VA loans can help veterans and service members buy homes, but many in the Philly region don’t use them

After Diamond Jones left the Air Force, the Philadelphia native ended up in Virginia, where she and her two children lived in at least four apartment complexes in six years.

When she moved to South Jersey, one of her goals was to buy a house she could make her own and that would give her “stability, security,” she said.

That house ended up being her brother’s. In February, she bought the three-bedroom home in Sicklerville with a mortgage backed by the U.S. Department of Veterans Affairs. With the VA loan, she was able to keep more of her savings, because she didn’t have to make a down payment.

“It’s definitely a benefit to take advantage of,” said Jones, a 38-year-old project manager.

The Philadelphia metropolitan area is in the top 25 markets for VA home loans, thanks to its position as a large metro area not far from Washington and its military base in Burlington County. With these mortgages, veterans and members of the military are able to buy homes without making a down payment, an up-front cost that is often a hurdle for aspiring homeowners. VA loan borrowers also don’t have to pay for private mortgage insurance. They also pay limited closing costs and lower mortgage interest rates.

June marked 80 years since the VA home loan program was created.

“It’s rooted in the idea of removing obstacles and making [home buying] easier,” said Chris Birk, vice president of mortgage insights at the Missouri-based Veterans United Home Loans, the country’s largest VA lender. “We definitely see veterans who can’t make this dream a reality without this benefit.”

Veterans have higher homeownership rates than the general population, and racial and ethnic ownership gaps are smaller among veterans and service members. The Department of Veterans Affairs projects that the country’s populations of Black veterans and Hispanic veterans will grow over the next two decades, so greater use of VA loans could help shrink homeownership gaps.

But VA loans make up a small fraction of mortgages in the region. In 2023, about 1,900 of the roughly 50,000 mortgages originated for the purchase of single-family homes in the eight-county area were VA loans, according to federal mortgage data.

Many military veterans, service members, real estate agents, and lenders aren’t familiar with the loans. And as with mortgages backed by the Federal Housing Administration, home sellers can be wary of working with buyers who use VA loans, fearing extra red tape and worrying deals won’t go through. For example, both types of loans require sellers to fix issues found during home inspections.

Jones said keeping track of benefits is hard when veterans are hit with “information overload” when they’re discharged. She was in her early 20s when she left the Air Force, and “it was completely overwhelming,” she said.

Her brother, also a veteran, was the one who told her about VA loans. He bought his first home — the Sicklerville house — using the loan. Her mother bought her first home using a VA loan last year.

“I have a veteran friend who hasn’t even considered ever using his VA loan,” Jones said. “I’ve been telling all of my veteran friends about my situation and my process and everything.”

Todd Bouchard, an Army veteran from South Jersey, said he didn’t know much about the VA loan before he used it to buy a home in University City in 2020. It’s one reason why he became a real estate agent a couple years ago.

“I want to help veterans who don’t necessarily know about the VA home loan and the process to get it and how it is beneficial for them,” said Bouchard, an agent at Coldwell Banker Realty who works across the Philadelphia region.

He said education also has to extend to home sellers and their agents.

“With a lot of sellers, there’s stigmas that there’s a lot of requirements, a lot of things to get around,” he said. Constant communication and setting expectations early are key to a smooth process, he said.

Lizzie Biddle, an Air Force veteran and team leader of The Biddle Group at Keller Williams Moorestown, said she plans to host classes in her brokerage to teach fellow real estate agents about VA loans. She specializes in the loans and works exclusively with the military community. The majority of her clients are active-duty service members at Joint Base McGuire-Dix-Lakehurst in Burlington County.

“VA loans are so underrepresented, and VA loans are dismissed as subpar,” said Biddle, who used the loan to buy her own home. She also said she sees “such an underrepresentation of competent VA Realtors.”

Buyers with VA or FHA loans “get the short end of the stick” in most bidding war situations, she said. “People hear ‘government loan,’ they think they’re broke and have bad credit,” but a lot of Biddle’s clients have cash reserves and good credit scores.

“There’s a lot of discrimination with VA loans,” she said.

During the height of the pandemic, when homebuyers were waiving inspections and going up against a dozen other people for a home, VA borrowers ″kept getting rejected over and over and over again,” Biddle said.

» READ MORE: Loan preference is shutting some FHA-backed buyers out of Philly area’s hot housing market (From 2021)

Some of her buyers with money to put down switched from VA to conventional home loans. “And lo and behold, once they did that, they got their offer accepted,” she said.

“Everybody says, ‘Thank you for your service,’ but they don’t take their loan,” Biddle said. “This is a perk that the service member is getting for their service for our country. It would be really, really nice if those people also said ‘thank you for your service’ by accepting their loan.”

She said that as more buyers enter the housing market as mortgage rates fall, she anticipates her clients will face more challenges getting their offers accepted.

One seller worry is the required home inspection. But in Biddle’s almost six years in the business, she has “very seldom” gotten inspection reports that call for excessive repairs, she said. Mostly, reports flag simple fixes for paint and handrails.

The Department of Veterans Affairs also requires termite inspections, and sellers have to fix any wood damage. A few years ago, sellers had to pay for that inspection, but in the last couple of years, buyers have been allowed to cover the cost.

Sellers also worry about VA borrowers being able to get a loan for the full price of the home, since borrowers don’t need to make a down payment. But if a VA appraiser’s valuation is below the asking price, the buyer is given 48 hours to justify the price to the appraiser.

Instead of mortgage insurance, the Department of Veterans Affairs requires borrowers to pay a “funding fee” of up to about 3% of the loan amount. This can be rolled into the loan, or it can be waived if the borrower has a service-related disability.

Because Bouchard of Coldwell Banker Realty was medically retired from the military, he was able to get the funding fee waived. And he rolled closing costs into his loan, thanks to a seller’s assist.

“I truly was able to get a house with 0% down,” he said.

Veterans and service members can use VA loans as many times as they want to purchase their primary residence, and there are no income limits.

The loan made achieving homeownership easier for Jones, who has “a whole to-do list of projects” planned for her Sicklerville home, including modernizing her bathroom and turning her yard into an oasis. And she’s looking forward to staying put and getting to know her neighbors.

“I feel really good,” she said.