More Young Home Buyers are Choosing VA Loans
The VA Loan is one of the most affordable ways for qualifying Veterans and Active-Duty Military to purchase a home. The VA Loan does not require a down payment, doesn’t have mortgage insurance, and typically will have a below-average interest rate. The VA Loan was created in 1944 to help soldiers returning from World War II put down roots and buy homes. However, it tends to be underutilized as a mortgage option. Recent data shows, both Millennial and Generation Z home buyers have led to a resurgence in VA Loan usage.
The Department of Veterans Affairs reports that the number of Millennials using the VA Loan jumped 14% year-over-year. Combined, Millennial and Gen Z home buyers accounted for 45% of all VA purchase loan originations in the past year. Young home buyers who qualify for the VA Loan find it’s more affordable up front and long-term than other government-insured or conventional home loans.
Advantages of the VA Loan
Lower than average interest rate.
The Millennial Tracker by Ellie Mae found that the average Millennial-aged VA Loan borrower had a mortgage interest rate of 3.5% compared to the overall average of all types of mortgage loans, 3.93%.
No down payment requirement. Buy a home sooner!
The biggest obstacle today’s home buyers face is saving for a down payment. Average mortgage payments are comparable to average rental rates, but would-be home buyers are struggling to save for a down payment due to student loan debt, rising costs of living, and stagnant wage growth, among other causes. Even with college-related VA benefits, some Veterans and active-duty military may have had to supplement their education through student loans. Since the VA Loan does not require a down payment, home buyers can move into their home sooner and don’t have to wait until they’ve paid down other debt and accumulated the down payment savings.
Lower costs = bigger home buying budget
With lower upfront costs, many VA Loan borrowers are able to increase their home buying budget. The average Millennial VA borrower had an average loan balance of $390,000, compared to the average Millennial balance of all mortgage types of just $260,000.
Chris Birk, director of education at VA loan lender Veterans United, explained, “the VA loan program helps younger buyers get into homes today, rather than have to wait years like so many Millennial and Generation Z civilians.”
To support our Veterans and active-duty military and their families, we are well-versed in the VA Loan and other options for current and former servicemembers. If you have a question about your VA Loan benefit, or want to compare it to other mortgage options, please let me know.