During the past year, nearly 75% of home sales with Veterans Administration (VA) loans had a 0% downpayment, and more than 85% had downpayments below 10%, according to research from Realtor.com.
Those findings are part of a research initiative by Realtor.com aimed at providing valuable insights on the benefits of VA loans for military households. The study has shown that the main benefit from the loan is that veterans can buy homes without the burden of a downpayment. Ironically, a recent survey by Veterans United found that only 30% of veterans were even aware of the zero downpayment benefit of a VA loan.
Realtor.com reports that during the past year, the average downpayment percentage for VA loans was 4.6%, while the average downpayment percentage for conforming loans was nearly 20%. The low payment benefit has proven especially important for first-time homebuyers who are often working with tight budgets. Realtor.com estimates that a 0% downpayment on a VA loan would save first-time homebuyers $69 per month and $824 per year, when compared to a similar conforming loan that requires an 8% downpayment upfront.
Even though VA loan borrowers are taking on larger debts because they are providing low or no downpayments, the combination of lower mortgage rates and low fees result in lower monthly payments on top of lower upfront costs. Those veterans who do provide a downpayment save even more in monthly payments.
The savings from VA loans are even more pronounced in expensive markets, including communities such as San Jose, where first-time homebuyers purchasing a typical home with 0% down can save up to $231 a month, or $2,772 per year, when compared to a conforming loan with 8% down.
Another significant benefit to the VA loan is its more relaxed credit requirements. Realtor.com reported that VA borrowers are more likely to have lower credit scores than other homebuyers. In fact, 23.2% of homebuyers with VA loans fell into the “fair” credit score category (580-669), compared to just 4.5% among conforming loan borrowers in the past year.
