The Department of Veterans Affairs has one of the best mortgage lending programs available to buyers, and those loans are extremely popular with D.C.-area buyers.
A recent Redfin report ranks the D.C. region No. 2 in the nation for share of VA loans. In April, VA loans accounted for 16.5% of all mortgage loans originated in the D.C. metro, behind only Virginia Beach, Virginia, at 41.7%.
VA loans require no down payment, no private mortgage insurance and often lower interest rates than conventional loans. They are available to all active-duty service members, veterans and their surviving spouses.
“We know that there are a lot of veterans in this area,” said Jessica Lautz, vice president of research at the National Association of Realtors. “We know there are a lot of active military in this area and those who are in reserves. They are taking advantage of this zero-down payment program.”
That large pool of military veterans includes thousands of federal government employees in the D.C. area, and even more who’ve transitioned to the private sector as government IT and defense contractors. Those companies pride themselves on their large veteran workforce, and many of those are high-paying jobs. They are still eligible for inexpensive VA mortgage loans.
FHA loans have also grown in popularity in the D.C. market, with 13.3% of loans in the D.C. region originating through FHA programs in April, according to Redfin.
Like VA loans, FHA loans have lower down payment requirements. But they are also available to buyers typically with lower credit scores, and less than perfect credit histories, including those with past delinquencies and foreclosures.
For homebuyers taking out conventional mortgage loans through banks or mortgage brokers, down payment requirements are the biggest hurdle. The median down payment on a conventional mortgage loan in the D.C. region in April was 10%, or roughly $62,000.
The 20% down payment remains the gold standard cited for mortgages, but it is not common. The National Association of Realtors reports the typical down payment for a first-time buyer over the last five years has been 6% to 9%.
“The 20% comes in because you know that you may have to pay property mortgage insurance, or PMI,” Lautz said. “But not every situation is the same, so making sure that you talk to those lenders is incredibly important.”
In the D.C. metro in April, 21.9% of all home purchases were all cash.
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