The Department of Veterans Affairs reports that 200,000 service members transition from active duty to civilian every year. It has been estimated that the five year period from 2011-2016 will see more than one million service-members receive their discharge. This figure represents an enormous segment of the population who may benefit from the accessibility of the VA home loan. Since it was originally created as part of the GI Bill in 1944, the VA loan has been providing veterans with greater opportunities to achieve the American dream of homeownership. Between 1944 and 1952 some two-and-a-half-million veterans used the VA loan guaranty to finance the purchase of a home. Prior to World War Two, because many Americans were unable to secure the money necessary to attain this, the dream was largely out of reach.
Today, the housing market has buoyed by the presence of the VA home loan. During the first quarter of this year, the VA loan has made up 8.1 percent of all mortgages made, equating to a figure of $19.5 billion. This number is up from 6.9 percent the previous year and a paltry two percent a decade ago.
Potential buyers still woozy from the recession are looking for ways and resources to supplement loans, assist with closing costs and open doors to buying a home. Veterans Administration Home Loans are an avenue that provides these things and more.
What factors appear to be influencing this?
The increase in VA loans is largely attributed to prevalent market conditions as well as adjustments to bank lending regulations, limited consumer resources, VA loan advantages, augmented loan limits, and increased awareness.
Market conditions
In the aftermath of the recession the United State Government took a hard look at lending procedures and noticed that there was a need for a complete reform of the mortgage industry. This legislation has caused certain loan types to change from unpopular to illegal. As reported by Citi © housing analysts earlier this year, key areas of change are coming within this industry. These include higher compliance costs, diminished refinancing mortgages and higher capital requirements. These changes to traditional loans further entrench the importance of VA loans.
Limited consumer resources
Because of difficulties and increased expenses during the recession, many consumers have limited cash on hand. To add to this, new bank regulations have changed the way Americans buy houses. The VA home loan offers consumers distinct advantages not easy to come by when compared with conventional loans. These include no down payment requirements, more lenient credit requirements, no private mortgage insurance, no-prepayment penalties, refinancing options, competitive interest rates and service-related disability options.
VA loan advantages
The inherent benefit provided by these loans is also largely driving this increase. Buyers using VA loans have an easier process of getting institutionalized seller paid closing costs approved, which is a big plus for home buyers with limited cash on hand.
Additionally advantageous is the easy access VA loans offer, especially in comparison to conventional loans. This is exemplified by the non VA defined minimum credit score. Borrowers can get VA loan approval while in bankruptcy or following a short sale or foreclosure, allowing them to get back into a home sooner than with other loan programs. However, one requirement is that an individual in a Chapter 13 bankruptcy must get court approval as a condition to taking on the new debt.
VA loan limits
With government loan products on the rise, in an effort to assist the economic recovery of the nation, the VA has made some adjustments to its standing loan limits, increasing consumer confidence as it pertains to the VA loan program.
Although limits vary state to state the increases have happened in most regions, with California, New Jersey and New York seeing the most significant changes, in some cases limits have raised by as much as $250,000. Following the second quarter of 2011, home prices have been steadily increasing.
However, there are some communities where the limits have fallen. High cost counties in Virginia have seen decreases all over the state by up to $150,000.
Still in these communities the process to apply for a VA loan remains the same, and is still an option for most would be home owners.
The increase is likely a correlation with expanded awareness of the loan program among qualified applicants. A 2004 study conducted by the VA revealed that many eligible Veterans were unaware of their entitlement.
Now that option arm 100 percent conventional home loan financing is a thing of the past, more and more buyers are looking for low and no money down programs. The VA home loan guarantee is the best no money down home loan available.
The VA loan program is expected to account for more mortgages in the coming years.
To apply for a VA home loan, contact VA Home Loan Centers Today!
