VA Loans Continue to Rise

The Department of Veterans Affairs (VA) is a government body that addresses the needs and concerns of American veterans even after they are no longer in the service. One of the biggest and most popular programs affiliated with the VA is the VA mortgage. Through this homeownership program, servicemen and women can secure affordable home financing without a down payment and without having to pay costly private mortgage insurance. Over the years, the VA loan has become increasingly popular – so popular in fact, originations for VA loans jumped more than 300 percent in a six year period.

According to a recent article on Realtor.com, there were 133,000 VA loans issued in 2007. In 2013, the number reached 630,000.

Why are VA loans becoming more popular?

Author Chris Birk, who penned “The Book on VA Loans,” says the rise in VA loan activity is also due to tighter lending practices in the mortgage industry. While it is true that obtaining a conventional home loan isn’t as simple as it was seven or eight years ago, the tighter restrictions were set in place in order to avoid another financial collapse and recession.

The rise in VA loan activity could also be due to the rising number of qualified veterans. Because the U.S. has been considered at war (as far as defining military service) for many years, servicemen and women who are returning home are considered veterans, even if they did not necessarily see combat. According to Birk, veterans only need to serve 90 days of active duty during wartime to qualify for a VA loan, as opposed to 180 days during peacetime.

Another attractive feature of the VA loan is the more lenient credit score requirement. According to Ellie Mae, the average credit score needed to obtain conventional home financing was 725. The average VA loan score is 620, making the program a much more accessible option for military borrowers who typically have more dings on their credit history due to the nature of their jobs.

Yet another perk, VA loans do not require private mortgage insurance, which is typically a requirement any time a borrower finances more than 80 percent of the home’s sale price. Because VA loans do not require any money to be put down, this can be a huge advantage for the budget-conscious veteran homeowner.

Who provides VA loans?

Contrary to what you may think, the VA does not actually provide VA loans. Instead, they set up certain guidelines for the loan and insure the loan, allowing mortgage lenders to offer the program to qualified borrowers at a lower level of risk. Since the VA insures the loan, lenders can rest easy knowing that they are protected in the event that the borrower defaults on the loan. Borrowers will need to go through a mortgage bank or other lending institution to obtain a VA loan.

Who is eligible for a VA loan?

We offer VA refinancing solutions as well as purchase mortgages. To find out if you are eligible for a VA loan, review the criteria here. You can also speak to a mortgage professional at eLEND by dialing 1-800-634-8616.