VA home loans are on the rise
In 2019, about two in five new government-backed mortgages were VA loans, according to a new study by Ginnie Mae.
That’s more than double the percentage of new VA loans in 2009.
So, why the spike in popularity? Because VA loans have huge benefits for home buyers, including:
- Below-average mortgage rates
- No mortgage insurance payments
- Zero down payment
And as of 2020, there are no size limits for VA loans.
But to access those benefits you need to qualify for the VA’s mortgage program.
You can check your eligibility using the link below.
Why VA loans are in demand in 2022
There’s one obvious reason VA loans are becoming more popular: We simply have more eligible VA borrowers, according to one expert.
But to truly understand the rise in VA loans, we have to consider all the major benefits of a VA mortgage:
- They require no down payment. This is one of the only programs out there offering zero down home loans
- There is no mortgage insurance required with VA home loans.
- A VA mortgage loan has no maximum loan amount
- VA home loans are backed by a government guarantee
- If you choose to sell earlier than planned, there’s no prepayment penalty or early-exit fee
- VA loans have had the lowest foreclosure rate among any loan product
- You get post-closing support. Even if you lose a job or suffer a costly emergency, you’re more likely to be accommodated by your lender if you have a VA home loan
- Most home lenders offer VA home loans
In addition, most VA loans are “assumable.” Put another way, you can transfer your VA loan to a future buyer if that person is also VA-eligible.
That can make it easier to sell your house at a later date.
Especially if rates rise in the future — which they’re likely to do — a VA mortgage at today’s low rates could become a hot commodity. This could make it easier to move your home in a tough market.
The experts’ take on VA home loans
Unsurprisingly, mortgage experts sing high praises of the VA home loan.
“The VA loan is a good, appealing loan product for veterans and their families looking for a primary residence. It’s a loan product that offers the most advantages to its target audience,” says Jeremy Sopko, CEO of Nations Lending.
Andrew Weinberg is principal of Silver Fin Capital Group. He says a VA mortgage is very popular today because we simply have more veterans and eligible borrowers these days.
“Plus, it provides below-market rates on a 30-year fixed-rate mortgage, with 100 percent financing,” says Weinberg.
VA loan rates are about 0.3% lower than conventional rates, on average.
Note that VA loan rates lately are about 0.30% lower than conventional rates, on average, per Ellie Mae’s latest report.
Also, “the VA offers loans across the credit spectrum. And the VA does not negatively hit borrowers too much for lower credit scores,” Weinberg adds.
In fact, there’s technically no minimum credit score required (although lenders can impose their own minimum). And the lending rules are more flexible. That makes it easier for eligible borrowers to qualify.
There’s technically no minimum credit score required for a VA loan, and lending rules are more flexible.
Sopko notes that there are limits in place on how much closing costs a VA loan borrower is allowed to be charged, too.
“It’s a no-brainer. There are so many built-in protections for eligible borrowers that just don’t exist in other loans. If you qualify, that’s the loan you should go with,” suggests Sopko.
Is a VA loan right for you?
It’s important to weigh all your options before choosing a VA loan.
“Ask yourself how long you plan to remain in the home you want to buy,” Sopko says. “If the answer is potentially longer than five years, go ahead and pull the trigger on a VA loan if you’re eligible.”
But if you foresee moving in less than five years, talk with a lending expert about your plans and concerns.
“The flip side of paying no money down is that, for the first few years of your loan, you’re going to earn roughly zero equity. And you won’t be eligible to pursue a cash-out refinance without equity, either,” Sopko cautions.
“Plus, without earning equity, selling your home becomes a tougher proposition without having to incur some out-of-pocket expenses,” he continues.
“If you’re looking to take advantage of the zero-down benefit, you should be buying a home... where you’ll be staying put for a while.” —Jeremy Sopko, CEO, Nations Lending
“If you’re looking to take advantage of the zero-down benefit, you should be buying a home in a place where you’ll be planting roots and staying put for a while.”
Don’t be afraid to research other loan options and rates, too.
“Although be wary of any lender that pushes you toward some other loan if you know you qualify for a VA loan,” says Sopko.
When shopping for other loans, “ask what advantage that loan has that would offset the zero-down benefit of a VA loan. And find out if this other loan will require you to pay mortgage insurance,” Sopko recommends.
Find the best VA lender
If you ultimately opt for a VA loan, choose your lender carefully.
“Go with a lender who is experienced in writing VA and government loans. In addition to the interest rate, factor in customer service, fees, and ease of the experience,” Sopko adds.
You can start comparing VA loan companies below.