From the outbreak of the Mexican American war in 1846 to campaigns being waged this very day in multiple countries around the world, New Mexico servicemen and women have bravely defended America’s Constitution and way of life. With that 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 US veterans in fiscal year 2022 (Oct. 1, 2021, to Sept. 30, 2022), according to the US Department of Veterans Affairs. A total of 5,259 of those loan guarantees were issued to New Mexico veterans. Of that number, 801 were utilized to purchase, 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 objective of the VA Home Loan Guaranty program is to help eligible Veterans, active-duty personnel, surviving spouses, and members of the Reserves and National Guard purchase, retain, and adapt homes in recognition of their service to the nation,” according to the VA website at https://www.benefits.va.gov/homeloans/.
The website also details the Native American Veterans 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 entered into memorandums of understanding with 110 participating Native American tribes. During FY 2022, VA closed 40 loans under this program. Since its inception, VA has made 1,205 loans to Native American Veterans.”
The concept behind the program is simple. Veterans who have decent credit and a steady source of income can use their benefit to purchase a home in Doña Ana County with no down payment. There is no longer a maximum purchase price for Veterans wishing to use a VA loan. Veterans can obtain a loan for any amount they can qualify for based on their credit and income. Key lending criteria include no maximum debt ratio, no minimum credit score and no mortgage insurance, although VA does oblige lenders to make sure the veteran has the ability to repay the loan. Most Las Cruces-area banks, credit unions and mortgage companies offer VA loans.
With the exception of disabled vets and their surviving spouses, the VA charges the veteran a one-time “funding fee” for purchase loans between 1.4 and 3.6 percent of the loan amount, depending on whether the buyer opts to utilize a down payment. This fee helps pay for the administrative costs of the program.
A side benefit to a VA loan is that it is assumable, which is to say that a qualified buyer can assume the veteran’s loan. Buyers who assume VA loans don’t have to be veterans and are not required to live in the home. Unfortunately for the veteran, his or her eligibility remains tied up in the home until the new borrower pays off the loan. Veterans can retain their eligibility, however, if another veteran assumes their loan. Veterans who assume a VA loan and substitute their eligibility for the eligibility of the original borrower frees up the original veteran’s benefit to be used again. The veteran who assumes the loan must occupy the home as their principal residence.
VA loans may add value to a property in the future. Let’s say a veteran with an existing VA loan at 3.5 percent decides to sell his home after living in it for 5 years. Let’s also say the home’s value estimated by 4.0 percent each of those years, resulting in equity of around 20 percent. Equity is the difference between the value of a property and what’s owed against it. Would a buyer with 20 percent down be better off financing his purchase with a new 30-year loan at 7 percent, or by utilizing the 20 percent to assume a VA loan at 3.5 percent that has 25 years remaining? The answer is almost assuredly 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 Manpower Data Center as of December 31, 2021: 13,914 New Mexicans were on active duty, along with 4,774 military spouses, 8,385 active-duty children, 7,824 National Guard reservists, 3,215 National Guard spouses, and 5,116 National Guard reserve children.
For the thousands of New Mexicans eligible to apply, this valuable benefit may be worth exploring. For more information, contact your Realtor; the VA’s Phoenix Regional Loan Center at 800-827-1000 or Phoenix Regional Office, Regional Loan 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., Realtors in Las Cruces. He loves to answer questions and can be reached at 575-642-2292 or [email protected].
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