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.