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As the VA loan turns 80, its economic impact is in the trillions

An analysis from Veterans United Home Loans found that the VA loan program has the highest satisfaction rating among all military benefits

An analysis released Wednesday by Columbia, Missouri-based lender Veterans United Home Loans revealed that the home loan program through the U.S. Department of Veterans Affairs (VA) has contributed $3.9 trillion to the national economy since its inception near the end of World War II.

The VA loan program — which was established in 1944 through the GI Bill — will celebrate its 80th anniversary on June 22. The program was designed to help military service members successfully transition to civilian status by becoming homeowners and building the wealth they missed out on during the war.

In conjunction with University of Missouri economics professor Joseph Haslag, Veterans United analyzed the historic benefits of the VA loan program. It also surveyed 500 veterans and service members for their insights.

“The economic impact analysis considers what the economy would have looked like if the VA loan hadn’t existed,“ the report explained. “It found the loan program has withstood various market changes, accounting for as much as 11% of new home mortgages in the postwar building boom. Total VA loan volume in 1947 was more than $3 billion, compared to its $447 billion peak in 2021.“

“The survey findings and economic analysis underscore the profound impact of the VA loan program on Veterans and service members, particularly younger generations,” Chris Birk, vice president of mortgage insight at Veterans United, said in a statement.

“This historic benefit has helped millions of Veterans and military families build wealth and shaped the growth of the American middle class. VA loans are also helping to close the homeownership gap for women and minorities. Today, this hard-earned benefit is more important than it’s ever been.”

Veterans United ranked as the top-producing VA lender in the country in fiscal year 2023, according to VA data. It originated $17.6 billion in volume across 58,253 loans — more than double the combined output of the No. 2 and No. 3 largest VA lenders, United Wholesale Mortgage (29,901) and Rocket Mortgage (22,553).

Top benefit

Survey results showed that 93% of veterans and service members used a VA loan to purchase their first home. And roughly 80% of this group was 34 years old or younger when they used the VA loan benefit for the first time.

This is slightly younger than the median age of all first-time homebuyers in the U.S., according to the most recent data from the National Association of Realtors (NAR).

The VA home loan received the highest satisfaction ranking of all military benefits, noted by 89% of respondents. This ranked ahead of education and training (85%), insurance (83%) and health care (73%).

Nine in 10 respondents agreed with the notion that the VA loan ”makes buying a home affordable.” The top advantages of the VA loan were ”competitive interest rates” and ”the ability to reuse the VA loan benefit,” followed by its zero-down payment feature, funding fee exemptions and limits on closing costs.

On Tuesday, the VA announced that will it implement temporary rules to allow buyer-paid broker fees. The department had previously prohibited this practice but was urged to change its policy to help VA borrowers remain competitive following nationwide changes to the agent commission structure.

Equitable access

Veterans United released a separate analysis of U.S. Census Bureau data last month. It found that the use of VA loans has surged since the Great Recession and has expanded homeownership opportunities for younger buyers, female veterans and veterans of color.

In fiscal year 2023, 60% of VA purchase loans went to buyers in the millennial and Generation Z cohorts. And over the past five years, the analysis found nearly 1 million millennials used their VA home loan benefit.

The report went on to note that race-based homeownership gaps are smaller in the veteran population than they are in the civilian population.

For example, the homeownership rate among white veterans (79.3%) is 18.5 percentage points higher than that of Black veterans (60.8%). But the gap is nearly 30 percentage points when looking at the rates for the white and Black civilian populations.

Women veterans owned homes at a 67.3% clip in 2022, higher than the 62.9% share among women in the civilian population.

Misconceptions persist

Even as more veterans and service members are utilizing their VA loan benefit, they don’t fully understand how the program works. Three in four respondents believe at least one myth about the VA loan, according to the survey results.

Thirty-five percent of respondents think that VA loans take longer to close than other loan types, while 32% think the federal government sets the associated interest rates. Additionally, about one in five respondents believe that the VA loan benefit can only be used once and that VA loans cost more than other loan types.

Veterans United noted that mortgage rates are ”based on a host of factors, and VA loans typically have the lowest average rates on the market.” Closing times for VA loans are similar to other product categories, while VA loans tend to be less expensive in terms of upfront costs and monthly payments. And veterans can use them multiple times.

About 20% of respondents mentioned ”seller hesitation about VA offers” and ”negative attitudes about VA loans” among listing agents as the top obstacles for using their benefit.

”Although the VA loan program has achieved great success and growth, many Veterans and service members still face misunderstandings and hurdles when trying to use their benefits,” Birk said. ”It’s important to dispel the myths and misconceptions about VA loans, especially among home sellers and real estate agents, to help Veterans make the most of the benefits they’ve earned. One way for Veteran buyers to get the most from their benefit is to work with real estate agents who know and understand the power of VA loans.”

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