“This is an excellent time for veterans and service members to take advantage. VA loans have a better chance of being accepted in today’s buyer’s market than they did several years ago, when buyers were competing with each other and sellers were calling the shots.”
Buyers get leverage
VA loans rose 3% year over year in August, while conventional loans fell 9%.
Report Analysts attribute the shift to changing market conditions that now give buyers more bargaining power.
“A buyer can make an offer with a VA loan, put down virtually no money, ask for $5,000 in closing credits, and have their offer accepted,” says Jim Fletcher, a Redfin Premier agent in Tampa, Florida. “The market is sluggish, there is an inventory backlog and buyers are in the driver’s seat. Florida has historically had a lot of cash buyers, but lately there have been more financed buyers – and many of them can win homes with ultra-low down payments, while the seller also picks up most of the closing costs.”
During the pandemic’s competitive housing market, VA buyers often lost to those who offered larger down payments. In late 2020 and early 2021 – when mortgage rates were at record lows – less than 6% of buyers with mortgages were using VA loans.
Sellers are still weighing higher offers
Even as the use of VA loans increases, these mortgages remain limited to eligible service members and veterans.
Sellers sometimes prefer conventional loans, which may involve higher bids or fewer contingencies, the report said.
“The overall market is slower than normal, but move-in homes in desirable neighborhoods are still selling fairly quickly,” said Matt Ferris, an agent with Redfin Premier in Virginia. “I’ve seen a few military sellers recently who have homes that fall into that category. Sometimes they would love to sell to another military family, but then they get four, five, six offers, and the best is from a buyer using a conventional loan, and they offer $10,000 more than the offer with a VA loan. The seller takes the higher offer with the conventional loan because he needs to get the most money out of the sale.”
In August, 13.9% of buyers with a mortgage used an FHA loan – slightly down from 14.1% a year earlier. Conventional loans continued to dominate the market, accounting for 78.9% of all home loans.
VA loans most common in Virginia Beach
Virginia Beach, Virginia, led all major U.S. metros in VA loan usage, with 43.2% of buyers with a mortgage using them in August – the highest percentage ever recorded for the city.
Jacksonville, Florida (17.2%) and Washington, DC (16.7%) followed, with Washington posting its highest August share in 14 years. San Diego (15.2%) and Las Vegas (11.9%) rounded out the top five.
Virginia Beach also saw the largest year-over-year increase, up from just under 40% last August. Other metro areas with notable gains included Orlando, Florida (8.2%, up from 5.3%) and San Diego (15.2%, up from 12.3%).
Of the 40 metros analyzed, 32 recorded an increase in the use of VA loans. In the remaining areas, the decline was generally about one percentage point or less.
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