The VA is seeing record numbers of veterans take advantage of their VA loan benefits over the last while, and this is widely attributed to the Pentagon making reductions in force as a result of the current budget crisis. The trend started in 2013, when the VA broke their record for number of loans guaranteed in a given year by guaranteeing over 620,000 loans. While this uptick is not unexpected, it’s seen as an indication that the government program is doing what it was meant to do – provide homes for veterans on better terms than they could get elsewhere. While 2013 was a record-breaking year for the VA, 2014 looks to be on track to dwarf it. Through March of 2014, or the first quarter, the VA guaranteed about 192,000 loans. Especially considering that the first quarter is often slower than the rest of the year, the VA is projected to not only beat the current record, but obliterate it by the end of the year. They could feasibly reach over 800,000 loans.
The previous record before 2013 was set in 1994, and was 602,244 loans. There are currently 1.9 million active VA loans. Together, they make up about $350 billion. The average loan amount for VA loans closed last year was $225,604. These statistics are an interesting snapshot of the current situation in the VA loan program. Knowing that many of our troops are taking advantage of the VA loan program helps us know that the program is providing the assistance that they need and making it possible for them to advance their lives through home ownership. With the military downsizing due to automatic budget cuts, and service members seeing a little more permanence in their lives with the conflicts in Iraq and Afghanistan mostly concluded, there is a lot more interest in home ownership among younger veterans and active service members. The active-duty force is expected to be reduced to 1.31 million troops by 2015, which is down from a 2010 high of 1.43 million. The reduction amounts to roughly 9%, or 122,000 troops. This reduction, in conjunction with the normal turnover of discharges and new recruits, makes for more veterans leaving active duty than is normal.
The VA has also made strides in recent years to make the VA loan program more accessible to veterans. Up until recently, a Certificate of Eligibility could only be applied for via mail, and could easily take weeks or even several months to receive. By making the COE application available to submit online, the VA has made it that much more accessible to those interested in taking advantage of their VA loan benefits. Probably not coincidentally, the number of individuals attempting to submit an online application for their COE increased by 29% in 2013. However, all agree that one of the biggest factors at play in the increase in VA loan applications is that they do not require a down payment.
One of the most unique things about the VA loan program is that VA loans do not require a down payment. Since saving up for a down payment is a matter of years in the best of economic times, while in the midst of the slowest recovery in American history it stands to reason that veterans are taking advantage of the ability to purchase a home without making a down payment. Indeed, 89% of all VA loans were made with no down payment in 2013. While a testament to the efficacy and value of the VA loan program, this trend does have somewhat more glum implications in terms of the economic statuses of our service members. It also suggests that veterans may be turning to the VA loan program because they have no other option.
This growth of the VA loan program is in spite of distaste for it in the minds of sellers who don’t like the additional government requirements for a VA loan borrower. The government requires an additional appraisal be done by a VA appraiser, which can throw a wrench in the works if the appraiser determines that the sale price of the home is higher than the fair value of it – even if both buyer and seller are satisfied with the terms. The VA loan program also requires the seller to sign an Escape Clause, which allows the borrower to step out of the contract to buy the home if necessary. For these reasons, many sellers shy away from selling to VA loan borrowers.