What a difference a year makes when it comes to VA home loans for purchasing a home and using the popular program for refinancing.
According to the Department of Veterans Affairs, VA home purchases in 2013 made up 38 percent of the VA loan market. VA refinances were 62 percent.
Fast forward one year to 2014, and the percentage increases of the two programs have switched places. The VA loan market consisted of 62 percent purchase and 38 percent refinance.
The Rise in VA Home Purchases
VA home purchases lurched forward last year partly due to the overall housing market bounce-back. The unique advantages of the VA home loan also bolstered home buying activity.
The VA home purchase program eliminates typical barriers to home ownership like a high down payment coupled with high credit and income.
VA loan borrowers also don’t have to pay PMI (private mortgage insurance) since the loans are backed by the federal government – that’s an instant savings of a couple of hundred dollars a month in most cases.
Throw in historic low mortgage rates in 2014 and it’s easy to see why the mix of benefits encouraged more people to move forward with a VA loan to complete their home buying dream.
Why did refinances diminish?
VA refinancing fell off because so many people refinanced in 2012 and 2013 that there weren’t a whole lot of borrowers left who could benefit. The VA streamline refinance program allows borrowers to drop their rate and payment with no appraisal, no income documentation, and no bank account or asset statements. The program is so easy that VA homeowners have little reason not to use it if they can save on their monthly payment. As a result, VA refinancing took the lion’s share of the VA market in years prior to 2014.
But that downward trend might be changing this year. This past January marked the first time since June 2013 that U.S. lenders closed more refinance loans than purchase ones (VA refinances among them). Rates unexpectedly dropped in 2015, back to levels not seen since 2013. An onslaught of VA refinances ensued.
VA Refinancing in 2015
The boom in purchases last year and refinancing the year before indicates that people were trying to take advantage of the favorable interest rates before they started to climb back up.
While the low rate period has gone on longer than most experts predicted, economists and real estate analysts agree that 2015 is the year in which the interest rates will begin to rise, most likely near 5 percent by year’s end.
That being said, rates have continued to fall in the early part of 2015. Depending on how you feel about the predicted rise in rates, it’s likely that there’s not a whole lot of time left to lock in a great rate.
The same goes for those who are thinking of refinancing using the VA Streamline program, also known as IRRRL. If your current VA home loan percentage is above today’s rates, it could be worth looking into a refinance, especially since it’s such a seamless process.
The two main requirements are 1) your current loan is a VA loan, and 2) you were not more than 30 days late on your mortgage payment more than once over the past year.
There aren’t reams of paperwork to get through and as a bonus you’ll pay less closing costs than for traditional refinance programs.
2015 VA Home Buyers
Many current and former U.S. military service members have not taken advantage of their VA home loan benefit yet.
They have received other benefits, like education through the GI Bill, plus medical and dental services. Yet veterans often overlook the fact that the VA home loan is a benefit that can be just as important.
It’s as simple as having a VA-approved mortgage lender pull your Certificate of Eligibility, or COE, to get started. That document details your home buying benefit, and is a great first step.
VA Home Loan Activity Increases in 2015
Based on the upswing of interest in VA home loan products in the past couple of years, it’s safe to say that more borrowers are tapping into the great rates and rising home values.
Will 2015 be the year in which the housing market changes dramatically? Only time will tell, but for now if you’re considering a VA home loan or refinance, the conditions remain favorable.