VA loans on the rise: Brownsville sees high increase
Brownsville is among the Texas cities with the biggest increase in Veterans Affairs home purchase loans over the past year, according to Veterans United Home Loans, the largest financer of VA loans in the country.
VA purchase loans increased 30 percent in Brownsville from the first quarter of fiscal year 2018 to the same period this fiscal year, according to the lender’s data. The city was second only to Midland, which saw a 35 percent increase over the same period.
Chris Birk, VUHL director of education, said the state’s increase in VA home loans is concurrent with the national trend, as the past six years have witnessed record-setting, year-to-year increases. Texas historically is one of the top three states for VA loan usage, he said.
The housing crisis that struck 10 years ago, which prompted conventional lenders to substantially tighten credit score requirements and demand bigger down payments, is one reason behind the increase in VA loans, which are financed by commercial lenders but backed by the federal government, Birk said.
The signature benefit of a VA loan is being able to borrow without a down payment, he said, noting that the average VA loan in Texas last year was $246,000.
“It’s gone from 2 percent of the market historically to almost 12 percent of the market,” Birk said. “It’s been a huge increase. ... In the wake of the housing crisis a lot of veterans were having trouble getting those conventional mortgages and they started looking for alternatives.”
The VA loan program was created as part of the GI Bill passed by Congress in 1944 to help returning servicemen readjust to civilian society. It was originally intended as a five-year program, but proved so popular that the government extended it, Birk said, describing it as “the only VA benefit that never expires.”
“People usually think of the education benefits of the GI Bill, and rightfully so, but this has also been a huge part of it and contributed to the growth of the middle class in this country,” he said. “It’s still fulfilling its original mission for veterans and service members.”
The benefit has been expanded over the decades to allow millions more U.S. veterans to take advantage of VA loans, and in 1992 the program was opened to reservists and National Guard personnel who serve honorably for at least six years and haven’t qualified for the program while serving active duty.
Birk said one likely reason for the big increases in cities like Brownsville and Midland is the sheer number of veterans per capita in such communities. Lubbock saw a 29 percent increase, College Station 23 percent, and Corpus Christi 12 percent, according to VUHL data.
Despite the growth of VA loans, misconceptions persist on the part of those who potentially could benefit from the program, Birk said.
Among them, that interest rates are higher than for conventional loans, when in fact VA loans have had the lowest average rate on the market for more than 50 months, he said. Another misconception is that because it’s a federal program, the loans take forever to close, though Birk said closing a VA loan takes only a few days longer than a conventional loan.
As for worries that the loans are unsafe, the reality is that VA loans have had the lowest foreclosure rate on the market for the past 12 years, he said. Also, counter to what many believe, the veteran is responsible for paying closing costs, not the seller, Birk said, adding that VA loans are very different from what they were 15 years ago.
“Not to say just because you’re a veteran or service member you should get one, but for many this is a financing option,” Birk said. “A lot of it is understanding all of your mortgage options.”