Executive Summary
- VA home loans allow eligible veterans to purchase a home with 0% down, potentially saving 4.4 years of saving time for a typical property.
- Despite this advantage, housing affordability for veterans is near historic lows, with less than 1% of listings being affordable in some California metro areas.
- A new report identifies “mismatch markets” like Los Angeles and Boston where VA loan benefits are high but their usage is low.
- Experts state that wider adoption of VA loans could give veterans a critical advantage in expensive markets and help them build equity sooner.
Despite offering a path to homeownership years faster than conventional alternatives, home loans insured by the Department of Veterans Affairs (VA) are underutilized in many key U.S. metropolitan areas, according to a recent analysis. The loans, which are available to veterans, service members, and their surviving spouses, feature a zero-down-payment option that can significantly shorten the time required to purchase a first home.
According to a Realtor.com analysis, the ability to bypass a down payment can shave years off the savings period for a prospective buyer. For a typical $430,000 home, a conventional buyer might need over $50,000 for a down payment. Saving for that amount would take a buyer with a median gross income of $78,700 approximately 4.4 years. The VA loan eliminates this initial financial hurdle, allowing veterans to begin building equity sooner.
However, persistent housing affordability challenges remain a significant barrier. Data from Redfin indicates that in 2023, the share of listings affordable to veterans using VA loans fell to a record low of 20.2%. In several high-cost California markets, including San Jose, Los Angeles, and San Francisco, a veteran using a VA loan can afford less than 1% of homes currently for sale.
The Realtor.com report identified a mismatch in several metro areas where the financial benefits of VA loans are highest but utilization rates are low. These markets, which include Boston, Los Angeles, and Cape Coral, Florida, represent opportunities for increased awareness to help veterans purchase homes. In a market like Los Angeles, where the median home price exceeds $1.14 million, a VA loan could reduce a first-time buyer’s path to homeownership by a decade.
“The standout benefit of a VA loan is the 0% downpayment but without the extra risk,” said Lawrence Yun, chief economist of the National Association of Realtors. “The lower upfront cost makes homeownership more attainable, especially in high-cost markets and amid elevated mortgage rates, giving qualified buyers a critical advantage and the ability to start building equity sooner.”
Key Takeaways
The core issue highlighted by market data is a lack of awareness among eligible veterans in high-cost areas. While VA loans provide a distinct advantage by removing the down payment barrier, their low adoption rate in markets where they would be most beneficial suggests a gap in education and outreach that, if addressed, could help more veterans achieve homeownership.
