With Refinance Booming, VA Loan Volume Hits 18-Year High
VA loan volume hit an 18-year high in the fiscal year that ended in September, according to data recently released by the Department of Veterans Affairs.
The significant increase — both historical and year-over-year — is another sign that military borrowers are moving away from the tighter conventional lending space and toward the VA loan program’s more flexible credit and income requirements. Loan volume jumped 51 percent from FY11 to FY12, spurred in large part by a boom in refinance loans.
VA loan growth
Record-low interest rates have made the VA’s Streamline and Cash-Out refinance programs increasingly attractive. In some cases VA-approved lenders are able to process Streamlines without an appraisal, which continues to help qualified underwater homeowners take advantage of low rates.
Here’s a look at how VA loan volume has changed in the last five years alone:
The continued growth of the VA loan program comes as consumers continue to face tighter lending requirements in the wake of the subprime mortgage meltdown. Generally, VA lenders are looking for a credit score of at least 620, and the program offers financial benefits such as $0 down, no private mortgage insurance and higher allowable debt-to-income ratios.
Many military borrowers can struggle to hit the credit and/or down payment requirements necessary to secure conventional or even FHA financing. The average credit score on an FHA denial in May was 669, according to the National Association of Realtors. More than half the conventional loans issued in August went to borrowers with at least a 740 score.
Every state experienced at least a 25 percent increase in loan volume. Some military-dense states posted big gains in particular, including Hawaii (89 percent), Virginia (69 percent) and California (65 percent).