3 Big VA Loan Benefits for 2021

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Despite the challenges of COVID-19, veteran home buying had a big year in 2020. The VA loan program backed a record of 1.2 million loans. Veteran homeowners refinanced in waves, thanks to modern-day low rates, and younger veterans and service members spurred a surge in VA purchase loans. 

The good news is that VA loans offer plenty of advantages for veterans looking to purchase or refinance this year, too.

Here's a closer look at three big ones.

$0 Down Amid Rising Home Prices

During the early stages of the pandemic, the housing market retrenched a bit before skyrocketing. A combination of low mortgage rates and low housing inventory caused home prices to soar.

With traditional loans, rising home prices create the need for larger down payments. Most conventional loans require buyers to put down anywhere from 5% to 20%, but qualified VA buyers can purchase a home with $0 down.

To put that in perspective, a 5% down payment on a $300,000 home comes out to $15,000. That kind of a lump sum isn't easy for many veterans and military families to put down at the time of purchase.

For this reason, the $0 down VA home loan benefit is increasingly important in 2021. Regardless of the home price, if you have your full entitlement, you will not need to pay a down payment. No down payment gives you flexibility as a homebuyer since you won't need to worry about draining your bank account amid rising home prices.

Low Interest Rates

Mortgage rates hit rock bottom in 2020, reaching modern-day lows. The average rate on a 30-year mortgage last year was 3.11%, according to Freddie Mac. To compare just two years earlier, the average was 4.54%.

Most housing economists expect mortgage rates to rise this year, but veterans will have a built-in advantage. According to data from Ellie Mae, VA loans have had the lowest average fixed rate on the market for six years running.

Interest rate fluctuations and differences can make a big difference in both monthly and long-term costs. On a typical $300,000 loan, the difference between a 3% rate and a 3.5% rate adds $82 to your monthly payment. If you multiply that over the life of your loan term, that .5% makes a big difference.

To be sure, rate quotes will vary by lender, loan type and other factors. But on the whole, veterans using the VA loan benefit have access to the lowest average rates available.

Expanded Eligibility for National Guard

This year, even more veterans will be able to take advantage of this hard-earned benefit.

Congress passed a bill late last year that expanded access to the VA loan program for certain National Guard members, including tens of thousands serving on the front lines of the pandemic.

Now, National Guard members activated under Title 32 orders become eligible for a VA loan after serving 90 days, 30 of which must be consecutive. In previous years, Guard members needed to serve either six total years or meet time-in-service guidelines on Title 10 orders to gain VA loan eligibility.

This retroactive change could help countless Guard members suddenly become eligible for what is arguably the most powerful mortgage product on the market today.

Take the Next Step

Veterans United helps veterans become homeowners with VA loans. See what your military service has earned you.

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