Home prices have risen to sky-high status, and availability has taken a sharp nosedive. But PCS season doesn’t stop for a booming real estate market. Many military homebuyers across the country have turned to VA loans to purchase a home in a climate that has stacked all the odds against them.
The VA loan is designed to help veterans, service members and their families achieve homeownership. Offered by private lenders but partially backed by the Department of Veterans Affairs, the VA loan does not require a 20% down payment (down payment requirements with an FHA loan can range from 3.5–5%), nor mortgage insurance. Other benefits include relaxed credit requirements and a hard limit on military homebuyers’ expenses for closing costs and fees.
Generally known for its highly competitive interest rates, VA loan rates have become an even brighter beacon of housing hope as home prices have grown over 17% in the past year. In today’s high-demand, low-supply real estate market, many military homebuyers have been forced to buy outside their typical price range. However, the security of a VA loan has enabled some private lenders to respond to the seller’s market with interest rates as low as 2.25%.
In Virginia, Navy Petty Officer 1st Class Josh Rivera recently took advantage of the VA loan to purchase a home in one of the country’s most saturated military regions after seeing how it benefited his colleagues.
“A good friend of mine had just bought and sold two homes,” Rivera said, “and he used the VA loan each time. You can’t beat the benefits.”
When the loan inspector assessed Rivera’s house, he addressed issues the typical inspection didn’t cover.
“He gave me grounds to tell the current homeowner to [make repairs],” Rivera said, including a new roof installation and replacement of several moisture-damaged parts. The repairs became part of the contingency of the sale.
“They saved me on two major things that could’ve potentially gone wrong in my new home.”
The seller’s market has inspired many landlords to raise rent or list their rental properties on short notice, leaving their tenants scrambling to find a new rental or purchase a home on a dime. This is precisely what happened to Kristen Collins, who recently switched from tenant to homeowner.
“We actually didn’t want to buy in the current market,” shared Collins.
She and her Coast Guard husband live in South Texas, where home availability has nearly vanished, and listing prices have skyrocketed since the pandemic began.
“We were renting the home we purchased, and the owners at the time gave us a 30-day notice.”
Thankfully, the family had the VA loan in their back pocket.
“We put an offer in on another home and tried securing a rental but were not successful. We ended up putting an offer in on the home we were renting when it hit the market. Luckily, after a little back and forth, our offer was accepted, but it was a very stressful situation.”
A common misconception about the VA loan is that homebuyers can only use it one time. However, the VA loan comes with a lifetime benefit, so qualifying veterans can use it again and again. Having used the VA loan for a prior home purchase in 2014, the Collins family knew to work with a realtor and lender who understood the intricacies of the loans.
“Although the process of having our offer accepted was incredibly stressful,” Collins said, “once we started the VA loan process, it felt like smooth sailing.”