Veteran Affairs (VA) loans are an excellent benefit for veterans. They offer an excellent opportunity for them to purchase and own a home in a more affordable way. Before buying a home, you must understand the housing market to decide if it’s the optimal time to use your VA loan.
Here are some things for VA loan borrowers to consider about the timing of purchasing a home.
What Exactly is a VA Loan?
A VA Loan is offered to veterans, active service members, or their eligible surviving spouses. VA loans are offered by private lenders like banks and mortgage companies but are insured by the U.S. government, making it much easier to qualify compared to conventional housing loans.
They are a great option for veterans who have little in the way of savings for a down payment and can also help you get a better interest rate. VA loans can cover the total cost of a property and likely will involve no down payment, mortgage insurance, or repayment penalties. They do come with a VA funding fee, which ranges from 2% to 3% of the total.
As of 2020, VA loans are not subjected to amount limitations. However, the amount a veteran or service member can borrow depends on various factors, including their debt-to-income ratio or their ability to pay monthly.
To find out what you would be paying with a VA loan, use a free VA mortgage calculator.
COVID-19’s Impact
The pandemic caused many young and minority veterans to lose their jobs, and this has not created a good financial standing to purchase a home for many. Home buying plans were affected for about 49% of veterans due to COVID-19. Some of them accelerated their purchasing plans rather than putting them to a halt.
Interest rates for VA loans remain low. For many, it is ideal to purchase a property now instead of waiting, risking the opportunity to an unknown future. Many veterans expect to have better income by 2022 but are less optimistic that the economy will recover faster.
Things are still uncertain in the economy and the job market. Everyone’s circumstances are different, and the housing market can change in an instance, so continuing saving until the time is right for you.
Low Inventory
Because the market is hot, there are very few houses available compared to the number of people looking to buy a home. Most ideal properties in good locations sell fast. If you find a property you like, you should act fast.
The fast market movement might pressure many homebuyers to advance their purchase too. But before you dive into buying any property, be sure to understand if there are any limitations to the type of property your VA loan will cover. Ask your lender and weigh your options.
There are instances when a seller will not want to accept a government-backed loan as well, and this can further narrow the options.
Veterans Are Buying
Veterans report that they are confident with the current state of the housing market, and many are looking to buy within the next five years. Today, VA loan interest for a 30-year or 15-year term is 2-3%, which is quite low. These interest rates and home prices are anticipated to increase this year and will further rise as the market continues to build.
Additionally, as the population grows, so does the cost of housing. The housing market saw significant growth in 2020, delivering a value of $2.5 trillion from the U.S. alone. It is set to grow further, so housing properties will increase in value as well.
The dynamic market is pushing many veterans to purchase homes immediately. This means there is a lot of competition, but you could also get a great deal if you are selling.
For better chances of competing in the market as a veteran and finding the right home for you, reach out to an experienced and knowledgeable real estate agent and loan officer. Working with professionals can give you an edge.
To Buy or Not to Buy?
Above all, the best time to buy a home is when you are ready to commit to it, financially and emotionally. It is a significant life decision, and it can be the most rewarding decision if done right.
Despite the dynamic market and current barriers, veterans and service members continue to utilize VA loans to help them afford the home they want. Maximizing this benefit can be a great help for those that are eligible.
