As the U.S. continues to condense the size of its military, returning veterans are having a widespread impact on civilian life. Many are entering the private sector while others struggle to find work. Many are benefiting from advanced medical care while others suffer from inattention. Despite the ups and downs of every veteran's transition, one area of civilian life that a great number of veterans are finding success in is housing, and they have the VA loan to thank for it.
Between 2007 and 2011, VA backed mortgages have doubled. Not only are veterans transitioning out in greater numbers, they're using VA loans to purchase property. According to the Washington Post, VA-backed mortgages represent 7 percent of the all home-purchase activity. For new homes, that number spikes to 14.5 percent. When you look at the benefits of suing a VA loan, it's not hard to see how things have shaped up this way.
Enticing Terms – Veterans will have a tough time finding loan terms comparable to what the VA offers. No money down, flexible credit underwriting, and competitive interest rates are the start of what they offer.
Lenders like VA loans – It's important to know that VA isn't actually issuing loans, they're simply backing them for veterans. This means that lenders still need to agree to the deal before veterans get their new homes. Fortunately, lenders are increasingly warming up to the idea of VA loans.
Coupled with these boons is strong support from various veteran housing charities. Organizations like Operation Homefront, the Military Warriors Support Foundation, HomeStrong USA, and Purple Heart Homes all help put veterans into homes. They do this by taking donated houses from banks and passing them on to veterans. Bank of America, JPMorgan Chase, Wells Fargo Home Mortgage, and others have pitched in. Combined, well over 3,000 homes have been donated to veterans.
It's important to contrast these positive numbers with the current housing climate: VA loans are a strong resource for veterans on their own, but they shine compared to what most civilians face.
According to Fox Business, at least 15 percent of homeowners are underwater, which means they owe substantially more than their house is actually worth. Realty Trac shows that 55 percent of homes valued under $50,000 are underwater. 34 percent of homes valued between $50,000 and $100,000 are underwater, as are 17 percent of homes valued between $100,000 and $200,000.
While this is a bad situation to be in for the homeowners, the ramifications are affecting the entire housing market. When a home is underwater, the homeowners are essentially stuck. If they could sell the property, they would still owe a big chunk of their loan because, again, being underwater means the home's value is less than what you owe. Because so many homes are underwater, and therefore so many homeowners can't move out, the housing market still hasn't entirely stabilized.
Because so many underwater homes are valued below $100,000, the market on cheaper homes is fairly constricted. People looking for cheaper homes are encountering difficulties because there just aren't that many of them available.
One of the most important traits of VA backed loans is the rigorous process prospective buyers most go through to obtain one. It's not extraordinarily difficult, but VA make sure that every prospective loan is being given to a buyer who is reasonably financially secure and has a low potential for defaulting.