When it comes to mortgages, VA loans are about the best you can get. With no down payment, no mortgage insurance, and super-low interest rates, they save homebuyers significantly—both up-front and over the long haul.
And while VA loans have historically been underutilized, it seems Millennials are looking to buck that trend. In fact, according to data from the Department of Veterans Affairs, the share of Millennials using a VA loan jumped 14% over the last year alone.
VA loan activity jumped with Generation Z buyers, too, and combined, the two generations accounted for 45% of all VA purchase loans originated in the past year.
If you look at the numbers, it’s no wonder buyers are flocking to the loan.
According to the latest Millennial Tracker from mortgage technology provider Ellie Mae, the average Millennial VA borrower saw a 3.5% interest rate in September—significantly lower than the overall average of 3.93% across all loan types.
Chris Birk, director of education at VA loan lender Veterans United, says VA loans are allowing younger generations to buy a home sooner.
“The VA loan program helps younger buyers get into homes today, rather than have to wait years like so many Millennial and Generation Z civilians,” Birk said. “Plus, because of their education benefits, many younger veterans aren’t burdened with mountains of student loan debt.”
The lower costs of VA loans are giving way to larger homebuying budgets, too. Millennial VA borrowers averaged loan balances upward of $390,000 in September. The average Millennial balance across all loan types was just $206,000.
According to Mario Negron, a real estate broker who specializes in helping veteran homebuyers, VA mortgages are “pretty much America’s best loan” and young buyers are smart to leverage it if they can.
“Many Gen Z and Millennial individuals joined the military after September 11 to honor our great nation,” Negron says. “They are now seeing the savings of no money down and not having mortgage insurance. This is their right, their honor, they received for serving our country. Why not take full advantage of the savings?”
Negron says he’s seeing the trend “in full force” on the ground in Cypress, Texas—a suburb of Houston—where he runs RE/MAX Pioneers. It’s no surprise, either.
According to the latest Millennial Tracker from mortgage technology provider Ellie Mae, the Houston area ranked as the No. 4 market for Millennial VA loan activity in September. Millennial buyers accounted for 32% of the city’s VA loan share for the month.
Other cities with large shares of Millennial VA loans were Honolulu; Clarksville, Tennessee; Omaha, Nebraska; Destin-Fort Walton Beach, Florida; and Ogden, Utah. All five are near at least one military base or reserve center. (Reservists can also qualify for VA loans if they’ve been a member long enough).