Posted on: September 28, 2018
When home buyers look at mortgage options, they tend to default to conventional or FHA loans. After all, these are the two most popular mortgage types for home buyers.
But in the current red hot housing market, many would be home buyers are stopping their searches and waiting for better conditions. That is, except for VA home buyers.
According to the Mortgage Bankers Association, VA loan applications made up 11.8% of all applications in August. By comparison, VA loans made up 11.6% of all applications in July.
While these numbers don’t seem significant, they tell a bigger story when put in context. There are fewer applications to purchase homes today than there were at this time last year, and while other mortgage types are slowing in popularity, VA loans continue to go strong.
There are a few obvious reasons for this. First, VA loans don’t require a downpayment. As home prices continue to rise, getting 100% financing is an easy way to keep homes more affordable.
Second, VA loans have the lowest mortgage rates available. For all closed loans last month, VA loans carried the lowest rate average at just 4.74%, as compared to 4.95% and 4.94% for FHA and conventional loans, respectively.
Perhaps the biggest reason that VA loans don’t demand a higher percentage of loan applications is because of the strict eligibility requirements. For the most part, the home buyer must be a veteran or current military member.
So, with home prices and mortgage rates rising, is now the time for veterans to buy a home with a VA loan?
Unfortunately, there’s no formula to pick the “perfect” time for home buyers. Each situation is different, and many factors – including mortgage rate changes and home availability – are impossible to predict.
But that’s just the nature of buying a home, and with some planning, home buyers can figure out the best time for their personal situation.
Before getting into the best time use the VA loan, it’s important to point out that veterans can use the program more than once. It’s a common misconception that the VA loan can only be used once. Anyone who is VA eligible is eligible for life, and they can use the loan more than once. Nobody needs to worry about losing eligibility.
So, how do you know if now is the right time? Well, for one, rates are trending higher.
Over the past year, the average rate for closed loans has increased from 4.27% to 4.92%, a sizeable increase.
VA loans saw a similar jump, going from 4.03% to 4.74%.
While it’s impossible to predict mortgage rates, there are a lot of signs pointing to rates moving higher over the coming months. By locking in on rates now, home buyers can avoid higher monthly payments.
Also, VA home buyers will likely get access to the lowest mortgage rates available.
Another good reason to use a VA loan now is because of the time of year. The busy summer buying season has come and gone, and now winter is approaching. Winter tends to be the slowest time for the housing market.
Any home shoppers who think that there aren’t many homes available right now will likely see an even tighter supply in the next few months.
It’s impossible to predict if the housing market will become more buyer friendly in the near future, but trends are pointing toward a more difficult time for buyers. Fortunately for veterans, the VA loan has benefits that will keep homes more affordable.
Before getting a VA loan, home buyers will want to get connected with multiple lenders. Different lenders offer different rates, and some lenders may have more VA experience than others.
If you’re VA eligible, the best first step is finding out what VA rates are available to you.