by Dan Green
VA Loan Guaranty Helps Military Borrowers
In 1944, the government passed the G.I. Bill, a law which provided a wide range of benefits to U.S. soldiers returning from World War II.
The Department of Veterans Affairs program continues to help eligible military borrowers purchase, refinance, and renovate homes in all 50 states and the District of Columbia.
In 2012, more than $141 billion in VA loans were funded nationwide.
Even veterans of World War II — the program’s original beneficiaries — continue to make use of the program. 733 VA loans were made to World War II vets in the last year, which is a 7% increase over the year prior.
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VA Loans : 5 Programs For Military Borrowers
The Department of Veterans Affairs administers the VA Loan Guaranty program. The agency doesn’t make VA loans directly — the loans are made by banks. Rather, the VA guarantees a portion of the loan, which protects the bank from loss.
Because of this guarantee, VA lenders can provide military borrowers with more favorable loan terms than for a non-guaranteed loan (e.g.; conventional mortgage).
VA loans offer 100% financing and never requires mortgage insurance.
There are five VA loan guaranty programs :
- Purchase Loans, for the purchase of a new home
- Cash Out Refinance loans, for taking cash from your home
- Interest Rate Reduction Refinance Loans (IRRRL), also known as VA Streamline Refinance
- Native American Direct Loan (NADL) program, for purchase, construction or improvement of homes
- Adapted Housing Grants, for veterans with permanent and total service-connected disability
Each program can be used for the purchase of a single-family or multi-family home, including housing units in condominium buildings and co-ops. VA refinance loans can also be used for home renovation and energy-efficiency programs.
There is no loan size limit with the VA Loan Guaranty program, but limitations can apply based on your area.
For example, VA borrowers in “high-cost” areas such as San Diego, California can borrow more via the VA loan program than borrowers buying or refinancing near Dayton, Ohio’s Wright-Patterson AFB; and neither have specific loan size limitations.
Gulf War Veterans Top 2013 VA Home Buyers
The VA loan program is available to eligible military borrowers and surviving spouses. During the Department of Veterans Affairs’ Fiscal Year 2013, the VA guaranteed more than 629,000 home loans, marking a 17% increase from the year prior and a two-fold increase as compared to FY 2010.
Ultra-low VA mortgage rates have played a role.
The number of rate-reducing IRRRL mortgages have increased 227% from 2010 and now account for 49 percent of all VA loans. VA borrowers refinanced close to $67 billion via the IRRRL program, a loan which is often referred to as the VA Streamline Refinance.
Other interesting patterns emerge when we split the loan data by period of service entitlement.
First, Restored Entitlement loans outnumber all other entitlement types. This is because “Restored Entitlement” describes when VA loan has been paid in full via home sale, or when the homeowner agrees to assume the outstanding VA loan balance.
We should expect Restored Entitlement figures to be high in a recovering housing market. Veterans are move-up buyers, too, after all.
Second, Gulf War veterans comprised 28% of all VA loans guaranteed in FY 2013. This was the largest uniform class of service entitlement. The group of Gulf War veterans includes military borrowers with service dates from August 2, 1990 to the present.
Lastly, it’s noteworthy that today’s active military personnel accounted for 17% of last year’s VA loan guarantees. Among all service classes, active personnel boasts the largest average loan size, registering $233,776 per VA loan.
Korean Conflict veterans showed the smallest average loan size at $161,050 per VA loan.
Get Today’s VA Mortgage Rates
The G.I. Bill provides subsidized mortgage lending, which is why VA mortgage rates are often so low as compared to conventional and FHA mortgage rates. It’s among the reasons why VA closings have increased steadily this decade.
See what a VA loan can do for you. Get started with a rate quote today. Rates are available online at no cost, with no obligation to proceed, and with no social security number required to get started.
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