At a March 26 hearing before the House Committee on Veterans’ Affairs Subcommittee on Economic Opportunity, a real estate professional and veteran delivered a clear message: The VA home loan program remains a powerful tool for homeownership, but it needs updates to stay competitive in today’s market.
Testifying on behalf of the National Association of REALTORS®, Kurt Thompson, broker-owner of RE/MAX Liberty in Westminster, Mass., drew on both professional and personal experience. Thompson, a veteran of the Army Reserve and New Hampshire’s Air National Guard, credited the VA loan program with helping him achieve homeownership.
Despite its strengths, the VA loan program is constrained by a lack of housing supply. NAR estimates the U.S. is short nearly 5 million homes, with the tightest inventory at entry-level price points.
In Thompson’s market, where most buyers are searching between $300,000 and $500,000, options are scarce, he said. Thompson told members of Congress that NAR is supporting passage of the 21st Century Road to Housing Act and the More Homes on the Market Act to boost supply and unlock inventory.
One of the most persistent challenges Thompson identified is how VA property condition standards put veterans at a disadvantage in competitive markets. VA appraisers are required to flag conditions that would not hold up a conventional transaction, which can trigger repair requests, add weeks to a closing and give sellers with multiple offers a reason to look elsewhere.
NAR wants Congress to align VA’s Minimum Property Requirements with the standards of Fannie Mae and Freddie Mac, which would create a more consistent bar across loan programs, reduce friction in transactions and expand the pool of appraisers willing to work within the VA program.
“Appraisal wait times add another layer of difficulty. In fast-moving markets, a weeks-long delay can unravel a deal before it closes,” Shannon McGahn, NAR executive vice president and chief advocacy officer, says. “Rate locks expire, sellers lose patience and veterans are left to start the search over. NAR is urging Congress to examine how the process can be modernized to move more efficiently while maintaining the quality and independence that protect veteran borrowers.”
Appraisals are not the only area where there is room to improve. VA loans are assumable, and in today's rate environment that feature has real appeal. A buyer who takes over a seller's existing low-rate mortgage rather than taking out a new one at current rates could see significant monthly savings. But in practice, assumptions can be difficult to complete. Processing timelines are long, lenders are not adequately compensated for the work involved and most buyers can’t afford to cover the difference between the existing loan balance and the purchase price out of pocket. In addition to addressing those barriers, McGahn says, Congress should address the fact that veterans currently lose their VA eligibility when their loan is assumed by a non-veteran, leaving them without a benefit they earned through their service.
“The VA Home Loan Guaranty program has been one of the most important benefits our nation offers, and I am proud to have benefited from it personally,” Thompson said in his testimony. “When it works well, it is a powerful path to achieve the American dream of homeownership and the kind of wealth building that can last generations.”
As Congress examines affordability challenges, REALTORS® emphasized that improving both housing supply and transaction processes will be key to making the program attractive and viable for more eligible home buyers.
