The historic VA loan program hit a major milestone this month, backing its 22 millionth home loan, according to the Department of Veterans Affairs.
This $0 down loan program has surged since the housing crisis. Veterans and military members have turned to the benefit's more flexible and forgiving credit requirements during a time of tight lending and limping wages. The VA guaranteed a record number of loans in fiscal year 2015 and has backed nearly 3 million since fiscal year 2011.
To put that in perspective, the VA didn't guarantee 3 million loans in the 11 years prior to FY11.
"The pace of changes we have implemented in our program has increased dramatically the past few years," said Mike Frueh, national director of the VA loan program. "We have focused on removing time and cost impediments to the industry to make and service our loans. The net result is that we are making an indelible and significant mark in this industry."
VA loan benefits like no down payment and no mortgage insurance continue to help a new generation of veterans and service members access the housing market. It can take military buyers years to save a down payment for conventional (often 5 percent) or FHA loans (3.5 percent). Both of those loans carry mortgage insurance costs for buyers who can't put down 20 percent of the purchase price.
Right now, a typical FHA buyer with a $200,000 mortgage pays about $140 per month in mortgage insurance. It's an expense they'll pay for the life of the loan.
In addition, VA home loans have had a lower average interest rate than both conventional and FHA loans for the last 23 consecutive months, according to data from mortgage software firm Ellie Mae. VA purchase loans have also had a higher closing success rate than both conventional and FHA loans over that same span.
Despite the no-down payment benefit, VA loans have emerged as one of the safest mortgage products on the market. In fact, they've had exhibited the lowest foreclosure rate of any loan type for most of the last eight years, according to data from the Mortgage Bankers Association.
The VA loan program's 22 millionth loan guarantee comes during a period of tremendous growth, not to mention tremendous promise. Market share for this program once hung in the low single digits. Today, VA loans account for about 10 percent of the mortgage market. And the VA expects loan volume to increase 36 percent over the next five years alone.
"We have definitely reached that tipping point, where veterans know we are no longer, 'My father's VA,'" Frueh said. "We are agile, we are responsive, and we are definitely meeting their needs."