If the past few years have been any indication, in 2019 we will continue to see a surge in VA purchase loans—those used to purchase a new home rather than refinance one that is already owned. According to the Department of Veterans Affairs, purchase loan activity is up nearly 60 percent since 2013, and the government-backed loans now account for about 10 percent of the current mortgage market.
Why the recent increase?
In the years following the 2008 mortgage crisis, lenders became far more cautious and established stricter requirements for conventional loans, which meant those who qualified for VA home loans were in a better position than most. Not only that, but Gulf War veterans, many of whom are in their 20s and 30s, now make up the largest portion of the U.S. veteran population. Incidentally, that’s the age bracket of most first-time home buyers.
Of course, not to be overlooked are the unique advantages provided by VA home loans. These include no down payment, no private mortgage insurance, more flexibility with regard to credit history, and the lowest average interest rates on the market. Plus, VA home loans are not just a one-time benefit; eligible applicants can use the program multiple times, and there are no prepayment penalties or early-exit fees.
Experts call it a positive sign despite a turbulent housing market.
The rise in VA purchase loan activity comes as encouraging news, especially considering a recent Harvard University study that revealed the American housing market is still suffering from the mortgage crisis (despite some small gains in the past decade). As more transitioning veterans, many of them first-time home buyers, start thinking about putting down roots, it is easy to see that VA home loans offer some of the best terms on the market.
According to Chris Birk, director of education at Veterans United and author of The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits, “More veterans have used this $0 down loan in the last five years than in the prior dozen years combined. While the VA’s data show refinance loans cooled in 2018, the purchase market remains strong as more veterans and military families turn to what’s become the most powerful home loan on the market.”
Not to mention that with mortgage rates higher than they’ve been in years, a VA home loan can mean the difference between finally achieving the goal of home ownership and being forced to continue losing your hard-earned money on rent.
Do VA home loans require pre-approval?
Getting pre-approved is a smart move that can save veterans a lot of time and frustration when searching for a home. Pre-approval involves providing your lender specific income documents (such as tax returns and W-2s) and credit history information to establish your credibility as a buyer and determine what you can afford. Many times, veterans are pleasantly surprised by their results and find they can expand their home search to include houses in a higher price range.
One more word of advice: Choose your lender wisely.
Just as you will eventually choose a military-friendly realtor, choosing a lender that has plenty of experience working with veteran home buyers is a must. This will ensure they understand and have experience with the VA loan application process, which in turn will help the home buying experience go more smoothly.
To find a military-friendly lender, you can start by searching online or talking to other military friends and family members. Once you have made your choice, you will apply for your VA home loan through your lender.
VA purchase loans are a big benefit for eligible applicants.
Buying a home is an important step toward making a successful transition back to civilian life, one that often helps veterans feel more rooted in everyday society. Since the VA home loan program was established in 1944, it has provided more than 22 million loans and will continue to do so for those who meet the eligibility requirements—one of which is having a copy of your DD214 to show proof of service.
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