VA mortgage, housing wants improve as journey restrictions elevate
The pandemic-related travel restrictions have been lifted for most military facilities and this will be the catalyst for new loan needs in the Veterans Department market when basic transfers resume.
Just a few months ago, more than half of all installations had restrictions on movement between the bases. They have now been raised to 207 from 230, or 90%, according to a Defense Department report. VA lenders report that there has been a relative increase in permanent change in station assignments in response, bringing activity levels closer to pre-pandemic levels.
This underscores a unique, additional source of demand opening in an already highly competitive housing market that VA lenders must find solutions to.
“Now that the post-COVID military has opened, we have many people struggling to find affordable or middle-income housing,” said Anthony Powell, executive vice president, mortgage division, American Armed Forces Mutual Aid Association.
AAFMAA Mortgage Services is addressing the problem by introducing VA Loans that combine construction and standing finance into a single deal as a result of previous professional networking promoting home construction. AMS plans to start in Florida and then expand to other jurisdictions within the 28 states in which it is licensed. Through its networking efforts, it is also making $ 5,000 worth of home upgrades available to military buyers at no additional cost.
Other lenders prioritize quick pre-approvals to ensure borrowers have quick access to funding that will help them compete in the bidding war in the resale market.
“A lot of people who do PCSing want their homes ready to move in,” said Sam Atapour, branch manager for Embrace Home Loans in Ashburn, Virginia.
In some ways, the prospects for residential property resale have improved as more VA borrowers sell and add new portfolios, noted Louise Thaxton, a branch manager at Fairway Independent Mortgage Corp. in Leesville, La.
“There are some people who are looking, but then there are also people who are selling. The good news is that with the travel ban lifted, the soldiers who have been in suspension for so long will be able to get on with their lives. If you are a military family and you own a house and you are ruling out PCS, it is very easy for you to sell, ”she said.
However, based on an informal survey of corporate loan officers in consultation with the real estate agents they work with, Thaxton said that bottlenecks in new and resale property are a concern for VA borrowers in many of the markets she is familiar with, partly due to large increases in the cost of lumber and other building materials over the past year. In one case, a prospective buyer in the Colorado Springs area had to quit a contractor after being told that the schedule for a new home would be suspended indefinitely until the price of materials dropped, she said.
Another challenge lies in the increasingly frequent occurrence of estimated values below the purchase price of the apartments bought. In the broader market, some buyers have made up the difference with cash, but that’s generally not affordable for a VA borrower today, Thaxton said.
“They want you to literally pay more for the property than it is being valued. Not many soldiers can pay that difference when they are military on active duty, ”she said.
The extent to which this is an issue for the military housing markets varies by region, with a hot area like Colorado Springs being a particular challenge for VA borrowers due to valuation gaps. Concern could rise in Louisiana as well, but it’s not as widespread there yet, Thaxton said.
Thaxton branches have chosen to cover lenders’ closing costs for VA buyers to help them cope with the multi-sector expensive and competitive housing market. Fairway allows but doesn’t require its branches to offer it, she said.
“That can be $ 1,200 that the service member doesn’t have to pay,” Thaxton said, noting that lenders’ closing costs may vary.
Adding potential incentives like this means that the bigger picture of active service staff moving to a new installation today has to decide whether it is literally worth investing in a hot market real estate purchase rather than a rental, and Thaxton suggests evaluating evaluation gaps through this lens.
“For example, suppose a property valued at $ 190,000 and $ 200,000 was the price the seller wanted to pay. If a military family on active duty wants to sell this house in three years, they have to see if they can get the $ 10,000 back, ”she said.
At press time, there were some slight signs of a slowdown in the property market, but home prices continued to rise.
“If mortgage rates go up, housing construction could slow down, but I’d say even if that happened it would probably be 24 or 36 months before there was a buyers market,” Atapour said. “I think we’re going to get stuck with this insane inventory shortage for now.”