Rise in VA Home Loans Stimulates Housing Market

soldier in front of house

A rise in the use of VA home loans is improving the housing market and the ability of veterans to obtain home loans. Veterans who would not previously qualify for a home loan are utilizing the many benefits stipulated in the VA program.

Imagine not having to save for a down payment, let alone make a down payment in order to purchase a house. According to the Department of Veterans Affairs, veterans “…do not need to make a down payment and there is no upper limit or required cap on the income of the borrower.” Instead, a certificate of guaranty from the VA is given to lenders to attest to the credibility of the borrower.

Active duty persons, military veterans, members of the selected Reserves, National Guard members, and in some cases, spouses of veterans are eligible for VA loans. Eligibility is also contingent on the amount of time served and type of service. With a VA home loan, veterans with low credit scores have a greater chance of getting a VA loan than a typical loan. The VA program gives veterans with low credit scores a second chance by looking at the last 12 months of a candidate’s credit history rather than a comprehensive credit score which could prove more damaging. VA home loans may also give borrowers the opportunity to refinance to a lower interest rate while in the VA program.

The surge in VA home loans is partially due to an increasing amount of soldiers returning home. In the 2012 fiscal year, the Congressional Research Service reported 63,500 troops in Afghanistan. As of May, there are currently 32,000 troops in Afghanistan. Earlier this year, Obama announced his goal of gradually reducing the number of troops in Afghanistan to 9,800.

For some troops, finding a home becomes a main priority before arriving home, especially for those with lengthy deployments. It is not unusual for a member of the military to have video and email correspondence with a real estate agent or spouse regarding the future purchase of a home. Video chats can transport a soldier within seconds to an open house and bring a soldier that much closer to closing on a new home.

In addition to returning soldiers, another reason for the rise in VA home loans is due to the tightened lending standards and rise in interest rates from the Federal Reserve’s tapering of stimulus cash. With a rougher lending landscape, veterans are recognizing the virtues of VA home loans.

The year 2013 signified a record amount of guaranteed VA mortgage loans—almost 630,000. According to a study conducted by Veterans United, the total loan volume for VA home loans has increased by 370 percent since 2007.  The program has proven to be a second chance for under qualified veterans to achieve their dreams of owning their own home.

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