VA Loans Need More Awareness

Growing segment benefits both vets and brokers.

A soldier in uniform holding a miniature houes.
Staff Writer

The good news is that U.S. military veterans have access to home loan programs that can save them thousands of dollars over traditional home loans, as a reward for serving their country.

The bad news is that too many veterans don’t know about the program or have misconceptions about it.

Now the Veterans Administration is out to reverse that lack of knowledge and dispel misconceptions about what is available to current and former members of the country’s military branches.

“We’ve made major steps over the past few years in trying to build a program that veterans can be proud of,” said John Bell III, executive director of the Loan Guaranty Service for the U.S. Department of Veterans Affairs.

Still Work To Do

A May report by the Navy Federal Credit Union and Operation Homefront highlighted the value of VA loans. Operation Homefront is a national nonprofit whose mission is to build strong, stable, and secure military families so they can thrive — not simply struggle to get by — in the communities they have worked to protect, according to its website.

A survey of 1,001 veterans found that many of them had misconceptions about the administration’s programs that prevented them from realizing some or all of the benefits.

The findings included: 

  • 49% of active duty military  and 31% of veterans believe that they can only use a VA loan once
  • 49% of active duty military and 22% of veterans believe that VA loans have higher interest rates  
  • Only 32% of veterans know that no down payments are required for VA loans and 49% believe that they have to put down 20%. An additional 37% believe that a 30% or more down payment is required.
  • 59% of veterans believe that VA loans have longer processing times and 49% believe that they are inferior to conventional loans.
  • Despite the misconceptions, 80% of those who have used a VA loan rated their satisfaction at 6 or 7 on a scale of 1 to 7.

Regardless of the overall lack of knowledge, Veterans Administration officials said that in fiscal 2021 the VA’s loan guaranty service set another record, registering more than 1.4 million VA-guaranteed home loans. The market share of VA loans has also risen from 1% to 10% in the last 10 years, officials said.

While the VA did not participate in the survey, Bell said the results will still help them see where they need to continue to improve veterans’ knowledge about what’s available to them..


Making The Process Better

Bell said that improving access to the VA’s services is one of the biggest changes that have been made. The administration has worked hard to modernize the process to get away from the notion that it’s “your grandfather's VA.”

That includes streamlining the mortgage loan process. Bell said that an eligibility confirmation that took 20 days two years ago, now can take minutes, with 95% of approvals made within three days.

The administration is also increasing its training staff from 2 to 12 full time people to work with borrowers and lenders as both parties have begun to embrace the opportunities available to them. 

“Last year we hit an all-time record since 1944 with 444,000 purchase loans,” Bell said. “This year we are only about 4% off even with rising interest rates.”

Bell noted that the VA  has also worked with 1,600 lenders who have written at least one VA mortgage.

John Bell III, Veterans Administration

The Results

“We get kudos all the time from the real estate community,” he said. “Most of the issues have been with lenders not well-versed in the government lending space.”

The same, Bell said, is true of the veterans in recent times.

“What we are hearing, once we educate, once they are armed with information to bid, it certainly helps them,” Bell said. “They just want more, that’s something we want to help with.”

Supporting Their Constituents

Bell said one of the best ambassadors for the VA loan program are the veterans themselves, from their average credit score of 722 to their average $54,000 in assets. But there are other advantages, including a VA guarantee of 25% of any home loan being guaranteed from default by the government and other filing costs covered by the government that speed up the process and save veterans money.

“Our default ratios are among the lowest in the industry,” Bell said. 

As a veteran himself, Bell can also speak to the value of the program. “I’ve used it five time in my life and I will tell you there were times that I would not have been able to buy a home if it hadn’t been for the VA,” Bell said.

But he is quick to add that that is no longer the case and that VA home loans are becoming a product of choice.

“This is not ‘I have to go to them because I can’t get a loan anywhere else,’” he said. “This is actually because it’s the lowest rates, the lowest out of pocket costs. From a funding perspective the VA should be the route I go.”

FHA Also Myth-Busting

The Federal Housing Administration has also been busy trying to dispel myths about its programs. In June it launched a four-part series of webinars designed to educate borrowers and lenders about common myths associated with using an FHA-insured loan to purchase a home.

The topics include: qualifying for a loan; affording a home; finding the right home;  and tips for buying your first home.

A few of the myths that the videos take on are: a home inspection is mandatory; you have to have perfect credit; you can’t qualify for a mortgage if you have student debt; and new homes are maintenance-free.

This article was originally published in the Mortgage Banker Magazine August 2022 issue.
About the author
Staff Writer
Steve Goode was a staff writer at NMP.
Published on
Aug 16, 2022
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