Easing millennial and Gen Z veterans’ path to homeownership, VA-backed loan

Adam Seidler set several goals to hit by the time he turned 30 — start a family, own a home.

With the help of a loan from the U.S. Department of Veterans Affairs, he achieved them. This year, he purchased a five-bedroom home for his family in Diamond, Ill.

“It was pretty smooth sailing,” he said.

Seidler, 30, is one of many millennial veterans capitalizing on their ability to secure a VA Home Loan, a program that started in 1944. Decades later, the initiative has provided the most loans in its history this year, helping more military families buy homes than ever before.

“To me, that’s one of the most remarkable and rewarding things about it,” said Chris Birk, vice president of mortgage insight at Veterans United Home Loans. “Seventy-six years later, it is still fulfilling its original mission to level the playing field.”

During the 2020 fiscal year, the agency backed more than 1 million federal loans — the most in its history, Birk said. Companies like his provide private loans to veterans partially backed by the VA as a way of easing the path toward homeownership for veterans and service members.

And despite many nonmilitary millennials having a tough time buying homes — often saddled with student debt and working to save for a down payment — millennial and Gez Z veterans accounted for half of all VA purchase loans in fiscal year 2020, he said.

“So many millennials are stuck on the sidelines because they don’t have great credit, they don’t have the savings for a down payment,” Birk said. “Younger veterans and service members are really ahead of the curve when it comes to homebuying, (compared with) their civilian counterparts.”

Across the Chicago metropolitan area, VA loans doubled from 2019 to 2020, growing from 7,313 to 14,913. Of those, loans for millennials and Gen Z buyers are also up, from 1,950 VA-backed loans in 2019 to 2,473 this year — making Chicago one of the top 50 cities for the demographic.

“Younger veterans and service members are the ones absolutely driving that growth,” Birk said.

The program helps service members, veterans and eligible surviving spouses become homeowners. The loans are provided by private lenders — banks and companies like Veterans United — and the federal agency guarantees part of the loan. According to the VA, the length of service or service commitment, duty stats and character of service determine eligibility for specific home loan benefits.

Veterans generally enjoy above-average financial well-being compared with the average U.S. adult, according to a 2019 analysis by the U.S. Consumer Financial Protection Bureau. While military benefits do help them establish financial stability, though, veterans also have unique challenges posed by frequent relocation, deployment, war-related trauma and higher levels of unemployment during their first year after service.

And there remains a real need for the VA Home Loan program; after the Great Recession, many mortgage lenders tightened eligibility for home loans. Particularly for younger veterans and active service members, those restrictions made it harder, as FICO credit scores for VA borrowers are lower on average, and it can take many years after service for military families to save up for a conventional down payment, Birk said.

“It left a lot of veterans and military families on the sidelines,” Birk said. “This is a demographic that believes in homeownership.”

So VA loans, long lauded for perks like requiring no down payment and offering historically low interest rates, became something people are “rediscovering,” he said.

“Veterans are seeing other veterans in their lives and their communities using this benefit, realizing what it can do for them,” he said. “They’re turning to it in waves.”

Birk said many assume they need to be a veteran, but those in active service also…