There was always a chance 43-year-old Gregory Lawrence Rhoads would become a statistic when he joined the Army back in 1974. And he has, but it's a good one.

In June, Rhoads became the 16 millionth veteran to use the benefits available under the GI bill to buy a house. First-time buyers, Greg and his bride Rosita used his eligibility to have a $103,000, three-bedroom home built on a five-acre lot the couple have owned in Spring Branch, Texas, since 1991.

Without help from the federal government, the Rhoads would still be renters. "Other lenders turned us down because they considered my husband's job (as an over-the-road truck driver) unstable," according to Rosita.

But Uncle Sam has long taken care of its former servicemen and women. In fact, since 1944, when President Franklin Roosevelt signed the Servicemen's Readjustment Act -- the GI Bill -- into law, the Department of Veterans Affairs has guaranteed more than a half-a-trillion dollars worth of mortgage financing for more than 343,000 loans.

The VA will back mortgages on behalf of qualified veterans, certain members of the reserve, active duty personnel and some spouses. More than 29 million people are currently eligible for VA financing, according to Keith Pedigo, director of the loan guaranty program.

The VA doesn't make mortgages itself. Rather, it promises private lenders that if the borrower fails to make his payments, it will step forward. The maximum guarantee is 25 percent of the loan amount up to $50,750. Thus, the most lenders generally limit VA loans to $203,000, though some will go higher.

Better yet, vets often don't need any money of their own to qualify for VA financing. As long as the loan amount doesn't exceed the value of the property, the VA doesn't require a downpayment. But for every dollar the loan amount exceeds $203,000, lenders typically want the borrower to put 25 cents in the deal. So if you want to borrow $213,000 with a VA loan, you'll need a $2,500 downpayment.

The interest rate on VA loans is usually a tad over market, but there is no mortgage insurance -- the mortgage is guaranteed, not insured -- and the loan can be taken over by anyone who buys your house when you're ready to move on.

But there is no free lunch: Borrowers are expected to pay a funding fee. Paid at closing, the fee is currently 2 percent (2.75 for reservists), but it can be included in the loan amount and paid from the loan proceeds.

Even though many veterans have already used their loan benefits, it may even be possible to buy another house by using your remaining entitlement or by having the entitlement restored.

Generally, full benefits can be returned if the original property is sold and the loan is paid in full.

In some cases, moreover, vets can combine both their federal and state benefits to purchase a house. That's exactly what Rhoads did -- twice!.

In 1991, he borrowed the maximum $45,000 from the Texas Veterans Land Board to buy his five-acre spread. And when he contracted to build his house this summer, he used the Texas land board's "Green Builder" program that rewards energy-efficient construction to obtain a lower interest rate on his VA loan.

Texas is one of only six states that support their former GIS in this fashion. California, Oregon, Mississippi, Wisconsin and Alaska are the others. But many states offer tax abatement programs.

In Connecticut, any of the state's 335,000 ex-GIS who spent 90 days in wartime service can automatically subtract $1,500 from the appraised value of their properties for tax purposes. If the vet is recognized as disabled, he can knock off up to $9,000. And some towns in the state are even more lenient, says Moe Collin of the Connecticut D.A.'s Office of Advocacy and Assistance.

So are some other states. In Maryland and Florida, for example, veterans who are 100 percent permanently and totally disabled are exempt from paying property taxes altogether. And in Maryland, that benefit passes to the GI's spouse under his or her death.

"Our brave veterans fought for the freedom we now enjoy and we shouldn't take that for granted," says Texas Veterans Land Board Chairman David Dewhurst "We can never repay them for all their sacrifices, but with a little ingenuity, we can help them buy good homes and keep their payments affordable."

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Published: August 9, 1999

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