Shopping for a mortgage is important because interest rates can vary between lenders by as much as 1 percent, and in some cases, the interest rates offered to you by the same lender can vary, depending on the loan originator’s commission. This is true of all home loans, including those insured by the Department of Veteran Affairs. This means that failing to shop for a mortgage can cost you thousands of dollars in upfront costs and tens of thousands in excess interest over the life of your loan.

While it’s important for veterans to shop for a mortgage in all economic environments, it’s especially important to do so during the current economic crisis caused by COVID-19. The reason? Capital is being reserved for loans to borrowers who are perceived to be the lowest risk (i.e. prime loans which are made to borrowers with high credit scores, low debt-to-income ratios, and higher down payments). This “flight to safety,” which is perpetuated by the uncertainty about the future of the economy, is causing an increase in interest rates for loans insured by government loans like those from the Department of Veterans Affairs and the Federal Housing Administration because these loans are perceived to be higher risk. Therefore, despite the Federal Reserve’s commitment to buy trillions of dollars of mortgage-backed securities, lenders that originate the loans that ultimately go into these securities are tightening their credit standards, raising interest rates to offset risk, and in some cases, even suspending government loan products all together.

For example, today a borrower with a 740-plus credit and 20 percent down that is securing conventional financing can expect interest rates near historic lows. On the other hand, a borrower with a credit score below 640 and less than 20 percent down can expect interest rates a full 1 percent to 2 percent higher than what was available just several weeks ago, if financing is even available at all. The spread between interest rates offered by lenders for conforming loans and government loans has widened because the investors that buy the mortgage-backed securities made up of government loans are demanding abnormally high returns for the additional risk.

Not only is shopping for a mortgage important to ensure you don’t overpay, but it can be the difference between securing financing or getting denied. In fact, at my company, Own Up, a veteran that recently used our service to shop for a mortgage was able to find a lender in our marketplace that offered an interest rate 0.75 percent below what he was being offered from his existing lender. This experience will save him and his family more than $17,000 over the life of the loan.

All mortgage lenders are under pressure due to the current economic crisis, and that is affecting rates for all government loans, including VA loans. However, there are still many lenders out there that are willing to work with veterans and will do their very best to make sure you’re getting fair terms. In times like these, it’s important for everyone to look for ways to save money, and there is no better place to start than with your home mortgage.

Patrick Boyaggi is co-founder and CEO of Own Up, a mortgage technology company that exists to make sure every American gets a fair deal on their mortgage. Own Up has helped tens of thousands of customers search for and secure a home mortgage. The average Own Up customer saves more than $20,000 over the life of their loan.

And no one involved in the purchase — including his realtor, his builder or his lender — suggested that he use the benefit. He even showed up to some meetings in uniform.

“You don’t know what you don’t know,” he said.

The VA home loan program, which is more than 75 years old, can be used, in general, to buy, build or refinance a home. It’s available to nearly every service member and veteran. And it can save you tens of thousands of dollars.

Bergjans, a Navy reservist, is now senior vice president and national director of military lending for Caliber Home Loans, which does business in all 50 states. The company ranked 13th in volume of VA loans in fiscal 2019, with 7,795 loans.

When he looks back at his own experience buying a home, there weren’t any malicious reasons behind the fact that he wasn’t offered the VA loan benefit, Bergjans said. It simply wasn’t on their list of options. “I had a straight lack of knowledge, no understanding.”

But he’s used his benefit since then. And that experience is part of the passion behind his effort to educate realtors. He speaks to thousands of realtors around the country every year, working to dispel some of their myths about VA loans.

Caliber Home Loans also partners with the MilHousing Network, an organization founded by two military spouses who are realtor estate agents, Lindsey Litton and Karina Gafford. MilHousing Network matches military families around the country with their network of about 1,500 military-friendly agents to help them find their new homes.

They also conduct military buyer training for real estate agents. Among the most important points: All agents should ask every buyer if they’ve ever served in the military, Litton said.

And according to everyone — real estate agents, lenders, VA officials in charge of the home loan program — the most important thing active-duty members and veterans can do when buying a home is to ask questions of their potential agent and lender about their experience with VA loans.

“If they’re going with a lender or a real estate agent who has done one or two VA loans in a year, that’s probably not who I would choose to go with,” said John Bell, deputy director of the VA Loan Guaranty Service.

“I would gravitate toward those people who know how to provide the benefit. I would ask those questions. How many VA loans have you done? How much training do you have for VA loans? What kind of advocacy are you doing for VA lending? I would ask those questions of not only my lender, but my real estate agent.”

The VA has made a concerted effort working with the Realtor community, such as providing training about the benefit, in order to combat some misconceptions, he said. There are myths that have been around for 20 or 30 years, he said, “and tackling those and really tearing down those perceptions have been the biggest struggle” for VA employees every day.

Bergjans warns veterans that it may be a challenge in some areas to use their VA home loan benefit, because real estate agents and lenders who don’t understand the benefit guide their customers to other, possibly more expensive, loan programs. “There’s a national epidemic with this,” he said.

Having that real estate agent who understands the military lifestyle is important for other reasons, said Karina Gafford, a real estate agent in San Antonio. For example, that agent should be very familiar with the area where an active duty service member is looking to buy a home, considering questions such as the likelihood of being able to sell or rent the home in two or three years. Borrowers need to evaluate their own situation to determine whether it makes good financial sense to buy a home.

In conversations with these service members, she said, “We ask them if they are prepared to be a landlord. You’re still subject to the whims of Uncle Sam. If Uncle Sam says ‘Jump!’ in six months, it doesn’t matter if you prepared and bought the perfect house that could easily be resold in three years’ time. If you have to move in six months, how quickly can you get your house rented, and how much can you rent it for?”

Bigger benefit now

One of the biggest advantages of using the VA home loan benefits has always been not having to make a down payment when purchasing a home, up to certain loan limits. That advantage just got bigger, with a new law that went into effect Jan. 1 that took away those loan limits, for veterans who have the full VA loan entitlement.

As a result, more veterans will be able to buy homes in high-cost areas.

The Blue Water Navy Vietnam Veterans Act of 2019 took away the loan limit maximums previously required in certain areas of the country. Qualifying VA borrowers could get higher loan amounts, but because of the restrictions on the loan amount the VA could back, borrowers had to make a 25 percent down payment on that part of the loan that was the difference between the sales price of the house and the loan limit.

Using an example provided by the VA, the VA loan limit was $690,00 in San Diego last year. A borrower buying an $879,000 house — $189,000 over the loan limit — had to pay a $47,250 down payment under the 25 percent requirement.

“We view it as a very positive thing for veterans, their ability to make those decisions to get into homes without using a lot of their money that they have saved up,” said the VA’s Bell. “We’d rather they would use their savings to buy things once they get into a home, instead of running up additional credit that could hurt them in the future.”

“I expect it to make a very big impact to our service members and veterans,” said Kevin Hall, assistant vice president of mortgage loan operations for Navy Federal Credit Union. “We’re in the early going, but we’re already seeing good results. This will allow service members and veterans to maximize their budget and their benefit.

“Before, just because you happened to be stationed in San Diego, or one of those other [higher cost] areas, you had to put money down, when others didn’t. Now that problem has been alleviated.” About 50 percent of Navy Federal’s mortgage loans are VA loans, and the credit union was the fourth largest lender in terms of VA loan volume in fiscal 2019, with nearly 30,000 VA loans.

The funding fee

Bell said VA officials are monitoring another change in law which took effect Jan. 1 — the increase in the VA funding fee due at closing. For active duty members and veterans who are first time buyers, it increases by 0.15 percent, now at 2.3 percent of the loan.

For those VA borrowers on their second or subsequent use of the benefit, the funding fee is higher, and the increase is larger. The funding fee has gone from 3.3 percent to 3.6 percent. So that’s $3,600 on every $100,000 borrowed.

As always, the funding fee can be rolled into the mortgage. But you’re still paying it.

That funding fee is reduced for VA borrowers who make at least a 5 percent down payment. Every borrower’s situation is different, and it pays to look at different scenarios with the lender.

Certain veterans, including veterans who receive any VA compensation for a service-connected disability, don’t have to pay the funding fee.

And under the new law, active duty service members who have received a Purple Heart don’t have to pay a funding fee if they close on the home while still serving on active duty.

Some tips and things to know about the VA home loan benefit:

* The interest rate on VA loans is generally lower than traditional private mortgages.

* You don’t have to buy private mortgage insurance, even without a down payment, which can save a couple of hundred dollars a month. Typically on other loans, if you don’t make a down payment of 20 percent, you have to pay monthly PMI premiums.

* You don’t have to have perfect credit. Generally with a VA loan, you’re going to get an “awesome” interest rate with a credit score of 680, 700, 720, Bergjans said. But even so, the average credit score of VA borrowers is well over 700, surpassing that of the average civilian borrower, he said.

* The number of VA loans used to buy homes has been increasing. About one third of VA borrowers are the youngest millennials leaving the military after their first tour and buying a home, Bell said.

* Understand what a loan guaranty is,” said NFCU’s Hall. “It doesn’t mean you’re guaranteed to receive a loan. You still have to meet qualifications.” The VA doesn’t make the loans; it provides the guaranty to lenders to back the loans.

* VA’s requirements are designed to help ensure that veterans have the financial ability to make their payments and stay in their homes. Lenders may have their own extra requirements.

* The VA has staff trained in helping VA borrowers who find themselves in financial trouble. “For us, it’s more important for the veteran to stay in the home than it ever is to get into one,” the VA’s Bell said. Veterans can call 1-877-827-3702 to reach a loan service representative. The foreclosure rate on VA-backed loans remains at less than 1 percent, Bell said.

* Be aware that 100 percent financing doesn’t mean it’s a free loan, Bergjans said. Be prepared to put down “earnest money” with your offer to buy a house, especially in more competitive markets. And besides the VA funding fee, there may be other costs at closing.

* Realtors and lenders who are experienced with VA loans are also helpful to those who are making a PCS move and don’t have much time for the process, including negotiating. These professionals know the nuances of VA loans, know how to work with a seller’s real estate agent who may be resistant to a VA loan. Gafford notes it’s a good idea when shopping for a lender to ask if the loan officer is available on weekends. If not, you may lose negotiating power.

* The first step in applying for a VA home loan is getting a certificate of eligibility. You can apply for that certificate online at va.gov/housing-assistance/home-loans/how-to-apply, or by mail. In some cases your lender can help you get the certificate.

* Active-duty members as well as other veterans can use the VA loan benefit. Those on active duty now, and who have been on active duty for at least 90 continuous days, generally qualify for a VA loan. For other veterans, there are variety of scenarios, depending on the time when you served. Visit va.gov/housing-assistance/home-loans/eligibility/.

* You can use the benefit multiple times, and it doesn’t expire.

* Don’t fall for it when misinformed Realtors tell you that VA appraisals are bad, said Bergjans. “The VA appraisal is the best in the business, and is designed to protect the veteran.” The VA has minimum property requirements related to ensure veterans are moving into properties that are safe, sound and sanitary, Bell said. Officials also always advise every veteran to get a home inspection.

* Another misperception is that VA loans take longer to close, Bell said. The VA program’s average length of time to closing is “neck and neck with FHA” and within a few days of conventional loan programs, he said, with an average of about 54 days. Some lenders are faster.

* Call the VA loan center if you have questions about anything involved in the process, Bell said.

* If you have concerns about your lender, shop around for another VA lender.

* That said, those applying for a VA loan should do what their financial institution tells them to do, NFCU’s Hall said. These lenders do have underwriting requirements, and providing needed information and documentation in a timely manner is important for a smooth process.

But two military veterans who are now seasoned journalists want to change that.

That’s why Navy veteran Zack Baddorf and Marine Corps veteran Russell Midori launched Military Veterans in Journalism, a professional association designed to help veterans transition into media careers and will provide veterans with a journalism workshop next year.

“I think a lot of media outlets have been negligent in doing outreach to the military, veteran community and trying to hire them,” Baddorf, who served in the Navy from 2001-2006 and has more than 15 years of media experience, told Military Times. “That’s not to say that they don’t respect the values, or the skills that they would bring. They do.”

However, hiring veterans requires resources like time and money and as a result, Baddorf said media outlets haven’t been as proactive about recruiting veterans.

After informally mentoring people, Baddorf and Midori realized there was a need for a more formal institution and launched Military Veterans in Journalism in May to provide a mentorship program to veterans.

Furthermore, the association announced it is organizing a three-day Journalism Immersion Workshop in New York City in 2020 for nine veterans that will include panel discussions with senior journalists, a career fair with human resources representatives from media organizations and other networking events to meet other journalists.

Participants will also shadow a working journalist for a day.

Those selected for the program come from a variety of military backgrounds, including a retired Army pilot, a former Army combat medic and a former Navy electrician’s mate.

Although not all the veterans selected for the program have substantial journalism experience, Baddorf said he and Midori wanted a diverse group of applicants who had a desire to learn. For example, some veterans already have journalism degrees and jobs in the field, while others haven’t been published yet and are looking for ways to get their foot in the door.

The workshop will take place in the spring, although specific dates have not yet been selected.

Baddorf said as a journalist in the Navy, a rating that has since been merged with the mass communications specialist rating, he accumulated a strong portfolio reporting on the military.

Even though he applied for dozens of jobs following his service, he never heard anything back. Ultimately, he resorted to freelancing and was published in outlets including the New York Times and the Associated Press.

“I’m really proud of that experience, but it was tough,” Baddorf said. “I didn’t have any mentors, I didn’t really know the process for getting employed. And you know, it was a challenging experience making that transition.”

Midori, who now works for CBS News, faced similar challenges as he exited the military and Baddorf said it motivated them to create an outlet for veterans interested in journalism.

According to Baddorf, newsrooms and the public will benefit from more veterans in media jobs because they have a firm grasp on international affairs, military conflict and veterans affairs. Likewise, they also tend to have a more “non-partisan perspective,” Baddorf said.

“What the military is doing is a critical part of our public life and needs to be reported on with nuance and with understanding, and veterans are people who have experienced life within the military….They bring diverse experience and understanding of these issues,” Baddorf said.

The three-day workshop isn’t the only program that Military Veterans in Journalism wants to organize. Next on the horizon is working to secure fellowships and internships for veterans at various media outlets that could help them expand their portfolios and potentially lead to a full-time position.

“We believe that it’s that day-to-day experience that’s going to be good for their careers,” Baddorf said.

Department officials said they reviewed 130,000 cases over the summer to look for errors, which mostly involved simple clerical mistakes or disability ratings changes after veterans settled on their loans.

Under existing rules, veterans and service members must pay a VA funding fee when they apply for a VA home loan, with costs between 0.5 percent and 3.3 percent of total money lent. The money is designed to defray some administration costs for the department, but disabled veterans are exempt from the fee.

However, an inspector general report released earlier this year found that at least 53,000 disabled veterans had been charged the fees in recent years. VA officials announced in May they would review current and past loans, and contact veterans eligible for refunds.

In a statement, VA Secretary Robert Wilkie said the effort stretched back as far as 20 years ago. “Our administration prioritized fixing the problems and paid veterans what they were owed.”

The payout total was significantly above the nearly $290 million total investigators estimated earlier this year. Those refunds ranged from a few thousand dollars to more than $20,000 for some individuals.

VA officials also announced a new policy guidance for lenders to ensure they are asking veterans applying for the loans about their disability status, and establishing new internal processes for oversight over future loan applications which may qualify for waived fees.

The department has also planned new outreach efforts to help inform veterans of the waivers they are eligible to receive.

Officials said they consider their review of the issue now complete, but veterans who believe they may be entitled to a refund for mistaken fees can contact the department’s regional loan center office at (877) 827-3702 or visit the VA’s website for more information.

That included widening doorway so his wheelchair could fit through, making kitchen cabinets and hallway closets more accessible, and completely renovating showers so he could walk in without difficulty.

“It’s not just one thing you have to modify, it’s the whole thing,” said Kules, 38, who lost his right arm and left leg in a roadside bomb attack in 2005. “One of the changes we had to make was having our master bedroom on the first floor .. we’re lucky because we were able to make it work with what we had available.”

The Department of Veterans Affairs provides grants to disabled veterans for the housing work, but that wasn’t available to Kules because he had already used the program back in 2009, when he bought his first home.

That house was a good fit for the Kules family at the time, before the birth of his second daughter and his son. But as his family changed, the VA adaptive housing program didn’t.

On Thursday, Kules was on Capitol Hill with Wounded Warrior Project to lobby on behalf of an upgrade to the program. The group (along with other veterans advocates) is pushing for legislation boost the VA’s Specially Adaptive Housing Grant by more than 15 percent (to $98,000) and allow disabled veterans to renew the payout every 10 years.

“Young critically injured veterans will age, many will marry, and some will be fortunate enough to grow their families with children,” Derek Fronabarger, director of government affairs for WWP, told members of the House Veterans’ Affairs Committee during a hearing on the proposal.

“We want warriors to thrive in their work and personal lives. For those who seek new and better opportunities in life and career, relocating has to be an option. It is, in our estimation, unreasonable to expect a veteran to buy a home and never leave.”

Expanding the program is expected to cost about $120 million over 10 years. About 2,000 veterans use the program annually, a figure that would rise if veterans could apply a second time for the grants.

Lawmakers expressed general support for the idea at Thursday’s hearing, but also face a host of unrelated budget fights in coming months. Advocates say the issue is one that want to make sure doesn’t get lost in other priorities.

“This benefit is reserved for those catastrophically injured and who deserve our assistance throughout their entire life, not just one portion of it,” Fronabarger said.

Kules said he is comfortable in his renovated suburban Maryland home now, but he knows other disabled veterans aren’t as financially secure to be able to make similar moves without government help.

“This move was to set us up better for our family,” he said. “Having those funds available would make it easier to expand a search.

“And it would just let us know that I shouldn’t have any limits, where we want to live and where we’re able to be, just because I have a disability.”

For the most part, it’s good news. Basic pay is once again rising at the same rate as private-sector wages after several years of tight Pentagon budgets resulted in service members losing some ground compared to their civilian counterparts. The new retirement benefit, which includes cash contributions to a thrift savings account, is a major boost for the vast majority of the force that serves for six or eight or ten years but never reaches the 20-year mark to become eligible for a lifelong pension.

Yet revisions to health care coverage and the GI bill education benefits are more complex, and may impact individual service members, their families and veterans in different ways.

Maximizing the options available to you is essential to making the most out of your military career. These are generous benefits. You’ve earned them. Getting smart about what has changed and what hasn’t is worth your time.

Basic pay is getting its biggest boost in a decade

A look at the basics that make up your basic pay … and what could be in store for your bank account come 2020:

WHAT IT IS

Basic pay is determined by rank and length of service, with automatic raises when troops meet certain time and promotion markers. In addition, each year Congress determines how much of a pay raise all troops should get.

The figure is tied by law to the anticipated increase in private sector pay, but lawmakers in the past have approved smaller raises to save money for other military priorities.

WHEN IT HAPPENS

The annual military pay increase takes effect in January of each year. The White House issues its target for the hike each August, either going along with the projected rise in private sector wages, known as the Employment Cost Index, or offering justification for establishing a different rate.

Congress has the final say, however. Last summer, Congress finalized a 2.6 percent pay raise for 2019, the earliest they’ve finished that work in more than two decades. The raise is usually applied across the board, although lawmakers made an exception at the height of the wars in Iraq and Afghanistan to provide more money for some mid-career service members to help with retention.

WHAT IT MEANS

The most junior enlisted service members make around $19,000 a year in basic pay (not including allowances, special pays and other benefits), while enlisted troops nearing retirement typically earn about $70,000 annually. Officer pay is significantly higher: The most junior officers clear close to $38,000 a year while senior officers nearing 20 years of service can make in excess of $170,000. That means that even a small change in the anticipated pay raise calculations can make a big difference for military families.

For example, in recent years (but not for 2020) the Pentagon has backed plans for a pay raise 0.5 percent below the federal formula for the annual increases.

If that reduction were to be put in place for 2020, an E-4 with three years of service would see a difference of about $140 in take-home pay over the course of a year compared to the expected level of pay boost. For a senior enlisted or junior officer, the difference is closer to $300 over 12 months.

Outside advocates have said even though those gaps won’t cover a mortgage payment, they are the difference between being able to afford a monthly co-pay for prescriptions or having to go without. That makes even small increases or trims a major issue in the military community.

Since the start of the all-volunteer military force in 1973, Congress has authorized a pay raise of at least 1 percent for troops every year, even during budget cycles where other civilian wages were held steady. For the last three years, those increases have matched the rate of expected growth in civilian wages.

WHAT’S NEW

The 2.6 percent pay raise troops received in January 2019 was the largest they had seen since 2010. That mark matched the federal formula based on the annual Employment Cost Index calculation, but lawmakers and the president claimed credit for the boost as proof they are taking care of military members and families.

In March, White House officials released their fiscal 2020 budget proposal which included a 3.1 percent pay raise for next January. It too matches the ECI formula under federal law, and would be the largest raise troops have seen since 2010.

Lawmakers have already voiced support for that level. If it holds, that means a monthly boost of around $70 for junior enlisted troops, $125 for senior enlisted and junior officers, and nearly $240 for senior officers.

Current BAH rates aim to cover 95 percent of housing costs

This year, the Pentagon bumped the 2019 Basic Housing Allowance rates an average 2.5 percent higher compared to last years, setting the tax-free benefit at a level intended to cover 95 percent of the anticipated housing costs for each assigned duty post in the U.S.

WHAT IT IS

Basic Allowance for Housing provides service members not living on base or in government-provided housing a cash supplement to be able to rent housing at local market rates. The amount paid to a service member depends on rank, whether or not they have dependents, and where they are based.

ELIGIBILITY

Any active-duty service member stationed in the 50 U.S. states who is not provided with government housing is eligible. Those stationed in U.S. territories, possessions or overseas who are not provided government housing are eligible for an Overseas Housing Allowance, which is calculated under a separate formula.

NOTEWORTHY

BAH is non-taxable, and unlike the Overseas Housing Allowance, if a service member can find housing below the BAH rate for their assigned location, they are able to pocket the difference, because what service members actually spend is not used to calculate BAH. In Overseas Housing Allowance, however, it’s “use it or lose it.” Service members lose whatever portion of OHA they do not spend.

HOW BAH IS CALCULATED

DoD calculates median rental costs for 300 military housing areas, including Alaska and Hawaii. The calculations are based on the rental costs for a 1 or 2 bedroom apartment, a 2 or 3 bedroom townhome, and a 3 or 4 bedroom single family home, and then set against specific enlisted and officer ranks for a service member with dependents and service members without dependents.

RATES VARY WIDELY

Based on rank and the local real estate market, what you take home can be less than $1000 or more than $3000. For example, an E-1 at Fort Bragg, North Carolina without dependents would receive $984 according to the 2019 BAH Calculator. On the other hand, a Colonel or Navy Captain working in Washington, D.C. with dependents would receive $3243, based on the 2019 rates.

CHECK YOUR RATES

For details of locations across the country, see: https://www.defensetravel.dod.mil/site/bahCalc.cfm

WHAT IF BAH FOR MY AREA IS CUT WHILE I AM STILL THERE?

Service members are protected from falling rates under a rate protection policy that maintains their current rate for as long as they remain at their location, regardless of whether the official rates drop. However, they will receive the new, lower rate if they are demoted or if their dependency status changes, in which case they’d receive the current rate for their new status.

If rates rise in a location, all service members receive the higher rates regardless of when they arrived. Two rates are set for each location by a survey of rental costs: The with-dependents rate goes to personnel with at least one dependent and does not increase for additional family members.

WHAT IF MY SPOUSE AND I ARE BOTH IN THE MILITARY?

If there are no children, both spouses get the without-dependents rate.

Your new retirement benefits: The biggest change in decades

The military retirement system has just undergone the biggest change since World War II, as defense officials implemented the Blended Retirement System in 2018.

Now and in the future, all service members entering the military now are automatically enrolled in the new BRS.

In 2018, more than 400,000 eligible service members opted in to the new BRS, out of the 1.6 million currently serving active duty and reserve troops who were eligible to make a choice between the legacy system and the new system. In addition, more than 150,000 new service members were automatically enrolled last year.

The majority of those who chose the new BRS over the legacy system, or about 80 percent, were enlisted members. The average active duty member who opted in had 3.05 years of service.

BRS is a blend that combines traditional retirement pay of the legacy system with some new features that allow military members to take some government benefits with them even if they don’t serve until retirement. Historically, only 19 percent of active duty service members and 14 percent of Guard and Reserve members serve long enough to get retirement benefits.

Key elements of the BRS:

RETIREMENT PAY

You’ll get the traditional monthly retirement pay if you serve until retirement from the military. But it’s 20 percent less than what it is under the legacy system.

GOVERNMENT CONTRIBUTIONS

The Thrift Savings Plan, or TSP, is like a private-sector 401 (k) retirement plan savings account. The TSP has been available to service members for years, but there was no government match until now. The money you contribute to your TSP is always yours. You own the DoD contributions after you serve at least two years.

Here’s how it works: After you have served for 60 days, a TSP account will be created, and automatic deductions of 3 percent of your basic pay start going to your TSP. (You can change that amount.) DoD kicks in 1 percent automatically, but will contribute up to an additional 4 percent of base pay to match your contributions. So if you put in 5 percent of your base pay to your TSP, DoD also puts in 5 percent. Making your 5 percent contribution to your TSP is key to getting the maximum benefit out of BRS.

BRS participants contributed more than $500 million to TSP accounts in 2018, and DoD added another $300 million in government automatic and matching contributions to those members’ TSP accounts, said DoD spokeswoman Jessica Maxwell.

CONTINUATION PAY

The services will make a one-time payout of continuation pay when the service member reaches 12 years of service. To receive that continuation pay, which is similar to a retention bonus, you must commit to serve an additional four years.

Active-duty members get 2.5 times their monthly basic pay as of the first day of their 12th year of service. Reserve and Guard members get 0.5 times their monthly pay – except for those in the Army Reserve and Guard, who get 4 times their monthly pay. The Army increased that in December — that’s the prerogative of the services — to adjust that multiplier within a certain range, to meet their needs.

Continuation pay is taxable, but you can also contribute all or part of it to your TSP. You can receive it in a lump sum or, to help reduce your taxes, you can opt to receive continuation pay in four equal installments over four years.

LUMP-SUM RETIREMENT PAY

When you retire under BRS, you can request an up-front lump-sum payment of part of the retirement pay you’d receive before you reach full Social Security retirement age, which for most people is age 67. You can receive either 25 percent or 50 percent percent of its “discounted present value.” That means the amount is cut by a discount rate published yearly. For 2019, it’s a 6.81 percent reduction. If you take the lump sum, the retirement checks are reduced by either 25 percent or 50 percent, depending on what percentage you received, until you reach age 67. At the point, your retirement check returns to its full amount. The lump sum is taxable; retirees can choose to receive the money in up to four installments over four years to reduce the tax burden.

TIP

To get the most out of your BRS benefit, make sure you’re contributing at least 5 percent to your Thrift Savings Plan account, to get the matching DoD contribution of up to 5 percent.

Why turn down free money?

WHAT’S NEW

The Army has increased its continuation pay for Reserve and Guard members under BRS by eight-fold. Its previous formula was 0.5 times the monthly drill pay upon reaching 12 years of service. It’s been increased to 4 times the payment. For an E6 with 12 years, that’s a one-time bonus of $15,499 –$13,561.80 more than was previously offered.

The other services’ formulas remain the same, at 0.5 monthly drill pay for Reserve and Guard members.

Help for military spouses and children

The military lifestyle that involves frequent deployments and moving every two or three years can intensify the needs of families in some areas, specifically spouse employment and child care.

Bases worldwide offer families a wide variety of support services, from legal assistance and tax preparation, to child care, financial counseling, relocation assistance, education and employment assistance, youth programs, and deployment and mobilization support.

CENTRAL POINTS OF CONTACT

Start with the family centers on military installations or MilitaryOneSource.mil, which offers access to additional assistance by phone or chat, 24 hours a day.

Most of the site’s information is available publicly, but some extra services are available for free to service members and their immediate family members, survivors of deceased service members, and certain others. Retiring or separating service members (and their immediate family members) can also access these services for one year after they leave the service.

Among those services are nonmedical counseling – available in person, by phone, secure chat or secure video session – as well as financial counseling, including tax preparation and tax filing help. Spouse employment and education services; language translation services for documents, health and wellness coaching, child/youth behavioral counseling, and family life counseling are also available.

For decades, two of the biggest issues for military spouses have been finding employment and finding good quality, affordable child care. Here are some of the programs that address those needs:

SPOUSE EDUCATION AND EMPLOYMENT

Spouses can visit their installation’s family center for employment and education assistance. They can also visit the Spouse Education and Career Opportunities, or SECO, section at MilitaryOneSource.mil for information on scholarships and other education and employment needs. SECO provides certified career counselors to help spouses investigating career options, education options or entrepreneurial projects.

Through DoD’s My Career Advancement Account program, or MyCAA, spouses of certain junior service members can receive tuition assistance of up to $4,000, with an annual cap of $2,000, to pursue licenses, certifications or associate degrees needed for employment in high-demand, high-growth portable career fields and occupations. This benefit is available to spouses of active duty members in paygrades E-1 to E-5, W-1 and W-2, and O-1 and O-2. A recent government report said the program is underused, with just 7 percent of eligible spouses using the program in 2017.

Spouses can also search job opportunities on the Military Spouse Employment Partnership site, where hundreds of organizations are seeking to hire military spouses.

CHILD CARE

The Defense Department child care systems include more than 700 child development centers, school-age care facilities and about 2,600 family child care homes at more than 230 locations worldwide. All are required to adhere to DoD regulations, meeting nationally recognized standards for curriculum, safety and health. Fees are on a sliding scale based on total family income.

Any family child care provider on an installation who offers child care for other families’ children for 10 or more hours per week must be a certified provider. Families can get lists of certified family child care homes at their installation’s child development program office. They can also find certified family day care homes through the www.militarychildcare.com website. It gives parents more visibility over what child care slots are available at multiple installations in a given area.

Military families can also find high-quality, subsidized child care in their area if care is not available on base. Visit https://usa.childcareaware.org/fee-assistancerespite/military-families/

WHAT’S NEW

DoD and the services are looking at new ways to ease the child care shortage, such as streamlining the hiring process for child care workers. Last year, the Army launched a program to help military spouses get hired more quickly at the new duty station and streamlining the notification and hiring process

Ready to make the leap into home ownership?

The Department of Veterans Affairs home loan program took shape near the end of World War II and has been used by millions of service members and veterans since then: Nearly 3 million have VA-backed loans at present, and more than 740,000 new loans were taken out in fiscal 2017.

WHAT IT IS

The VA guarantees a percentage of an eligible beneficiaries’ home-purchase or home-refinance loan, allowing the lender to provide better, more affordable terms and often letting the borrower seal the deal without a big cash down payment.

WHAT IT DOES

Eligible service members and veterans can apply, via private-sector lenders, for home-purchase loans on properties up to $424,000 — more in some high-cost areas. These can be used to buy manufactured homes or homes under construction, in some cases, but not mobile homes. The VA loan program also offers cashout refinance loans.

An Interest Rate Reduction Refinance Loan can reduce the rate on an existing VA-backed loans. These loans come with funding fees that vary by loan type and veteran status. Veterans using the benefit for the first time on a no-down-payment purchase loan pay a 2.15 percent fee, for example, while a veteran making a second cash-out refinance loan would pay 3.3 percent. A full fee table is available at https://www.benefits.va.gov by typing “loan fee” into the search window.

Veterans receiving VA disability compensation are exempt from fees. Other loans, including joint loans, construction loans and loans to cover costs of energy-efficient repairs, also can be backed by VA. Consult your lender for information.

ACTION ITEMS

The key step for service members and veterans is to obtain a Certificate of Eligibility, either through the eBenefits site or via their lender, to be eligible for a VA-backed loan.

Those seeking to refinance existing loans should read lenders’ advertising material carefully: VA and the Consumer Financial Protection Bureau issued a “warning order” in November against deceptive lending practices.

Among the red flags: Aggressive sales tactics, low interest rates with unspecified terms and promises that borrowers can skip a mortgage payment as part of the new loan — a practice prohibited by VA.

DEADLINE

VA loan eligibility does not expire, though the entitlement can only be used for the borrower’s place of residence (not a rental property). It can be reinstated after the loan is paid off or under other circumstances — another veteran can assume the loan, for instance. Learn more: www.benefits.va.gov/homeloans; www.militarytimes.com/home-hq.

Are you among the VA-backed loan-holders who’ve been deluged with offers to refinance? Government officials have begun taking action to curb these practices. In addition, a banking-reform bill that passed the Senate in March could include some relief. Should the VA-related language in the Senate bill survive further lawmaker negotiations, the bill would prohibit lenders from offering VA-backed refinance loans within six months of a veterans’ initial loan. Lenders also would need to provide borrowers with a “net tangible benefits test” that outlines the full financial scope of the refinanced loan, so borrowers have a complete picture of what they’re saving over time.

ELIGIBILITY

Service members whose time in uniform falls within these date ranges must have 90 days of active-duty service to qualify:

• Sept. 16, 1940-July 25, 1947

• June 27, 1950-Jan. 31, 1955

• Aug. 5, 1964-May 7, 1975 (Note: For those who served in the Republic of Vietnam, this era begins Feb. 28, 1961).

• For loan purposes, VA considers “Gulf War” service beginning Aug. 2, 1990, and continuing through the present day. Service members from that time period must have completed 24 months of continuous active-duty service to be eligible, or at least 90 days if they have the right discharge status.

• If your time in uniform doesn’t apply to the date ranges above and you were enlisted and separated on or before Sept. 7, 1980, or if you were an officer and separated on or before Oct. 16, 1981, you need 181 continuous active-duty days to qualify. If your service came after the above date ranges, you need 24 months of time in or less if you have certain discharges.

• Troops now on active duty become eligible after 90 days of service for as long as they remain on active duty. Reserve and National Guard members become eligible after six creditable years in service. Troops discharged for a service-connected disability are eligible regardless of service length.

For more eligibility details, visit VA’s eBenefits site (www.ebenefits.va.gov) or call 877-827-3702.

Tricare changes: What you need to know

The military’s Tricare health program was overhauled in 2018 to include a strict limitation on switching between Tricare plans.

And for retirees, a new dental program, the Federal Employees Dental and Vision Insurance Program, or FEDVIP, has replaced the now-defunct Tricare Retiree Dental Program.

As of 2019, beneficiaries can’t switch between Tricare Prime and Tricare Select until the yearly open season starting each November, unless there’s some sort of qualifying life event, such as the birth of a baby, a move to a new duty station, marriage or retirement.

Amid Tricare’s bureaucratic reforms and changes in regions and contractors, beneficiaries are dealing with higher costs, and some have had difficulty finding local doctors and other medical providers who are in the Tricare network. Defense health officials have been closely monitoring the performance of the two Tricare contractors and are working to resolve the problems.

WHAT IT IS

Tricare is a health care program for almost 9.4 million beneficiaries that offers 11 different options, with choices depending on the status of the sponsor and the geographic location: Active-duty members; military retirees; National Guard and Reserve members; family members (spouses and children registered in the Defense Enrollment Eligibility Reporting System) and certain others, including some former military spouses and survivors, as well as Medal of Honor recipients and their immediate families.

Those entering the military on or after Jan. 1, or changing status (i.e., from active duty to retired) should make sure they and their eligible family members are enrolled in the Tricare program of their choice. Those who don’t enroll may only receive care at a military clinic or hospital on a space-available basis, and medical care by civilian providers wouldn’t be covered. The one-month open season begins on the Monday of the second full week in November and goes through the Monday of the second full week in December. During that time, you can enroll in a new Tricare Prime or Tricare Select plan; or change your enrollment. If you’re satisfied with your current Tricare health plan you don’t have to take action to stay enrolled.

THE DETAILS

Tricare offers two core options: Tricare Prime and Tricare Select. Select replaced Tricare Standard and Tricare Extra in 2018. All active-duty members are required to enroll in Tricare Prime; they pay nothing out of pocket. Active-duty families can enroll in Tricare Prime without an enrollment fee. Prime beneficiaries are assigned a primary care manager, or PCM, at their local military treatment facility or, if one is not available, they can select a PCM within the Tricare Prime network. Specialty care is provided on referral by the PCM, either to specialists at a military facility or a civilian provider.

Tricare Select is similar to a traditional fee-for-service health plan. Patients can see any authorized provider they choose, but must pay a deductible and co-pays for visits. Patients pay lower out-of-pocket costs when they receive care from a provider within the Tricare network.

All Tricare programs have a cap on how much a family pays out of pocket each fiscal year, depending on the sponsor’s status and the type of Tricare program used.

THE PLANS

• Tricare Prime: Prime is similar to a health maintenance organization, which has lower out-of-pocket costs but requires enrollees to use network providers and coordinate care through a primary care manager — a doctor, nurse practitioner or medical team. It’s free to active-duty members and families; retirees must pay an annual enrollment fee ($297 for an individual, $594 for a family in 2019). Those whose initial period of service began before Jan. 1, 2018 are grandfathered in to these rates. Co-payments for medical visits are lower than other programs, and there are no deductibles unless patients get care outside the network.

• Tricare Prime Remote: Service members who live and work more than 50 miles or an hour’s drive from the nearest military treatment facility must enroll in Tricare Prime Remote. Family members are eligible if they live with an enrolled service member in a qualifying location, or they may use Tricare Select.

• Tricare Prime Overseas/Prime Remote Overseas: Tricare Prime Overseas is a managed-care option for active-duty members and their command-sponsored family members living in nonremote locations. They have assigned primary care managers at a military treatment facility who provide most care and referrals for and coordination of specialty care. Tricare Prime Remote Overseas is a managed care option in designated remote overseas locations, with most care from an assigned primary care manager in the local provider network, who provides referrals for specialty care. Activated National Guard and Reserve members and their families also may enroll in these options while the sponsor is on active duty; retirees and their families aren’t eligible.

• Tricare Select: This is a preferred provider plan — authorized doctors, hospitals and other providers are paid a Tricare-allowable charge for each service performed. Costs are higher for out-of-network providers, and certain procedures require pre-authorization. There is no enrollment fee for active-duty families, or for retirees and their families and others whose period of service began before Jan. 1, 2018. Copays vary by status and type of care: An in-network primary care outpatient visit costs retirees and their families $29, for example, while some active-duty family members pay $21 and others — those whose sponsor entered the network on or after Jan. 1, 2018, pay $15.

• Tricare Reserve Select: Qualified Selected Reserve members can buy Tricare coverage when they are in drilling status – not mobilized. The program offers coverage similar to Tricare Select.

• Tricare Retired Reserve: “Gray area” National Guard and Reserve retirees who have accumulated enough service to qualify for military retirement benefits but have not reached the age at which they can begin drawing those benefits (usually age 60) can purchase this insurance, which offers coverage similar to Tricare Select.

• Tricare for Life: This wraparound program is for retirees and family members who are eligible for Tricare and Medicare. The provider files the claims with Medicare; Medicare pays its portion and then sends the claim to the Tricare for Life claims processor. Enrollees must enroll in Medicare Part A (free for those who paid Medicare taxes while working) and Part B (monthly premium required) to receive Tricare for Life.

• Tricare Young Adult: Unmarried dependent children who do not have private health insurance through an employer may remain in Tricare until age 26 under a parent’s coverage via TYA Select or TYA Prime. Premiums are required for both.

• US Family Health Plan: Beneficiaries who live in one of six designated areas, can enroll in this as a Prime option. Those enrolled get all their care, including prescription drugs, from a primary care provider the beneficiary selects, from a network of private doctors affiliated with one of the not-for-profit health care systems in the plan. Beneficiaries don’t get care at military hospitals or clinics, or from Tricare network providers when enrolled in the US Family Health Plan.

ACTION ITEMS

Beneficiaries must take action to enroll in a Tricare plan in order to be covered for civilian health care. Those who don’t enroll will only be able to get health care at a military clinic or hospital on a space available basis.

To be eligible for any of the Tricare plans, beneficiaries must first be enrolled in the Defense Enrollment Eligibility Reporting System. Active-duty members are automatically registered in DEERS when they join the military, but they must register eligible dependent family members. Service members should make sure the information is correct for their family members. Only military members can add or remove family members; this is done through the local ID card office.

GI Bill and tuition assistance: Know your education benefits

Going back decades, one of the main reasons people have joined the military has been to get access to the generous education benefits available to veterans.

That’s as true as ever today, with the Post-9/11 GI Bill. But the benefit has some complicated rules – and things recently got even more complicated with the Forever GI Bill, which changed some important aspects of the benefit.

Here’s what you need to know:

POST-9/11 GI BILL

The Post-9/11 GI Bill is a benefit for the latest generation of service members and veterans, as well as their eligible dependents. It includes payment of tuition and fees, a monthly housing allowance, and a stipend for textbooks and supplies.

ELIGIBILITY

The amount of time you spent on active duty determines your benefit level. In general, the higher your benefit level, the less you have to pay out of pocket for school, maxing out at the 100% benefit level, which covers full in-state tuition at public universities.

Here’s what veterans who received an honorable discharge after Sept. 10, 2011, are eligible for based on the amount of time they’ve served:

• 100%: 36 months or more of active duty service, or at least 30 continuous days and discharged due to service-connected disability

• 90%: At least 30 months, less than 36 months.

• 80%: At least 24 months, less than 30 months.

• 70%: At least 18 months, less than 24 months.

• 60%: At least 12 months, less than 18 months.

• 50%: At least 6 months, less than 12 months.

• 40%: At least 90 days, less than 6 months.

• No benefit: Less than 90 days.

WHAT IT COVERS

You can use your benefits toward an education at a college, university, trade school, flight school or apprenticeship program.

While the benefit covers all in-state tuition and fees at public institutions, it may not have the same reach at a private or foreign school. The maximum tuition coverage for private nonprofit, private for-profit and foreign schools for the 2019-20 school year will be $24,476.79, effective Aug. 1, 2019.

HOUSING STIPEND

The housing stipends GI Bill users receive depend on the level of benefits they’re eligible for, how many courses they take and where they go to class.

The rate is determined by DoD’s Basic Allowance for Housing scale and is paid at the same rate an active-duty E-5 with dependents would receive in a particular area. If you are pursuing a degree entirely online, you get half of the national BAH average.

The VA has historically based the housing allowance on the location of the main campus of a school, even if the student in question is taking classes at a different branch campus that could be many miles away. The Forever GI Bill directed VA to instead base the housing allowance on the location where a student takes most of his or her classes. That change was supposed to take effect Aug. 1, 2018.

But the department ran into technical problems implementing the change. So on Dec. 1, 2018, the VA gave itself until the same day in 2019 to change housing stipend payments to match the new rules.

TRANSFER RULES

Service members may transfer their benefits to a dependent, provided they have already served in the military for at least six years and agree to serve four more after the transfer is approved by the DoD. Starting July 12, 2019, only those with fewer than 16 years of active-duty service will be able to transfer their GI Bill benefits.

The transfer must happen while you are still in unform. Veterans who have already separated from the military are not eligible to transfer their benefits. Children are only eligible to start using the transferred benefits after the service member doing the transfer has completed at least 10 years of service. Spouses can use the transferred benefits right away, but they only have 15 years after the service member’s last separation to use the benefits if the discharge date was before Jan. 1, 2013.

WHAT’S NEW

As previously mentioned, service members who have been in uniform longer than 16 years will no longer be able to transfer their GI Bill benefits to a dependent, as of July 12. Other changes on the books:

• The Pentagon previously allowed service members who have already served more than 10 years – as well as those subject to mandatory retirement – to transfer their benefits without committing to four more years of service. Those exceptions are no longer available; everyone must commit to four more years of service to transfer benefits.

• Active-duty troops who earned a Purple Heart for combat injuries are now allowed to transfer their benefits to dependents regardless of how long they served or their ability to commit to more service.

• VA hopes that delaying implementation of the housing stipend calculation change frees up staff so that the department is able to process GI Bill claims without the extended delays that some students experienced in fall 2018.

Action items: You can apply for the Post-9/11 GI Bill online (www.vets.gov/education/apply/) or by visiting a local VA regional office. If you’ve already chosen a school or program, arrange a meeting with the institution’s VA certifying official, who can help you get started.

MORE ONLINE

GI Bill Comparison Tool (www.vets.gov/gi-bill-comparison-tool).

YELLOW RIBBON PROGRAM

Some schools participate in the Yellow Ribbon Program, a voluntary agreement with the Veterans Affairs Department to split school costs not covered by the GI Bill. This reduces or eliminates the amount students must pay themselves.

As of Aug. 1, 2022, active-duty troops will gain access to the Yellow Ribbon Program and it will also be available at that point to the spouses of service members eligible for 100 percent GI Bill benefits.

THE MARINE GUNNERY SERGEANT JOHN DAVID FRY SCHOLARSHIP

The Fry Scholarship allows children or spouses of service members who died in the line of duty on or after Sept. 11, 2001, to use the GI Bill at the 100 percent level.

These benefits are extended to children as of their 18th birthday. If they became eligible for the benefit before Jan. 1, 2013, they can only use their Fry benefits until their 33rd birthday. If they became eligible on or after that date, that age restriction is removed.

Spouses cannot have remarried, and they have 15 years to use the benefit if they became eligible for it before Jan. 1, 2013.

TUITION ASSISTANCE

Service members have more education benefits available to them than just the GI Bill.

While service members can begin to use their GI Bill benefits on active duty, they can often get help paying for college from their service branches – and save the GI Bill for later – by using tuition assistance.

Here’s how TA works, and what you’ll need to

know to make the most of it:

WHAT IT IS

TA is a federal benefit that covers the cost of tuition, up to particular limits, for active-duty service members, as well as some members of the National Guard and reserves. The funds are paid directly to schools by the service branches.

ELIGIBILITY

Each service has its own requirements.

• Air Force: All Air Force officers incur a service requirement if they use TA, but there is no service-length requirement to begin using the benefit.

• Navy: Sailors must wait until they’ve been at their first permanent duty station for a year to use TA, unless they get a waiver. Navy officers must agree to remain on active duty for at least two years after using TA.

• Army: As of Aug. 5, 2018, there is no longer a one-year waiting period after completion of Advanced Individual Training, Basic Officer Leader Course or Warrant Officer Basic Course to receive TA. Active-duty officers incur a two-year service obligation.

• Marine Corps: After previously having to wait 18 to 24 months to use TA, Marines now have no minimum service-length requirements for the benefit. However, they must agree to at least two more years of active duty service to use the benefit.

• Coast Guard: Active-duty Coast Guard members must have been on long-term active-duty orders for more than 180 days to access TA. The Coast Guard also has unit-specific requirements and requires commanding officer approval.

• Guard/Reserve: Soldiers who are activated or on drill status are eligible under the same conditions as active-duty Army personnel. Air National Guardsmen and reservists of other branches are eligible for TA if they are activated, and the use of TA often comes with a service obligation for a certain amount of time once the last course is completed.

LIMITS

The Defense Department caps tuition assistance at $250 per semester hour and $4,500 per fiscal year. The Coast Guard recently decreased its annual cap to $2,250 per year, down from $4,000. The Navy and Army set limits at 16 semester hours per year.

Generally, TA funds can be used to pursue a higher degree than what you have already earned, up to the master’s degree level. If you have a bachelor’s degree, you can use it to pursue a graduate degree — not an associate or second bachelor’s, though there are some exceptions. Some branches require you to create a degree plan or take a branch-specific course before your TA benefits are approved.

GRADES

If you do not perform well in a class or need to withdraw for reasons other than personal illness or military duty, you will be required to pay back the funds used for that course. The Army and Coast Guard require service members to earn a “C” grade or better for undergraduate courses and a “B” grade or better for graduate courses; anything lower requires reimbursement to the U.S. Treasury.

In the Air Force and Marine Corps, service members must maintain a grade-point average of at least 2.0 for undergraduate work or 3.0 for graduate work.

Those who fall below the requirements can become eligible for the benefit again once they have raised their GPA above the threshold. The Navy will force service members to reimburse their TA if they receive a failing grade or lower, which is a “D” for undergraduates and “C” for graduate students.

SCHOOLS

To accept tuition assistance funds, colleges and universities must sign a memorandum of understanding with the DoD, agreeing to comply with a set of rules related to recruiting and educating military students.

To enter into the agreement, institutions must be regionally or nationally accredited, state-approved to accept the GI Bill and certified to participate in federal student aid programs.

TA OR GI BILL?

If you have served for at least 90 days on active duty since Sept. 10, 2001, then you are eligible to receive Post-9/11 GI Bill benefits. You may use these benefits while on active duty, though experts suggest using your tuition assistance first.

If you take advantage of the Post-9/11 GI Bill while you’re still active, you will not receive an additional monthly housing stipend with the benefit as you would if you waited until separating from the military. That said, the Forever GI Bill has made it so active-duty service members can receive a housing stipend the day after separating from the military, as opposed to the previous wait time of one month.

If you choose to use the GI Bill while on active duty to help pay for your education, you will need to apply for veterans benefits and contact your school’s certifying official, who will formally submit your enrollment in VA benefits.

ACTION ITEMS

Search for schools that have signed DoD’s memorandum at www.dodmou.com. To apply for TA, visit your nearest education service center or visit your branch’s education website for details.

MORE ONLINE

Get the latest military education news, as well as updates to transition benefits and scholarship opportunities, at Military Times Rebootcamp — Rebootcamp.militarytimes.com.

Auditors said they found it “troubling” that senior Veterans Benefits Administration officials were aware in October, 2014 that thousands of exempt veterans were owed refunds, but didn’t take adequate action to issue refunds.

Nearly 73,000 exempt veterans were incorrectly charged an estimated $286 million in funding fees for their VA home loans from 2012 through 2017, auditors estimated. During that period, VA issued about $97 million in refunds to 19,700 of the veterans — leaving an estimated 53,200 who may still get refunds.

Although the inappropriate charges represent just 3 percent of the total amount of funding fees collected, auditors said, it can be significant for individuals. Their sampling found the amounts averaged $4,483, and were as high as $19,470. In coming up with their estimates, the auditors conducted a statistical sampling of 200 loans made from 2012 through 2017.

Generally, veterans and service members are required to pay a VA funding fee when they apply for a VA home loan, to defray the VA’s cost for administering the loan. However, veterans are exempt from paying a funding fee if they’re entitled to receive VA disability compensation. VA funding fees range from 0.5 percent to 3.3 percent of the loan amount. The VA guarantees the loans, which are made through lenders such as banks and credit unions.

VA Loan Guaranty Service officials have drafted a plan to identify these exempt veterans and to issue the refunds, and expect to implement their plan by July 31, according to the VA’s response submitted to the IG. It was not clear when they expect the refunds to be issued. VA officials referred questions about the issue to the VA’s six-page response in the IG report.

Officials have also asked their general counsel for an opinion on whether the law allows VA to issue refunds directly to the veteran rather than to their lender to apply the refund to the balance of the loan.

On May 13, VA officials announced that veterans who qualify for the funding fee waiver are now being notified in the home loan certificate of eligibility, and in their disability compensation award letter. They also announced procedural changes to provide a regular review of data. VA will also make changes to ensure a veteran’s up-to-date status for the fee waiver is correctly identified.

One issue identified by the IG, and being reviewed by the VA, is how to credit borrowers who, after their loan has closed, were awarded disability compensation with retroactive effective dates which would have made them eligible for the waiver at the time the loan was given.

VA officials cited an an ongoing review looking at millions of loans dating back to 1998, noting that since 2014, the VA has provided an average total of $75- to $100 million in these refunds to about 5,000 veterans each year.

VA officials knew about this in 2014

In October, 2014, officials with the VA regional loan center in St. Paul, Minn., notified the VA Loan Guaranty Service officials that their nationwide analysis of loans issued between October, 2006 and May 31, 2014, indicated about 48,000 veterans may be due refunds of funding fees totaling about $151 million. They noted it would take between four to eight staff members about a year to refund the charges. In May, 2016, the former director of the Loan Guaranty Service documented a need to address the refunds, acknowledging more than $150 million in refunds may be due, the IG auditors stated.

“Disturbingly, as of January 2019, Loan Guaranty Service management had not taken action to issue refunds to these exempt veterans,” the IG report stated.

An official with Disabled American Veterans said he is troubled to learn that VA didn’t take adequate action to issue refunds to disable veterans despite become aware of the issue in 2014. “This breach of trust needs to be immediately rectified by refunding these fees to ensure disabled veterans are made financially whole without delay,” said Randy Reese, DAV Washington Executive Director.

“Likewise, Congress should hold oversight hearings to hold those who ignored or attempted to cover-up the fee exemption errors and refunds accountable.”

In their response to the VA IG, Loan Guaranty Service officials cited other competing priorities: unprecedented growth in the VA home loan program during the period from 2012 through 2017, with parallel increases in phone call volume, requests for VA certificates of eligibility, and appraisals. In 2014, VA estimated it would take 12 VA employees devoted full time for an entire year to complete the refunds; the more recent data indicates it would take at least 30 full time employees more than a year to complete the process, according to the VA’s response.

The Loan Guaranty Service has relied on veterans to contact the VA, and veterans are required to file a claim for the refunds, according to the report. However, auditors found that the VA hasn’t published a standard form for requesting a funding fee refund. Requiring a veteran to submit a claim for a refund “improperly places the burden and responsibility solely upon the veteran,” the auditors stated.

The earlier VA announcement directs veterans who think they may be eligible for a refund to visit the VA’s website at https://www.benefits.va.gov/homeloans/purchaseco_loan_fee.asp

In some cases, the veterans were exempt at the time they applied for the loan, but were incorrectly charged fees. That would be difficult to prevent if the lenders incorrectly collected fees even when the veteran’s certificate of eligibility showed he or she was exempt, but VA should be able to detect those cases and issue refunds, auditors said.

In other cases, veterans became exempt after the certificate of eligibility was issued; or the certificate of eligibility was incorrect. In still other cases, the veteran was owed a refund because of a retroactive change in exemption status

“We know the veteran for the most part is someone who’s going to be reliable, disciplined and has the ethos of, ‘I have an obligation and I’m going to take care of it,’” said Tom Lynch, executive chairman of the mortgage company NewDay USA.

That sentiment should boost the confidence of any troops or veterans looking for the best mortgage options for buying their first homes. As should the benefits of VA loans, which offer generous terms to veterans that civilians can’t get.

A recent report from the Consumer Financial Protection Bureau indicated that active-duty troops and veterans buying their first homes are forgoing conventional real-estate loans and other government-funded mortgage options in favor of VA loans.

With that in mind, here are a few tips from experts for troops and veterans looking to buy their first homes.

Take advantage of VA loans

The fact more people are using VA loans isn’t a fluke.

For one, the VA provides 100 percent loans that eliminate the need for down payments. Most conventional loans require a down payment and usually only cover 80 or 85 percent of the home’s total value.

Unlike loans received through the Federal Housing Administration, VA loans don’t require a monthly mortgage insurance payment.

In addition, veterans who receive monthly disability benefits don’t have to pay the VA’s funding fee, which can run from 0.5 to 3.3 percent of an overall loan.

Lynch said that the usage rates of VA loans will probably continue to increase as more home-buyers discover all the upsides of going with a VA loan.

“It is rising,” he said. “It’s a combo of people understanding the benefit of the VA loan … and it’s also symptomatic of the rising real-estate values around the country.”

Know the VA loan process

Home-buyers must meet a few requirements in order to qualify for a VA loan, as the VA’s website details.

As with other loan types, you must have strong credit and enough income to afford the home.

But for VA loans, you need to apply for a VA Home Loan Certificate of Eligibility. The process has different rules depending on your military status.

After establishing your eligibility, the next step involves making sure you have all your necessary military service documentation handy. The most important form for this process is the DD214, a Department of Defense document issued whenever a service member separates from the military.

The VA’s website also mentions that anyone applying for a VA loan needs “certification that you will occupy the home.”

Once you have all your documentation ready, you can go to lenders like USAA and NewDay USA who work directly with the VA to get the right loan for your situation.

Do your homework

Lynch encouraged new home-buyers to make sure they understand all the fees that will be involved in their VA loans and — arguably more importantly — that their realtor does as well.

“If your realtor doesn’t understand VA loans, get to a realtor who has done VA loans before,” he said.

Ed Robinson, senior vice president and head of real-estate lending at USAA, advised first-time home-buyers to know the basics, like what kind of loan they want, their credit scores and as much about the borrowing process as possible.

“The process can seem extremely daunting to someone, because if you think about the vast majority of lending that’s available, it’s very short-term in nature,” he said. “Understand all the things you’re going to have to have handy.”

Lynch also made it clear that the ultimate goal is to put as little money into a new home as possible.

“Put a minimal amount of money down,” he said. “You try to keep money in the bank so you’re not cash-poor.”

Shop around

A VA loan is a great option for first-time home-buyers, but it’s certainly not the only one.

“I think they should look at a few options,” Robinson said.

You can also take out a loan through the Federal Housing Finance Agency, which includes secondary mortgage-loan lenders Fannie Mae and Freddie Mac.

There are also conventional real estate loans and other government-funded loans available through agencies like the Federal Housing Administration and United States Department of Agriculture.

It’s also worth remembering that chances are you will be working with lenders who will be your middlemen for obtaining loans through any of these sources.

Believe in yourself

If veterans are unsure how to go about buying their first homes, there is no shame in asking for help, Robinson said.

Get “the counseling that’s on the marketplace so the service member knows how to get the best rate possible,” he said.

And, Robinson added, there are resources out there like VA loans designed to make the home-buying process easier for troops and veterans alike.

“It does make sense, especially for first-time home-buyers, to be able to maximize that opportunity and reduce that upfront out-of-pocket,” he said.

But because you don’t, it’s easy to miss a couple of questions when you are “interviewing” your prospective loan officer.

Remember, this is going to be one of the biggest purchases you’ll ever make. Getting it right can be easy if you know the right questions to ask. Here are seven, with some guidance on what the answers should be:

1. How many VA home loans do you, personally, close each month?

In my experience, a good loan officer will close at least five VA purchase loans every month. This number could fluctuate a bit by region — areas with very few veterans may offer limited opportunities for VA loans — but experience closing these loans is critical.

2. What is the average time it takes to close on a home, from contract to closing date, with your company?

In competitive markets, the average time is 30 days or less.

3. What do you charge for the VA origination fee?

The maximum charge is 1 percent, but some lenders may charge less.

4. Do you charge “discount points”?

These points are basically fees that lower your interest rate. In many cases, especially if you are planning to move or refinance, it doesn’t make sense to pay them.

5. How does your team communicate during the home-buying process?

Be sure your lender will keep you updated. If they don’t have a plan in place to do so, find somebody else.

6. Do you have a secure way to send and receive sensitive information?

Many of the forms you’ll fill out will require strong security measures. You don’t want your Social Security number roaming the internet.

7. What additional costs are associated with the loan?

Remember, just because you’re not putting any money down doesn’t mean the loan won’t cost you anything at signing: You still have to pay for closing costs, although they can be covered by the seller or with a lender credit.

Getting clarity on these small items can help turn an average home-buying experience into a great one.

David Piatek is in the Illinois National Guard and has over 12 years of experience specializing in VA home loans. Find him via email at teamdavid@thefederalsavingsbank.com.

Some caveats for all of the entries: Eligibility rules differ by state and from VA programs, and most state-run efforts include income and property-price limits, as well as other requirements that don’t have to do with military service.

State-based veteran housing benefits in:

• Alaska, California, Nevada, New York, Texas, Washington.
• Indiana, Maryland, Massachusetts, Mississippi, Oregon, Wisconsin.
• Missouri, Nebraska, Ohio, Tennessee, Utah.
• Georgia, Florida, North Carolina, Pennsylvania.

Colorado: Qualified veterans can participate in the Colorado Housing and Finance Authority’s FirstStep and FirstStep Plus products regardless of whether they are buying their first home. The program requires participants to have a credit score of at least 620, but those without a measured credit score can participate. Second mortgages offered via the program can be used to assist with closing costs, down payments and other expenses; visit the CHFA online for details.

Connecticut: The Military Mortgage Option offered by the state’s housing finance authority reduces the program’s interest rate by 0.125 percent for qualified participants seeking to buy their first home (or their first in at least three years). It’s open to current and former service members, as well as to surviving spouses and civil partners of troops who died in the line of duty or from a service-connected disability. Other rules apply, including income and property-price caps. The new home must be the owner’s primary residence.

Delaware: Qualified veterans can use the Delaware First-Time Homebuyer Tax Credit even if they’re not buying their first home. Beneficiaries receive either 35 percent of their taxable interest as a tax credit or a $2,000 credit, whichever is lowest. Visit the above link for other restrictions and property-price limits, and head here for a list of approved lenders.

Illinois: The state offers veteran support via multiple programs, including @HomeIllinois ($5,000 in down payment and closing cost help, plus other benefits) and 1stHomeIllinois ($7,500 in down payment/closing cost help on a 30-year fixed-rate mortgage in certain counties). Unlike other program participants, veterans aren’t required to be first-time buyers. Get details, contact information and links for all the programs here (PDF), and learn more about 1stHomeIllinois here.

Iowa: The Military Homeownership Assistance Program, run by the state’s finance authority, offers eligible veterans $5,000 toward a down payment or closing costs. It’s open only to those with time on active duty during Operation Desert Storm/Shield and since Sept. 11, 2001, and to surviving spouses of those veterans; visit the link for full eligibility requirements, including financial and property restrictions.

Louisiana: Qualified veterans are eligible for a variant of the Louisiana Housing Corporation Market Rate Program that allows beneficiaries to secure VA-backed 30-year fixed-rate loans at “favorable interest rates.” Participants must have a credit score of 640 or better and must use a program-approved lender (PDF).

Maine: Qualified veterans (active-duty members, honorably discharged veterans and reserve-component members who’ve served 180 days in a combat zone) can get an extra 0.125 percent off their 30-year fixed-rate mortgage under the SaluteME and SaluteME Home Again programs, offered via the Maine State Housing Authority. The programs are offshoots of the First Home Loan program, which offers some participants $3,500 to help with a down payment, closing costs or related fees. Check the program’s website for other requirements and contact details.