VA Loans vs. Conventional Loans
by Redfin Team
Nationwide, just over one in five (21.8%) home listings are affordable to the typical U.S. military veteran using a VA loan, while 26.5% are affordable to the typical veteran using a conventional loan.
Affordability has improved slightly over the last two years. Just 20.2% of listings were affordable to the typical veteran using a VA loan in 2023, and 25.5% were affordable to veterans using a conventional loan, the lowest shares on record.
For comparison, a similar share (22.8%) of listings are affordable to the typical U.S. non-veteran household with a conventional loan. That’s a slight improvement from 2024’s low point, when 21.7% of listings were affordable for non-veterans.
Homebuying affordability has improved marginally for both veterans and non-veterans over the last two years because monthly housing payments have declined, while incomes have risen. The average mortgage rate was 6.81% in 2023, and it is 6.66% today. The median household income for veterans is an estimated $85,955 this year, up roughly 10% since 2023. For non-veterans, it is an estimated $81,078, also up roughly 10% over that period.
Veterans using VA loans are consistently able to afford fewer listings than homebuyers who take out conventional loans. Even though the typical veteran earns more than the typical non-veteran — and VA loans come with a slightly lower mortgage rate and no private mortgage insurance — 90% of VA loan users make no down payment, which inflates monthly payments.
“VA loans provide a great opportunity for first-time veteran homebuyers to purchase a home without the substantial down payment that’s required of most buyers these days,” said Redfin Economist Grishma Bhattarai. “It allows them to get their foot in the homeownership door and start building equity, but it comes with the tradeoff of a bigger loan and higher monthly costs.”
Nationwide, 7.3% of mortgaged homebuyers used a VA loan in August. That’s a small share, but it’s up from 6.5% a year ago, and it’s the highest share of any August in six years. More people are taking out VA loans because in today’s buyer’s market, more sellers are open to accepting buyers coming with no down payment.
Veterans Could Have Bought 53% of Listings in 2015
Veterans (and non-veterans) can afford far fewer listings than they could have a decade ago. A veteran using a VA loan could afford more than half (53%) of home listings nationwide in 2015, more than double the share they can afford today. A veteran using a conventional loan could afford roughly 57% of listings in 2015, and a non-veteran using a conventional loan could afford about 52%.
It has become much more difficult to afford a home because sale prices skyrocketed during the pandemic, then rising mortgage rates pushed monthly housing payments to new heights.
