Guest Post: Chris Birk, Director of Content Development for Veterans United Home Loans
For the past six years, the VA home loan has experienced incredible growth in spite of a sluggish economy.
The VA backed 630,000 mortgages in the 2013 fiscal year, an all-time high for a program that turns 70 next year. The program has grown exponentially since the real estate and housing market collapse – a whopping 370 percent since 2007.
Here’s a look at VA guaranties over the last six years:
FY12: 539,884
FY11: 357,592
FY10: 314,011
FY09: 325,690
FY08: 179,670
FY07: 133,313
Low rates combined with a tight credit environment have made the VA program more attractive than ever. About 8 in 10 VA borrowers couldn’t have qualified for conventional financing.
The VA loan program is dedicated to making homeownership affordable and accessible. VA lenders are typically looking for a credit score of at least 620, which is well below what homebuyers will need for conventional and often even FHA financing.
For example, the average credit score on a successful conventional loan in October was 758, according to Ellie Mae. For FHA loans it was 692.
The recent low rate environment has also meant a boon for VA refinance options. The VA’s Streamline refinance program has emerged as a key benefit for homeowners who owe more than their home is worth. Some VA lenders can process these refinance loans without the need for an appraisal.
Why the Growth?
Both the collapse of the housing market and the failing economy have played huge roles in the growth of the VA home loan. Accordingly, lenders have made their lending requirements stricter and made financing less affordable. With a conventional loan, prospective homebuyers were in need of higher credit scores and higher down payments – two factors that the waning economy made difficult for many prospective homebuyers to obtain.
The VA home loan program allows a more flexible debt-to-income ratio, lets borrowers with lower credit scores secure financing and helps veterans purchase without the need for a down payment. For many veterans, this nearly 70-year-old program has become the most – and sometimes the only – financially feasible path to homeownership.
Perhaps surprisingly, VA loans have also thrived in the face of foreclosure. They’ve had the lowest rate of foreclosure of any mortgage product for nearly all of the last five years. That’s despite the fact that 9 in 10 VA borrowers purchase with no money down.
This historic loan program isn’t just about helping veterans secure home financing. It’s also done an incredible job ensure veterans keep their homes. As VA loans head into their 70th decade, they’re just as important today as they were in 1944.
To learn more about the VA home loan program, watch Veterans United experts live chat with the VA and Rick Davison, CEO and president of Century 21 Real Estate LLC.
About the Author: Chris Birk is the Director of Content Development for Veterans United Home Loans and author of “The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits.” Connect with him on Facebook at VA Loans Insider or on Google+.
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