Number of Loans Guaranteed by Department of Veterans Affairs Reaches Record High

(NEW YORK) While there are many ways to show your patriotism and love for country, one of the most poignant ways to do so remains putting life and limb on the line through service in the nation’s armed forces; and when it comes to the men and women putting it all on the line, it only seems fair that, as a country, there something in return.

One of many benefits available to U.S. veterans allows a shot at the most regarded facets of the American dream- home ownership through a VA Loan, a government sponsored program that, according to the New York Times, has seen peak usage in recent years.

A VA loan is a mortgage guaranteed by the U.S. Department of Veterans Affairs (the VA). The VA loan was designed to offer long-term financing to eligible American veterans or their surviving spouses (provided they do not remarry).

The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not available and to help veterans purchase properties, in some cases, with no down payment at all. The VA loan allows veterans 103.3 percent financing without private mortgage insurance or a 20 per cent second mortgage and up to $6,000 for energy efficient improvements. And since there is no monthly Private Mortgage Insurance, more of the mortgage payment goes directly towards qualifying for the loan amount, allowing for larger loans with the same payment.

According to the New York Times, the number of loans guaranteed by the Department of Veterans Affairs reached a record high in 2013; the upward trajectory of this trend, they speculate, began after the housing market collapse of 2008 when traditional home loans were hard to come by said Mike Frueh, the director of the V.A.’s Loan Guaranty Program.

“The department guaranteed nearly 630,000 mortgage loans in fiscal year 2013, setting a new high just as the program enters its 70th year,” he said. “The average loan was about $225,000, an amount that reflects the program’s value to working-class America.”

The Times cites several factors as contributing to the growth spurt of VA Loans; a major one being  historically low interest rates, which have driven a tremendous increase in loans for the purpose of refinancing. In fact, approximately one half of all VA Loans issued in 2013 were for the purposes of refinancing, although those figures decreased towards the tail end of the year due to rising interest rates.

The tough lending climate of the last six years is another factor that has elevated the stature of the VA Loan, making it the most viable option for many service members. A huge advantage for first-time buyers is that the loans do not require a down payment; indeed, 90 percent of VA Loans are made with no money down at all. And an additional windfall for prospective veteran homeowners is the benefit of private mortgage insurance, or the lack thereof; VA Loans don’t require any, which translates to a lower monthly payment overall.

According to industry expert Mark Madsen, a VA Loan requires certain minimum service and financial requirements; as far as participation in the military; an applicant needs at least 90 consecutive days on active duty during wartime, 181 days of continuous active duty during peacetime, and a total of 6 years in the Selected Reserves or National Guard.

“The financial requirements, consist of suitable credit, sufficient income, and a valid Certificate of Eligibility; borrowers must show enough monthly income after paying personal debts and housing costs to meet “residual income” levels set by the department. The home must also be intended as a primary residence, Madsen said.

However, according to TheMortgageReports.com, there are certain "ineligible purposes" under which a VA Loan may not be granted; these ineligible purposes can include:

·   Buying land with the intent to build a home on it in the non-immediate future

·   Buying a property to be used as a rental or investment property

·   Buying a home to be used as a second home or vacation property

·   Buying a home in a foreign country

Lodinews.com clears up the misconception some have that a VA Loan is extended from the U.S. government itself, which is not the case; instead, the government is offering security on a private loan that a veteran has secured. Because the agency offers this security, often called a guarantee or insurance, a veteran will receive better financing terms and more accessibility to mortgages.

In a tough economy where the average family is struggling to secure a home loan, it’s certainly good to see the men and women of our nation’s military, after a distinguished period of service, are actively pursuing the extra financial assistance their entitled to. The fact that the VA Loan program has experienced the very peak of its successful usage since its inception over 70 years ago is a clear testament to how effective it is at simply doing what it set out to do all along- help put honest, hard-working Americans into the home of their dreams, that is – as long as they can stay alive to take advantage of it.