Veterans and military homebuyers propelled the historic VA loan program to a record year in 2015, according to recently released figures.
The Department of Veterans Affairs backed an all-time high 631,142 loans in fiscal year 2015, a whopping 19 percent increase from the year prior. The previous record was set just two years earlier.
Demand for these government-backed home loans has soared since the housing crash, in part because of tighter lending guidelines and flatlining income growth. VA loans allow for $0 down payment and tend to feature more flexible credit underwriting requirements than conventional loans.
Nationally, the veteran homeownership rate (82 percent) continues to far outpace that of civilians (63 percent), according to data from both the VA and the U.S. Census Bureau. And there's likely more good news on the horizon for this benefit program. Buoyed by an influx of younger veterans, VA loan volume is expected to rise by more than a third over the next five years, according to department estimates.
"A good home starts with a good loan, and our loan is a fantastic loan for veterans," said Mike Frueh, national director of the VA loan program. "Veterans believe in community, they believe in stability, and the VA loan has helped them achieve that through the years."
VA loans have become a lifeline in recent years for thousands of military members, veterans and their families. Many face unique credit and financial challenges given the nature of their service, and it can take would-be homebuyers years to save for a down payment. Historically, about 9 in 10 VA buyers purchase without putting money down.
To put that in perspective, the average VA purchase loan last year was for $243,997. For a typical FHA loan, a veteran would need about $8,500 for a down payment. Conventional loans often require at least 5 percent down, which would be about $12,200 for that same average VA purchase loan.
On top of that, conventional buyers who can't muster a 20 percent down payment typically extra money each month for private mortgage insurance. FHA buyers have their own costly form of mortgage insurance as well. VA loans feature an upfront funding fee but no mortgage insurance.
VA buyers also benefit from more lenient guidelines when it comes to credit scores and previous derogatory issues like bankruptcies and foreclosures. Yet, these no-down payment loans have proved incredibly safe. In fact, they've emerged as an industry leader -- VA loans have had the lowest foreclosure rate of all loan types for most of the last seven years, according to data from the Mortgage Bankers Association.
Seven decades after its creation, the VA loan program continues to make a tremendous difference for veterans, military members and their families. It's also become an increasingly powerful mortgage option, featuring lower average rates and higher closing success rates than conventional loans, according to mortgage data firm Ellie Mae.
To be sure, a VA home loan isn't going to be the right mortgage option for every veteran or military member. But this hard-earned benefit continues to help scores of people who might otherwise have a tough time securing home financing.
Chris Birk is director of communications for the VA Mortgage Center, which specializes in VA loans for veterans and active duty service members.