This past weekend, millions of Americans honored our Veterans in celebrations throughout the nation. With our heroes coming home in increasing numbers, so to are the opportunities to increase their chances of homeownership.
Despite the recent economic free-fall, home ownership remains a cornerstone of American society. Nearly 70 percent of U.S. citizens own a home, which most see as a path toward wealth creation and financial stability. Rates for home ownership among veterans are even higher, right around 82 percent, according to the Mortgage Bankers Association.
The last few years have proved a mixed bag for home buyers and existing homeowners. Borrowers who qualify have reaped the benefits of government-sponsored tax credit programs and record-low interest rates. At the same time, the sub-prime mortgage meltdown and ensuing financial crisis created a restrictive credit environment and made it significantly tougher for some prospective borrowers to purchase homes or to refinance existing mortgages.
That relatively grim storyline isn’t exactly the same for military members. VA loans are consistently easier to qualify for than other loan products. Veterans and active duty service members don’t need to hit strict credit or income guidelines to participate in the program. In fact, credit history plays less of a role in determining home ownership for veterans than it does for non-VA borrowers.
These loans also come with significant financial benefits. Veterans routinely point to the program’s signature benefit as its most powerful: qualified borrowers can purchase a home with no money down.
Given the lending environment we now inhabit, it’s almost difficult to believe anyone can buy a house today without shelling out money up front. But it’s true, it’s incredibly powerful, and it’s a benefit that only one other loan product, USDA loans, can still provide.
“Most people don’t realize, especially younger people and first-time home-buyers, what a benefit it is,” said Scott Dow, of Charleston, SC., a former Coast Guard officer and Reservist who has purchased two homes using his VA benefit. “I would not have been able to purchase a home without a VA loan.”
Neither would most military buyers. About eight in 10 VA borrowers could not have qualified for conventional home financing. Nearly 90 percent of the VA loans issued in fiscal year 2011 came with no down payment.
Falling home prices and a watertight credit market have brought new attention to the long-cherished VA home loan program. Loan volume increased 14 percent and skyrocketed in 2011 as military buyers flocked to the VA’s more flexible and less costly alternative. Overall loan volume has soared nearly 170 percent since 2007.
The VA loan and military borrowers have also proved resilient in the face of foreclosure.
VA loans have the lowest rate of foreclosure of any product on the market. Part of that success is due to the loan counseling experts at the VA who work tirelessly to keep veterans and their families from losing their homes. The VA has multiple programs and options aimed at helping those who have served our country stave off foreclosure.
But active duty troops and veterans themselves deserve much of the credit as well. Order, structure and obligation are deeply ingrained tenets for most service members. That conditioning tends to follow them throughout their lives, including when the time comes to follow through on structured loan payments.
Despite wide-ranging benefits, VA loans have been utilized by only a fraction of the nation’s 22 million veterans. Fewer than 13 percent have taken advantage of the program to purchase or refinance a home. What’s worse is that nearly 20 percent of veterans are not even aware of the program’s existence, according to a 2004 report from the VA.
To be sure, a VA loan isn’t a perfect fit for every military borrower. But this crucial program has served as a springboard to homeownership for more than 18 million veterans since 1944.
Today, as a new era of mortgage lending takes root, the VA Loan Guaranty program is more important than ever.
Chris Birk is a former journalist and author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits”. He is also director of content development for Veterans United Home Loans, the nation’s leading dedicated VA-approved lender. Follow him on Google+.
This is post was included in the November issue of Arizona REALTOR® Magazine.