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Local Voices

VA Home Loans Providing Boost to Housing Industry

Since the housing boom of 2005, the real estate industry has since struggled to get back on its feet; while things have slowly improved over the years, their efforts are still laden with the failures of the past and a still-sluggish national economy. However, a recent upswing in the purchase of homes has been notices, and it’s coming from rather surprising source- United States military veterans who are taking advantage of the government’s “VA loan” program, and they’re doing so in numbers that, according to Bloomberg, represents a startling 20-year high.

A VA loan is a mortgage loan guaranteed by the U.S. Department of Veterans Affairs (VA) and is designed to offer long-term financing to eligible American veterans or surviving spouses who do not remarry. The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.

The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 per cent second mortgage and up to $6,000 for energy efficient improvements. And since there is no monthly Private Mortgage Insurance, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment.

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Businessweek.com reports on a number of reasons for the current increase of in the use of VA loans can be attributed to the cessation of combat in Iraq and Afghanistan after more than a decade of hostilities; with U.S. military action in that region of the world coming to a close, members of the armed forces are now rotating back home, many of whom are eager to either start a civilian family life or re-join one that they left. Either way, new military vets looking to buy a home, Businessweek.com said, and a VA loan is one of the easiest and most effective ways to do it.

“About 4.7 million full-time troops and reservists served during the wars and many are now able to take advantage of one of the easiest and cheapest paths to homeownership,” they said. “The program’s share of new mortgages, at a 20-year high, is also increasing as other types of government-backed loans have grown more costly.”

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Businessweek.com cited the newsletter Inside Mortgage Finance, which notes that VA loans accounted for 8.1 percent, or $19.5 billion, of mortgages made in the first quarter, up from 6.9 percent in 2013 and less than 2 percent a decade ago.

Mdnewsfeed.com reports that such phenomena is commonplace after the return of military personnel after extended armed conflict; they noted that as veterans returned from fighting against Germany and Japan, the loans they took out jumped to 28 percent of all mortgages recorded in 1947. That drove up homeownership and helped create a suburban building boom.

Mortgagenewsdaily.com said that the boom in home loans, which remains the highest ever on record, dwarfs what we’re seeing from VA loan usage today; however, the fact that military vet loans are at a modern high and rising is a positive sign that the housing market is on the mend...with a little help from our nation’s vets.

“The VA's share of new mortgages is at a 20 year high and in the first quarter of 2014 accounted for 8.1% (just under $20 billion),” they said. “Last year, VA's share in Q1 was 6.9% and 10 years ago it was under 2%. The record was 28% in 1947, as one would expect as WWII troops found their financial footing and the building boom began.”

In addition, Mdnewsfeed.com said that extended stay in combat-intensive regions, while very dangerous and psychologically difficult, can nonetheless help soldiers build up the funds needed to take advantage of a VA loan when they eventually rotate back to civilian life.  

“For some, the combat deployments helped them build a nest egg. Service members don’t pay taxes during deployments in war zones and receive $225 a month in danger pay for service in Iraq and Afghanistan,” they said. “Basic salaries range from $18,378 to $64,933 for enlisted personnel and $34,078 to $153,925 for officers with less than 20 years’ experience. In addition, service members receive significant tax-free housing and food allowances.”

Every day, the men and women in our nation’s armed forces risk life and limb to safeguard the freedoms that we all hold dear; the VA loan program is one of the many ways that we attempt to repay that selflessness, and, in turn, its usage by vets is again extending a helping hand back to the nation they serve; it’s a win-win situation for all involved, and it’s slowly helping the shaky housing market to get back on its feet after an extended period of hardship.

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