One of the top perks the nation offers its veterans is subsided
mortgages through the VA Home Loan Program. And in recent years,
demand has been surging.
Demand for VA loans has shown a huge increase over the past five
years, with home purchase loans up 71 percent from their FY 2007
levels and the number of mortgages refinanced this year 20 times as
high. The VA guaranteed 540,000 mortgages in FY 2012, which amounts
to nearly a third of the 1.7 million VA home loans currently
The increase is due to a number of factors. For one thing, VA
loans are one of the only remaining ways to get a mortgage with no
down payment, an attractive incentive to young veterans or
active-duty personnel with tight budgets. Approximately nine out of
10 VA mortgage borrowers make no down payment.
Lower credit scores allowed, streamlined refinancing
The VA also has less restrictive credit requirements than most
conventional mortgages; the average FICO score for VA mortgages
last year was reported to be 708, compared to the 750-770 range
more typical for conforming
mortgages these days. The VA has no minimum credit score
One reason for the large increase in VA mortgage refinances -
and why such a large percentage of VA mortgages were originated
within the last year - is that the VA makes it very easy to
refinance. Through what's called a VA streamlined refinance, a
borrower who currently has a VA mortgage can refinance it almost
automatically if mortgage rates decline, as long as they are
current on their mortgage payments.
VA borrowers can get a streamlined refinance even if they're
underwater on their mortgages, whichhas been a major obstacle for
borrowers with conventional loans in recent years.
Another factor behind the increase in VA mortgages in recent
years is that eligibility standards were recently expanded.
Legislation signed into law by President Obama last August extended
eligibility to surviving spouses of veterans whose deaths were not
deemed service-related, and sped up the process by which veterans
could be deemed eligible for a disability waiver, which would
exempt them from paying VA loan origination fees.
Established in 1944 as part of the GI Bill of Rights for
returning WWII veterans, the VA Home Loan Program announced just
last month that it had topped the figure of 20 million home loans
guaranteed under the program. That home was purchased in Virginia
by the surviving spouse of a veteran of the Iraq War who passed
away in 2010, according to the VA.
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