The Department of Veterans Affairs is having a busy summer when it comes to home loan activity, with the VA reporting it will likely back more than 1 million loans by the end of its fiscal year in September. The previous record was set in 2017 with a total of 740,386 loans.
The VA home loan program is 76 years old and offers zero-down mortgage options to veterans, service members, and “select military spouses”. The loans are issued by private lenders and guaranteed by the U.S. Department of Veterans Affairs. The program was created in 1944 to help returning service members purchase homes and has guaranteed more than 24 million VA loans since its inception.
2020 was already a big year for the loan program thanks to active refinancing, which increased 315 percent year-over-year in the first three quarters of 2020. Purchase loans were up more than 11 percent during the same time period. The VA reported this week that lending volumes were already up prior to the COVID-19 pandemic and the CARES Act, but noted that the pandemic did seem to stoke demand for VA loan products.
“To be sure, the coronavirus also introduced challenges for prospective borrowers,” said VA lending expert Chris Birk. “Many lenders tightened their credit requirements and introduced additional employment checks.” However, the average VA purchase loan continued to close quickly throughout the summer, posting a 47-day turnaround in June 2020.
Top Markets for VA Loan Growth in Q3 2020
Not every buyer will qualify for a VA loan, but those who do (or who might be able to do so within 1-5 years) can be excellent buyers for investors' properties. Whether you want to sell at retail and outright or creatively finance with an eye toward helping the buyer qualify for this type of financing in the future, knowing your buyer's options for VA loan programs can help you help them get in a home.
In Q3 2020, 35 metro areas saw VA loan growth of more than 100 percent.
Top performers with loan growth in excess of 150 percent included:
• Sacramento, California
• Los Angeles, California
• San Diego, California
• Honolulu, Hawaii
• Baltimore, Maryland
• Washington D.C.
According to Veterans United Home Loans, VA purchase activity is being fueled largely by Millennial and Gen Z buyers hoping to take advantage of low interest rates. In fact, millennial homeowners refinanced into VA loans with staggering 463 percent jump over this time last year.
Do you keep VA loans in mind when you are working with buyers? What is your strategy?
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