Data from the 2023 NAR Profile of Home Buyers and Sellers indicates that 16% of recent homebuyers were veterans. In the same 2023 report, NAR found that 15% of all buyers, both veteran and non-veteran, purchased a new home. This was a higher rate than the 2015 average
NAR trotted out the standard reasons for the strong preference for new houses among military buyers: the desire to avoid renovations and upgrades and the ability to customize. But these are the reasons all new-home buyers prefer new over existing houses.
Why Military Buyers Go New
Vets and active-duty personnel have a couple of additional reasons for buying new. One, it’s often easier to work with builders and their sales staffs and, perhaps, their affiliated loan companies or recommended lenders.
Some real estate professionals are under the misconception that working with military buyers is too cumbersome, especially when they want to make use of their GI housing benefits. Sellers, too, have an antiquated view of dealing with VA loans. But that’s not the case with a builder’s sales rep, most of who are happy to walk the extra miles for our nation’s heroes.
It’s also easier – and less expensive – to build a new house for wounded vets than it is to retrofit an old one. The kitchen and baths can more easily be fitted for wheelchairs, for example, first-floor primary bedrooms are the norm and even hallways can be built wider if necessary.
New Home Markets
If you are in the market for a new home and ready to put your VA loan benefit to use, take a look at these options:
These cities offer a great quality of living, welcoming new home communities, and proximity to employment. Check out NewHomeSource for the most complete listings of new home communities. Use the filters to find the exact features you want.
VA Home Loans
Most military veterans are aware of VA loans but a percentage of them may choose to not utilize this benefit. The VA home loan program is often the best bang for the military borrower's buck.
How Does the VA Loan Program Work?
For starters, the VA doesn’t make loans directly. Rather, it promises to pay back private lenders if a borrower should fail to make his or her mortgage payments. Lenders accept that promise as a substitute for a down payment.
The basic advantage for borrowers is that borrowers may not have to put any of their own money into the deal. The agency does not set a cap on how much you can borrow, but there are other limits.
The basic entitlement available to every vet is $36,000. But lenders will generally lend four times that amount without a down payment. Consequently, in most places, vets currently can borrow up to $417,000 without putting up any cash of their own. But the limit is higher in some high-cost areas such as Denver, the District of Columbia, and Honolulu.
Of course, you can borrow more, but for every $4 dollars borrowed above the limit, you’ll be required to put down $1 of your own money, or 25 percent.
Even without a down payment, VA borrowers have to pay a funding fee, just as other low down payment borrowers have to pay for mortgage insurance. It can range from 0.5 to 3.3% based on loan type, down payment, and whether you are a first-time buyer. Currently, the fee is 2.15% of the loan amount.
The VA does not set interest rates. The lender does that and the rate may vary from lender to lender. But the agency does limit the amount you can be charged for closing costs. And a savvy VA borrower will persuade the seller to cover some – or even all – of his closing costs, up to 4% of the loan amount. Better yet, those charges – and the funding fee – can be added to the loan amount, so the out-of-pocket costs remain minimal.
Another benefit of VA loans is that they are fully assumable, meaning that they can be transferred to your buyer when it comes time to sell, as long as the buyer qualifies.
Vets also are allowed to use their VA housing benefit on a subsequent house – say a move-up model – if their original loans are paid off or if the person assuming their outstanding loans also is an eligible veteran.
Generally, servicemen and women who were on active duty for at least 90 days from Sept. 16, 1940 to the present are eligible for VA loans. But during some periods, 181 days continuous service is required. Surviving spouses also are eligible.
You will need to show your lender a certificate of eligibility from the VA. You can obtain a COE online, in the mail or through your lender.
For more information, go to the U.S. Department of Veterans Affairs’ website and click on the benefits tab.
Lew Sichelman
Lew Sichelman is a nationally syndicated housing and real estate columnist. He has covered the real estate beat for more than 50 years.