. Equity is the difference between the value of a property and what is owed to it. Would a buyer with a 20% down payment be better off financing their purchase with a new 7% 30-year loan, or using the 20% to take on a 3.5% VA loan that remains for 25 years? The answer is almost certainly yes.
New Mexico was home to 158,994 New Mexico veterans as of November 2020, according to the NM Department of Veterans Services. According to the Department of Defense’s Defense Workforce Data Center as of December 31, 2021: 13,914 New Mexicans were on active duty, along with 4,774 military spouses, 8,385 children on active duty, 7 824 National Guard Reservists, 3,215 National Guard spouses, and 5,116 National Guard spouses. Child care reserve.
For the thousands of eligible New Mexicans, this valuable benefit may be worth exploring. For more information, contact your real estate agent; the VA Phoenix Regional Loan Center at 800-827-1000 or Phoenix Regional Office, Regional Lending Center – Phoenix Regional Office (va.gov), or your local lender.
Thank you for your service!
Gary Sandler is a full-time realtor and president of Gary Sandler Inc., real estate agents in Las Cruces. He loves answering questions and can be reached at 575-642-2292 or [email protected].