With the housing market starting to shift once again, VA buyers are incredibly well positioned to stay competitive, if not come out on top.
Rising home prices and limited inventory have led to some bumps in the road for Veteran homebuyers over the last two years.
But they're still on a roll overall, with VA purchase loans increasing year-over-year for a decade now. With the housing market starting to shift once again, VA buyers are incredibly well positioned to stay competitive, if not come out on top.
Here's a look at seven reasons why:
Historically, the interest rate on VA loans is lower than conventional, FHA, and USDA products. So far this year, through August, on average, the 30-year fixed VA rate was at least 0.20% lower than other loan products (Conventional, FHA, USDA).
Even a quarter point drop in mortgage interest can help homebuyers save thousands every year. As interest rates continue to be volatile in the current market, VA buyers can always count on getting the lowest rates.
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Compared to 2020, we have 30% more homes available in the market. Demand for housing has softened while inventory increased, giving VA buyers more options and better prices due to no bidding wars and far less all-cash offers. Aside from the existing homes market, there is also a lot of inventory coming in the new homes market, more than doubling the options for homebuyers since 2012.
Home prices just saw the biggest monthly drop in six years. This doesn’t mean that home prices are declining, but instead returning to their normal levels of appreciation. From July to August, national home prices saw their most significant month-to-month drop since 2016. The share of homes with price reductions continue to rise, increasing significantly compared to last year, giving buyers more opportunities to get the best deal.
One of the key reasons VA buyers were getting pushed out of hot markets was due to a highly competitive housing market in the last two years. This year competition has been falling rapidly, reaching its lowest level on record with the exception of April 2020 at the onset of the pandemic.
Homes are staying in the market for longer with the median amount on market increasing for the first time in August since June 2020. As days on market rose, the percentage of price reductions rose by almost 10% from last year, getting closer to 2019 levels. This gives buyers more selections and time to find a home that meets their needs and budget.
More: See what you can afford with this VA loan affordability calculator.
Over the last 20 years, VA loans have been the most resilient product regardless of market conditions. The VA loan has shown a history of continuous growth with this market growing by 616% from 2000 through 2021 according to HMDA. This product has been contributing to sustainable homeownership growth despite swings in the market.
One of the pain points for Veterans during a competitive housing market was the appraisal process taking too long. A legislation introduced this summer could streamline the appraisal process for VA loans, making the process cheaper and faster. If passed, this legislation would make VA borrowers more competitive.
VA disability pay for 2023 increased by 8.7%. The new disability compensation rates took effect on December 1, 2022. See the current VA disability pay charts, and calculate your monthly compensation.
Credit score requirements vary by lender. However, most lenders have similar criteria. Let's look at the minimum credit score for a VA loan and what lenders typically expect.