Small, additional costs can hike monthly payments
Rising funding fees and interest rates could lessen the chances of veterans and service members of taking out a VA mortgage or even keeping their homes, according to new research from NDP Analytics.
The research showed that increasing the first-use VA funding fee by 100 basis points (one percentage point) would keep over 100,000 first-time buyers from utilizing their VA loan benefit.
A recent report from the Urban Institute supports these findings, revealing that the costs of fast prepayments on VA mortgages also push up the prices of other government-backed mortgages.
“Raising the VA funding fee will have a dramatic impact on these key drivers for the US economy,” said Nam Pham, author of the study.
Around 365,000 veterans and military families would be priced out of using their home loan benefit if rates and fees climbed, according to Pham’s research.
“The VA Home Loan Program has helped millions of Veterans and service members secure mortgages to purchase their homes,” Pham said. “Additionally, the residual economic impact of the program is far-reaching, supporting 361,862 jobs across all industries that earn $12.7 billion per year. VA purchase loans generate another $47.3 billion in economic activity and contribute $27.6 billion value-added to the US GDP.”
Approximately 76% of veterans are homeowners. Over 685,000 veterans and military members used their average VA loan benefit of roughly $257,000 from 2016 to 2018.
