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In honor of , Realtor.com has undertaken a research initiative aimed at providing valuable insights to veteran households and the industry professionals working with them, enabling them to better grasp the advantages of VA loans. Our analysis features a comprehensive comparison of key factors such as down payment requirements, credit score considerations, and mortgage rates, contrasting them with conforming loans originated in the past 12 months. In addition, we calculate the potential monthly savings that veteran households can gain from utilizing VA loans. With this research, we hope to empower veteran households with the knowledge and tools they need to make informed decisions about their homeownership goals and financial well-being. More information can be found at Big gaming/veterans as well as in the Veterans & Military Benefit section of for-sale home listings on Realtor.com.

VA loans offer homebuyers zero down payment and flexible credit criteria

The hallmark advantage of VA loans is the ability to purchase a home without the burden of a down payment, a game-changer in today’s real estate market where home prices are near a record high. Over the last year, the average down payment percentage for VA loans stood at 2.7%, whereas the average down payment percent for conforming loans was 19.1%.¹ In particular, nearly 9 in 10 (87.0%) of VA loan recipients managed to secure homes with a down payment lower than 10%, whereas the share of homebuyers with conforming loans that fell within this favorable bracket was less than half as large (42.2%). Specifically, more than 3 in 4 (75.2%) of VA loans had a down payment of 0%. This underscores the significant advantage VA loans offer to those seeking homeownership without the need for substantial upfront funds, an important attribute to first-time home buyers who do not have historical high home equity to draw on. However, according to a recent survey conducted by Veterans United, only 3 in 10 veterans and active duty service members were aware of the .Ìý

Figure 1: Nearly 90% of home sales using VA loans have down payments under 10%

As VA loans offer great relief from the substantial down payments, one of the about the loan is that it requires perfect credit scores. However, according to a recent survey by the Veterans United, more than one fifth of active duty and veteran respondents thought a credit score between 620-699 was the . In fact, VA loans tend to have flexible credit score criteria. In the past year, about 24.8% of home buyers with VA loans fell into the Fair credit score category (580-669)  compared to 4.7% among conforming loan borrowers. ²

Figure 2: VA borrowers are more likely to have a lower credit score

Moreover, it’s worth noting that the average down payment percentage for VA loans consistently falls below the corresponding percentage for conforming loans as shown in Figure 3. This is especially true for the roughly 1 in 4 VA borrowers with weaker credit scores–those falling below the ‘Good’ level. It is a significant advantage, especially for younger homebuyers who may find themselves in a challenging position, lacking not only high credit scores but also substantial down payment funds required for their initial foray into homeownership.

Figure 3: VA loans have lower down payment percent, on average, across different credit score groups

VA loans offer lower mortgage rates yielding monthly savings

In addition to enabling more people to get access to homeownership with minimum down payments, VA loans also have lower mortgage interest rates which could save monthly costs. Between October 2022 and September 2023, the average mortgage rate for 30-year fixed-rate VA loans was 6.27%, whereas it was 6.67% for conforming loans. Furthermore, the mortgage interest rates for VA loans are lower than conforming loans across all down payment groups as shown in Figure 4.Ìý

Figure 4: VA loans have consistently lower mortgage rates than conforming loans with similar down payments

Table 1 shows a simple example of savings on a hypothetical monthly payment  between VA and conforming loans by controlling for home prices. Because a zero percent down conforming loan is not available, we consider the 5% scenario, closer to the typical down payment recent first-time home buyers made³, and adjust for fees and insurance borrowers will face. Unlike conforming loans, VA loans do not require private mortgage insurance that protects lenders in case of a borrower default.⁵, For first-time homebuyers making a 0% down payment, a VA loan saves $115 (or 3.9%) per month and $1,375 per year over a somewhat comparable conforming loan that requires 5% down upfront. Put another way, even though the VA loan borrower is taking on a somewhat larger debt, the combination of lower mortgage rates and lower fees will mean lower monthly payments. Scenarios where VA and conforming loans with the same down payment shares (under 20%) and thus the same mortgage debt are considered, result in even greater payment savings. For homebuyers with a 10% down payment under VA loans–a threshold that applies to 90% of VA borrowers–the monthly payments are $286 (or -10.3%) lower than buyers under conforming loans, adding up to more than $3,400 for a year.

Table 1: First time home buyers under VA loans can save over $115 monthly, on a typical home in the U.S.

VA Loans Help to Boost Homeownership Among Veteran Households

The advantages of VA loans place veteran households in a more favorable position than non-veteran households in today’s housing markets. In 2021, the homeownership rate for veteran households nationwide stood at 79.7%, surpassing that of the non-veteran population by a significant margin of 16.2 percentage points.⁷,

In fact, the homeownership rates for veterans are higher than non-veteran peers in all of the top 100 metros. Des Moines, IA (88.3%) saw the highest homeownership among veteran households, followed by Grand Rapids, MI (87.0%) and Palm Bay, FL (86.7%). Meanwhile, Los Angeles, CA (67.6%), Urban Honolulu, HI (67.9%) and San Diego, CA (69.6%) saw the lowest homeownership among veteran households, which could be explained by the expensive overall housing markets in these areas.Ìý

Interestingly, even though Los Angeles boasts the lowest veteran homeownership rates among the top 100 metropolitan areas, it ranks as one of the leading markets where veteran households enjoy substantial advantages over their non-veteran counterparts: the average homeownership rate among veteran households was 24.8 percentage points higher than for their non-veteran peers. While metros like Los Angeles and New York have smaller shares of veteran households and thus a lower share of VA loans, the combination of a minimal down payment and competitive mortgage rates has made it easier for veteran households to access homeownership in some of the nation’s least affordable markets. For example, first-time home buyers purchasing a typical Los Angeles home with a 0% down payment through a VA loan can see monthly savings of  $314 compared to using a conforming loan with a 5% downpayment. Therefore, the greater savings via VA loans are especially pronounced in these expensive markets.

Table 2: Markets where Veteran Homeownership Rates Notably Exceed Non-Veteran Rates

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Figure 5: Hypothetical VA Loan Savings Among the Top 30 Metros Range from $314 in Los Angeles to $66 in Pittsburgh

Meanwhile, in metropolitan areas such as Augusta, Virginia Beach, and San Antonio, known for their higher concentration of military bases and facilities, veteran households are more prevalent. Consequently, veterans in these markets likely benefit from easier access to information about VA loans, industry professionals more experienced with VA loans, and greater familiarity among sellers who may be more likely to accept a buyer using this type of financing. This accessibility has resulted in veteran households in these markets enjoying more substantial advantages in home purchasing when compared to the non-veteran peers.