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June 24th, 2014

Why VA Home Loans are often underused

loanToo many troops and veterans either don’t know about their VA home loan benefit or are being discouraged from using it, experts say.

The Veterans Affairs Department should modernize the program and fund outreach efforts to educate real estate professionals and loan counselors — as well as troops and vets — about the benefit, said Son Nguyen, who heads the nonprofit Veterans Association of Real Estate Professionals.

A $200,000 VA home loan saves a veteran about $200 a month compared to any other type of home loan, said John Bell III, VA’s assistant director of loan policy and valuation loan guaranty service. Although far more troops and veterans are eligible for the benefit than are using it, the usage rate has increased, according to VA data. Six or seven years ago, when the subprime market was at its peak before the mortgage market downturn, VA loans comprised about 1 percent to 2 percent of the mortgage market. Today, they comprise about 13 percent of the market, Bell said.

Experts say military and veteran home buyers often don’t identify themselves as such, so their real estate agents and lenders don’t know they’re entitled to the benefit. Mark Connors, VA’s lender liaison for loan policy and valuation loan guaranty services, encouraged real estate agents and lenders to ask buyers if they are veterans.

Bell said VA is taking steps to ease these issues. The loan review process now takes about 4½ business days; Bell said the goal is to shorten that to 24 to 48 hours. Because of complaints about the appraisal process, they’ve also been pushing to recruit more VA-approved appraisers.

Nguyen said borrowers would benefit from seeing a broader comparison of loans. He noted that lenders now must provide comparisons of Federal Housing Administration loans and conventional loans, but suggested VA loans be added to the mix “for more informed decision-making.”

“It’s not just a great loan product. It’s something our military and veterans have earned,” said Megan Booth, senior policy representative for the National Association of Realtors.

Noting that the default rate on VA loans is only about one-fourth the default rate on VHA loans, she said, “The military are going to be responsible citizens.”

While the VA can do a number of things administratively to help improve the program, there are some things that require legislation, she said. And because of the attention on the VA in other areas — the medical staffing issues, Booth said, there’s a “great window” of opportunity to make the case for these changes.

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