Nationwide, 7.3 percent of mortgaged homebuyers used a Veterans Administration (VA) loan in August, up from 6.5 percent a year earlier and the highest share for that month since 2019. That’s according to a new report from Redfin.
VA loans, which are mortgages available to military service members and veterans, are becoming more prevalent as the housing market tilts in buyers’ favor and sellers are more apt to accept offers with low down payments.
“Military members have made sacrifices to protect our home,” Rocket Chief Business Officer Bill Banfield said in a release. “VA loans are one of the most powerful benefits available to veterans and service members, opening doors to homeownership with zero down payment, no monthly mortgage insurance and flexible credit requirements. Now is a prime time for veterans and service members to take advantage of them. VA loans have a better chance of getting accepted in today’s buyer’s market than they did several years ago, when buyers were competing against each other and sellers were calling the shots.”
The share of mortgaged homebuyers using a VA loan has increased and so has the number of buyers taking out VA loans, according to Redfin’s report. Nationwide, the number of VA loans rose 3 percent year-over-year in August, while the number of conventional loans declined 9 percent.
A higher share of homebuyers are using VA loans than any late summer since 2019 because it’s a buyer’s market in much of the country, according to Redfin. In an ultra-competitive market, such as during the pandemic, the market favors buyers with higher down payments and more ability to prove their financial security. In late 2020 and early 2021, when mortgage rates were at record lows and it was a prime seller’s market, less than 6 percent of mortgaged homebuyers were using VA loans. Now that the market has tilted in favor of buyers, people are more likely to get an offer using a VA loan accepted.
“A buyer can make an offer with a VA loan, put virtually no money down, ask for $5,000 in closing credits, and get their offer accepted,” Tampa, Fla.-based Redfin Premier Agent Jim Fletcher said. “The market is slow, there’s a backlog of inventory, and buyers are in the driver’s seat. Florida historically has had a lot of all-cash buyers, but recently, there are more financed buyers — and many of them are able to win homes with ultra-low down payments while also having the seller cover most closing costs.”
Only a small share of homebuyers use VA loans because they’re available to a small portion of the population, and some sellers favor other offers that come with bigger down payments, according to Redfin.
“The overall market is slower than usual but move-in ready houses in desirable neighborhoods are still selling fairly fast,” Virginia-based Redfin Premier agent Matt Ferris said. “I’ve seen a few military sellers recently who have houses that fall into that category. Sometimes they’d ideally like to sell to another military family, but then they get four, five, six offers, and the best is from a buyer using a conventional loan, and they’re offering $10,000 more than the offer using a VA loan. The seller takes the higher offer with the conventional loan because they need to make the most money from the sale.”
Just under one in seven (13.9 percent) mortgaged buyers used an FHA loan in August, down incrementally from 14.1 percent a year earlier. Conventional loans are the most common type of mortgage. Nearly eight in 10 (78.9 percent) home loans were conventional in August.