VA loans buck trend for first-time homebuyers

Mortgages have become harder to obtain for many Americans, as federal regulations have clamped down on careless lending practices. Financial institutions are careful to check credit histories and debt levels and are turning away more applicants than they have in years. One type of mortgage is on the rise, however: those backed by the Department of Veterans Affairs.

These loans are issued by qualified lenders but guaranteed by the VA, and they have grown every year since 2010. They require no down payment or mortgage insurance, and interest rates are typically lower than for most mortgages. Moreover, older loans can easily be refinanced to take advantage of current low rates.

The G.I. Bill introduced VA loans in 1944, and since then the program has guaranteed more than 20 million loans. Their value surpassed $141 billion in 2013, when 629,000 were issued, 17 percent more than the previous year. Gulf War veterans led all borrowers at 28 percent of the total, and active personnel have the largest average size mortgages at $233,776. Interestingly, 733 World War II vets were issued VA-backed loans last year.

Earlier this year, as this blog reported, the administration introduced legislation to curb improper practices in loans to military personnel after discovering that some lenders were taking advantage of the financial inexperience of many service members. While the VA loan program is only applicable to mortgages, the numbers suggest that many veterans are not taking advantage of benefits that could help them significantly.

With mortgage loan software, participating banks can set the ideal terms for veterans' loans, safe in the knowledge that the VA guarantees their repayment.