Effects of the Loan Rate Act for Military

The idea of military personnel getting a loan probably is not what we imagine when we think of them. After all, soldiers, sailors, airmen (and women), and marines are trained to fight, to battle, and to go to war when we need them. Often we do not think of them participating in the simple, ordinary activities of life.

Yet, they buy homes, cars, and clothes (for when they are not on duty), go on vacations, go to school, and struggle to provide for their families. Yes, that is right, they struggle; because unfortunately, the salaries of military personnel are quite low. So, the interest rates they pay on loans are quite important. Thus it was that a loan rate act for military loans was passed in 2004.

History

Better known as the Veterans Benefits Act of 2004, it was signed into law by President Bush on 10 December of that year, and it made quite the important modifications to the Veterans Home Loan Guaranty Program. First off, it raised the level of the loans from $240,000 to $359,650.

Now, this amount might seem odd, but you have to keep in mind that American laws are the product of negotiation and compromise. So, while some members of Congress wanted a higher amount, others wanted something lower, and so they settled on a mid level.

Another key point was the boosting of the loan amount for first mortgages for any homes bought in Guam, Hawaii, Alaska, and the U.S. Virgin Islands. The maximum loan amount was increased by fifty percent! So, the loan rate act for military loans was very effective.

What the Act Does

The act also had a clause covering veterans was service-related disabilities. It raised to $50,000 something known as the Specially Adapted Housing Grant. The injury the veteran suffered had to impair the use of their upper extremities, in order for them to be eligible for the grant. Next, the loan rate act for military loans had several features covering adjustable rate mortgages.

First, the interest rate would be revised each year. Second, the interest rate could not be adjusted more than one percent with each change, and only a maximum of five percent over the full term of the mortgage. And finally, the mortgage had to be underwritten at one percent above the original interest rate.

Then there is the funding fee for the loans. The loan rate act for military loans expanded the list of veterans who could get a waiver from having to pay the funding fee for a loan. One of its key provisions was that service personnel still on active duty, but were getting ready to be discharged, could qualify for a waiver of the loan funding fee.

As a result, many servicemen (and women) could start applying for a loan while still on active duty and in the process of getting their discharge. So, it is easy to see that the loan rate act for the military changed a number of aspects of the process by which military personnel got loans. A lot of people saw them as positive moves toward improving the conditions for servicemen and women.