June 28, 2019
Conventional Loans Fall in Veteran Estimation Over a Decade
According to the Consumer Financial Protection Bureau’s quarterly consumer credit trends report released in early March, the loans that servicemembers choose to finance their purchases of homes have undergone a shift in the decade since the housing crisis to robustly favor VA loans over conventional loans.
The Bureau’s Office of Research used “a longitudinal, nationally-representative sample of approximately five million de-identified credit records from one of the three nationwide consumer reporting agencies,” cross-identified with home-buyer information on the Department of Defense’s Servicemembers Civil Relief Act (SCRA) database to distinguish the numbers of credit reports for servicemembers. Thus they managed to sort out which sorts of loans Americans who have served in the armed forces have favored over time—and in particular on first-time homebuyers among this set.
Servicemembers are the only Americans permitted to take out a home loan guaranteed by the U.S. Department of Veterans Affairs (VA). These VA loans differ from conventional mortgages in a number of ways. Among these: stronger loan-servicing protections, permitting purchases without mortgage insurance, and permitting purchases with no down payment at all. On the other hand, servicemembers are always free to go the conventional route, making property purchases using types of loans that are available to civilians and servicemembers alike, such as conventional loans or loans regulated by the US Department of Agriculture or the Federal Housing Administration.
Among the report’s key findings:
- The share of first-time homebuying servicemembers using VA loans increased from 30 percent in 2007 to 63 percent as of 2009—an immediate response to the housing crisis.
- While non-servicemembers also increased their reliance on regulated (USDA and FHA) loans in the same period, civilian reliance on these subsequently fell off; servicemembers, however, continued to increase in reliance on VA loans, reaching 78 percent by 2016—whether their credit scores were prime or subprime.
- The median first-time buying servicemember’s first VA loan increased from $156,000 in 2006 to $212,000 in 2016.
- Early delinquency rates were lower for servicemembers with subprime credit scores who were on active duty than they were for veterans no longer on active duty. For those with prime credit scores, there was no difference in rate of delinquency.
Here at Topouzis & Associates, P.C., we do extensive title search work and perform curative services on every form of real property, and for every form of loan, so that a buyer knows for sure that they are getting into a parcel with clear title. Contact us if you have any questions or if you would like our considerable experience in dealing with the particularities of the real estate system.