VA Loans for Veterans Rise Exponentially

Veterans keep our American Dreams safe—they deserve to own a part of it, too. And a Department of Veterans Affairs loan program seeks to do just that. VA Loans for Veterans Rise Exponentially photo

Through the program, servicemen and women can obtain home loans with no down payment and no private mortgage insurance.

The VA doesn’t offer the loans itself. Rather, the department sets guidelines for the loans, and insures the loans—which gives the lenders more confidence to lend, and less likelihood that they will be holding the keys if a veteran has difficulty making payments.

Such mortgages have become a smoking hot commodity. In 2007, 133,000 such loans were issued. In 2013, the number hit 630,000. That’s more than a 300% increase for a program that began in the wake of World War II and celebrates its 70th anniversary this spring.

Chris Birk, author of “The Book on VA Loans,” attributes the rise to a confluence of trends: the rising number of qualified veterans, the tightening of loan qualification requirements, and the shaky economy.

The United States has been considered at war, for the sake of defining military service, since the Gulf War—more than 20 years, Birk said. Veterans only have to serve 90 days of active duty during wartime to qualify, as opposed to 180 days during peacetime.

Meanwhile, by early 2014 the average credit score needed to obtain a conventional mortgage was 725, according to Ellie Mae.

The average VA loan score is 620, and military members often have more credit dings, Birk said, due in part to the nature of their jobs.

“They’re in service but they have to tackle credit card payments … that can get sidetracked and lost,” Birk said. “We’ve seen veterans who’ve been shut out of the conventional housing market flock to this market because they can get into a home without a down payment, and they don’t need sterling credit.”

The loans may not work for everyone. A family who can afford to put 20% down might do better trying their fortune with a conventional mortgage, Birk said. But if their credit scores fall below pristine, the VA loan could still serve as a better option. And while FHA loans might be an option, the VA loans don’t require private mortgage insurance—as FHA loans do—that can drive up monthly payments.

The Department of Veterans Affairs also backs other programs, for refinancing at a lower rate, loans to adapt a home to the needs of a disabled vet, even some property tax deductions.

 

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Are you looking at buying or refinancing? Do it before rates rise.

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Below is an snippet of what one of the leading lenders is saying about current interest rates.

While the federal government contemplates increasing home-financing rates, the Fed has stated that it will likely raise rates when unemployment falls below 6.5%, so now is the time to refinance your home. There’s a program the government created a few years ago called the Home Affordable Refinance Plan®, commonly referred to as HARP, which enables Americans to save big on refinancing when they otherwise could not due to a decline in their home’s value. It provides you the opportunity to refinance at surprisingly low rates, which could reduce your monthly payments. The average reduction was a savings of about 33% last year. On a $200,000 loan, that translates to an average savings of $4,100 in the first year. With the low rates, 39% of homeowners were actually able to shorten their loan terms as well.

Homeowners are becoming increasingly savvy, and many are surprised to learn how much they’re able to save on their mortgage while refinancing. The program started in March of 2009, but is set to expire at the end of December 2015, so it’s vital to act fast. We recommend using our lending-finder service at LendingTree, which has a proven track record of helping consumers save money by comparison shopping for lenders.

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Mortgage rates hit 2014 low

 

The government’s stimulus program has helped keep borrowing costs down. The Federal Reserve has been purchasing Treasury Bonds and mortgaged-backed securities for years, providing a steady market for mortgages.But the Fed has cut back on its purchases, and plans to end the buying program entirely in October, reducing demand for mortgage bonds. That should eventually cause rates to climb.

Low mortgage rates and home prices that are climbing more slowly should boost the housing market, said to Keith Gumbinger, spokesman for HSH.com, a mortgage information company.

“That should provide a solid foundation for home sales this fall,” he said.

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