Loan and Benefit Information for Veterans and Military

Be prepared. It’s the age-old motto of the Boy Scouts. When it comes to finances, it’s the single most important thing a member of the National Guard can do to ensure as smooth as possible of a deployment—before, during and after.

There is a lot going on before a deployment. “We knew it was coming, we’d been preparing for so long. My husband was born to do this—he’s been in the Guard for 18 years! But when the time actually came, it seemed surreal,” said Kate, wife of a National Guard member currently deployed to Mississippi, then off to Iraq.

While The Guard fights for equal recognition with the other branches of the Armed Forces, many at home are unaware of what the Guard does and the toll it has on their families. Some service members come home from deployment and are soon rushed off to fight wildfires or patrol after Hurricanes. Despite these facts, the Guardsmen do not get the same level of benefits or treatment for non-combat injuries that full-time soldiers receive. These slights are now being addressed during this election and there appears to be optimism among many Guardsmen.

The tears, the goodbyes and the emotions involved can overshadow the practical details to consider. Attention to detail will help alleviate stress when your loved one departs as well as when he or she returns. Here is a list of ideas:

Get organized! Put together a checklist. See the sidebar for helpful links—you will find multiple websites possessing already prepared checklists to follow to help you get your various accounts and all of your finances in line.

If the family member being deployed regularly handles the bills and the household finances, properly instruct the other head of household how to pay the bills and handle the finances in the Guard Member’s absence. Be sure to determine which accounts allow family access to ensure the head of household can properly service the account while the Guard member is away. Be sure to contact all of your various credit companies, banks and any investments you might hold and let them know about the deployment. If you have credit cards where the deployed is the borrower and the spouse is an Authorized User that could cause problems. Check your billing statements to verify.

While the service member is deployed, the added pressure and stress on the remaining sole head of household can lead to late payments and other actions that will lower credit scores. Setting up automatic bill pay from your checking account can be one way to assure that your credit remains in tact. Shop around for a bank offering free online bill paying.

You need to consider clarifying the Power of Attorney status for the deployed. A General Durable Power of Attorney gives the spouse the authority to act on the service member’s behalf in financial matters. If you anticipate buying or refinancing a home, you will need a Specific Power of Attorney for that purpose. When the deployed returns, it can be difficult for the spouse to relinquish the finances once again—remember that the family finances require a team approach!

Have a plan in place in case you ever find your family at the point of insufficient funds.
You may even want to inquire about overdraft protection, in the event of an error or temporary cash flow problems. “We have a rental property, so before I was deployed I took out a HELOC (Home Equity Line Of Credit) for an extra resource to draw on to cover the expenses if something went wrong with the rental,” said Chuck Thompson, Guard Member who served 2 deployments to Iraq. Be warned—some banks are freezing Home Equity lines and credit cards for the amount outstanding. Check your statements monthly to assure that your original line amount is still intact. Frozen credit lines not only will dry up any funds needed for an emergency, this will also lower you credit score dramatically as you will appear to be “maxed out” on that line.

Take time to copy all important documents. In addition to copying your license, passport and social security card, make copies of all credit cards, their numbers and company information. If your wallet is stolen, you will have the appropriate information to alert your credit card companies and credit bureaus, which will assist in preventing ID fraud.

Realize that the extra military income may not entirely offset the additional family expenses. Without the second parent to share parenting duties in cases of families with children, simple things can end up costing money. An everyday task like a doctor’s appointment might require a babysitter, therefore incurring a babysitting fee. Additionally, with the second parent gone, the spouse and kids might find they want to visit more friends and family, again, incurring extra expenses in the way of travel.

Another vehicle to consider is the new Military Reverse Mortgage (MRV). This reverse mortgage program allows military families to obtain a loan with no payments due in order alleviate financial stresses while the service member is deployed. The borrowers must be 62 years of age, just as with a regular reverse mortgage, but the money received can be used for a number of purposes. Kevin Murphy, President of Freedmont Mortgage®, is the first lender to offer the Military Reverse Mortgage and he states that there has been great demand since the product first came out in late September. Murphy gives the example of one client: a working mother with four kids all under 10 years of age was finding it difficult to juggle all of her responsibilities while her husband was deployed. She could not quit her job, but her job required some travel. The solution was to have her parents obtain a MRV and she used the funds to pay off both cars and to hire an au pair for 12 months. The au pair provided 40+ hours a week of help a week, plus as a live-in provided the nighttime coverage required. Paying off the car provided the freedom from car payments. Once the husband returns from active duty, the money can be repaid back to the parents (not required) or can be treated as a gift (if so chosen). If considering a MRV, be sure to consult a tax advisor.

Murphy stresses how important credit scores will be in this economy, especially for active military families. His firm offers an online credit score simulator (see sidebar) which they use to help clients get better rates and terms, and the higher the score, the better the rate. This product has been utilized by various unions and military families with great success. “The average client sees their score increase over 48 points but we have recent cases where clients have increased over 100 points and that translates to thousands of dollars in savings on loans, credit cards, insurance and other areas of everyday life,” adds Murphy.

Visit your HR department. Make sure they are informed and on the same page about your deployment plans to avoid any confusion in regards to payment, health insurance and job status. Following a deployment, many reservists are concerned about whether their job will be waiting for them upon return. Be familiar with your rights under USERRA (The Uniformed Services Employment and Reemployment Rights Act), and keep the lines of communication open with your employer.

Check your withholdings—service members fill out a W-4 upon entering the military. The more exemptions claimed, the more money will appear in your paycheck and less will be withheld. IRS supplies a calculator to determine withholdings on their website: www.irs.gov/individuals/page/0,,id=14806,00.html.

Be familiar with the rights afforded to your family under the Servicemembers Civil Relief Act (SCRA). SCRA provides a number of provisions to help the deployed and his/her family meet financial obligations. The relief is NOT, however automatic—you must invoke or request relief. A few commonly invoked benefits of SCRA:
Cap on interest rates: If you can establish that active duty will cause you to be unable to pay the loan, you can reduce interest rates to 6 percent per year for the time you remain active duty. The cap applies to credit cards, mortgages or other loans you or your spouse acquired prior to being called to active duty, not loans obtained while on active duty. Federal student loans are exempt from the cap as well.
Credit Protection: No lender can deny credit, change a loan’s terms or deny credit as a result of your seeking SCRA protection. Taking advantage of your rights under SCRA cannot be used against you by a lender making the assumption that you are not able to repay a loan, therefore a bad credit risk.
Protection against foreclosures, forced sales and higher rents: If being on active duty causes you to be unable to pay your mortgage, SCRA could be helpful. Your property cannot be foreclosed upon without a court order, and under some circumstances the service member can request a stay. For example, the highest rate in 2006 for protecting active duty military families from eviction from a rental was $2615.15 per month. A cost of living adjustment happens each year.

Once the deployment is over, there is an adjustment period. The joy and relief of being reunited with your loved ones sometimes leads to overspending on things like trips and big ticket items, often in an effort to make up for lost time. If the deployment resulted in financial difficulties, remember that even though you are happy to see each other, you need to keep your budget in mind. You still might be paying for those added expenses like extra baby sitters and long distance phone calls that added up over the course of the deployment.

If you do find you can afford a big purchase or a fun trip upon return, remember to seek out military discounts. “I went to Disney World after I returned and we were able to get a huge discount on our tickets,” said Lt. Col. Charles Kohler. “I’ve found people really want to support us—I went to a Chinese restaurant shortly after returning and I went to pay. A lady had already paid for my lunch out of appreciation. I thought that was really great!”

If job search assistance is an issue for a service member after deployment, a program called TAP (Transition Assistance Program) exists. TAP provides support and education through the Dept. of Labor, Defense and Veterans Affairs to help the guard member to find the best work situation in the civilian job market. Who is eligible? Service members and their spouses within one year of their separation or two years of their retirement from military.

A great program for any service member to consider after the deployment is the VA loan program. “I used a VA loan for my first house years ago,” said Chuck Thompson. “They are very helpful—it’s a great program.” Many Guard Members don’t realize that once called to active duty during wartime, they only need to serve for 90 days to become eligible for a VA loan. During peacetime, a guard member needs to serve 181 days of continuous active duty to be eligible for a VA loan. In regular circumstances a reservist or guardsman is required to serve 6 years to become eligible for the VA loan.

Despite the sacrifices made by our military for our country, our Government saw fit to exclude VA loans from the recent loan program overhaul. While Fannie, Freddie and FHA all had their loan limits increased, Congress did not choose to raise VA loan limits. VA limits should rise in the coming months –it is one of the last 100% financing programs available. Kevin Murphy of Freedmont Mortgage adds “I had one case where the seller put $1500 toward the lease to enable the veteran to buy his home. Anything to help the veteran.” When using the VA loan, concessions can be utilized to contribute toward things such as new appliances. Moreover, many veterans are unaware that they can reuse their VA benefits. Please see sidebar for more details and a link to check eligibility requirements on the VA loan.

Moving forward, maybe Congress is seeing the benefit of equal consideration for the National Guard—the Air National Guard is about to have their first-ever four-star general, Lt. General Craig McKinley. Once bestowed, he should be seated among the Joint Chiefs of Staff.

Remember, take the time to pay attention to the details and deployment will be more manageable when it comes to the family finances. Why make it harder on yourself when you and your family will be experiencing so many changes and adjustments? Just like that old motto goes—BE PREPARED!

Credit Reporting

“Having a good credit rating is more important now than ever, but determining exactly what yours is gets complicated.” CNN Money

In the current economy, your credit score carries more weight than ever before. A good score can help save you money in everything from interest rates to insurance premiums, to rental rates. Improving your credit can be done effectively and easily if done correctly. Beware of companies promising to repair your credit—it can be costly and if the process is done incorrectly, your score could end up lower than before!

Credit reports should be examined at least once a year. A very good way of determining not only your credit scores but how to improve your credit is to use the Credit Simulator. The Credit Simulator gives you the 3 major credit bureau credit scores plus a multi-page blueprint that maps out the steps to follow to improve your credit score. An experienced staff offers years of expertise to guide you and clarify the report. Go to www.freedmont.com and click on Online Credit Reporting to get started.

 

VA Home Loans

Every Guardsman and Reservist should know about the benefits he/she is entitled to by having served as an active military member. Eligibility requirements for Guardsmen depend on the amount of time served as active-duty, whether during wartime or peacetime. In order to determine eligibility, the best thing to do is apply for a certificate of eligibility with The Veterans Administration. The VA Form 26-1880 must be submitted, and can many times be obtained through your lender.

Why a VA Loan? Whether purchasing a new home or doing a refinance, VA loans offer some distinct benefits. Most notable, VA loans are among the last loans in the marketplace requiring no downpayment. They also offer easier credit requirements and no monthly mortgage insurance. Loan limits have been increased to $417,000, sometimes more depending on equity. There are extra benefits for disabled veterans as well.

Quick Steps to a VA Loan:

1. Apply for Certificate of Eligibility by submitting Form 26-1880.
2. Decide on a home
3. Order a VA appraisal through your lender
4. Apply for the VA Loan with your lender
5. Close loan.

Always remember to seek out trusted advisors, including an experienced lender to help you through the process.