Images by GettyImages; Illustration by Hunter Newton/Bankrate
More than half of aspiring homeowners say living costs are too high or their incomes are too low to squeeze a down payment and closing costs into their budgets, according to Bankrate’s new Down Payment Survey.
Reflecting the bout of inflation that swept through the economy in 2022 and 2023, fully 51 percent of would-be homeowners say the cost of living poses an obstacle to their home-buying plans. Meanwhile, 54 percent of Americans say their incomes haven’t kept pace with home prices that are flirting with record levels.
“With so many aspiring homeowners saying they’re not making enough money to afford a down payment, the job market has been more resilient, the economy more robust than many experts expected,” says Mark Hamrick, Bankrate’s chief economic analyst. “That strength can still be leveraged.”
Bankrate’s key takeaways
Myriad financial challenges vex would-be buyers. In addition to the high cost of living and low income, aspiring homeowners cited these barriers to homeownership: credit card debt (18 percent); friends or family not being able to provide financial assistance (15 percent); and student loan debt (10 percent).
Saving up could take a long time. Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Just 7 percent say they’ll be ready in less than a year.
Successful buyers were intentional about achieving their goal. More than four in 10 current homeowners (41 percent) saved specifically for the down payment and closing costs on their first homes, and 14 percent got down payment assistance or a first-time buyer grant.
Americans’ housing outlook is growing less gloomy. Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in September 2023.
Many say high living costs, constrained incomes pose challenges
More than half of aspiring homeowners say the current cost of living is too high or their income is not high enough for them to afford a down payment and closing costs for a home (51 percent and 54 percent, respectively).
In addition to the high cost of living and low income, aspiring homeowners cited credit card debt (18 percent), friends or family not being able to provide financial assistance (15 percent) and student loan debt (10 percent) as barriers to homeownership, while 8 percent cited some other reason. Just 13 percent of aspiring homeowners said nothing is holding them back.
Younger aspiring homeowners are more likely to point to a lack of financial assistance from friends or family as obstacles to homeownership compared to older generations, while millennials are most likely to point to both credit card and student loan debt.
Aspiring homeowners not hopeful they’ll be able to afford to buy in near future
Fully 20 percent of aspiring homeowners think they will never be able to save enough to purchase a home. Older generations (36 percent of baby boomers and 28 percent of Gen Xers) are more likely to believe they will never be able to save enough to buy a home, compared to 18 percent of millennials and 10 percent of Gen Zers.
Nearly one-third of aspiring homeowners (30 percent) say it will take at least five years or longer to save enough money for a home, while 10 percent say it will take a decade or more.
Americans more optimistic about housing market
Overall, 42 percent believe now is a bad time to buy a home, a decrease from 49 percent in a September 2023 Bankrate survey.
Among other housing market headwinds, nearly two in five (39 percent) say they think mortgage rates will remain elevated for the foreseeable future, while 38 percent say a buyer needs excellent credit to get a mortgage and 17 percent say that renting is cheaper than buying a home.
Current homeowners got there through intentional savings
When asked how they came up with the cash for their first homes, 41 percent of current homeowners saved specifically for that purpose, 14 percent received a gift from family or friends and another 14 percent used a first-time homebuyers grant or loan assistance program. Nine percent received a loan from family or friends, while another 9 percent took money out of retirement savings. Fewer homeowners found additional income streams (8 percent) or sold some personal items such as jewelry, electronics or cars (7 percent).
3 ways to save for a down payment
Leverage a savings account. Although mortgage rates have increased, the rates on savings accounts have gone up, too. Look into high-yield or money market accounts, or even a certificate of deposit, to take advantage of these returns.
Don’t sweat 20 percent. While 20 percent is an ideal amount to put down, the reality is that the typical home price nationally is close to $400,000, and most first-time buyers don’t have $80,000 to devote to the down payment. The good news is that there are plenty of loans available for borrowers with as little as 3 percent to 3.5 percent for the down payment.
Tap into first-time buyer programs. Nearly every state in the country has a program to help first-time buyers become homeowners. These programs typically feature some sort of down payment assistance.
FAQ
Because of the combination of high home prices and still-high mortgage rates, fewer Americans than usual are buying homes. Don’t wait too long, though: If mortgage rates decline significantly in 2024, that shift would lure more buyers into the market, creating more competition and upward pressure on home prices.
No. While the best mortgage offers are available to borrowers with credit scores of 740 or higher, that’s not a requirement. Mortgages are available to borrowers with credit scores as low as 580, although those loans typically carry higher costs.
The current consensus is that mortgage rates will fall to 6 percent or below by the end of 2024. A lot can happen between now and then, however — much depends on the direction of the economy and when the Federal Reserve decides to cut interest rates.
Bankrate commissioned YouGov Plc to conduct the survey. All figures, unless otherwise stated, are from YouGov Plc. The total sample size was 2,267 U.S. adults, of which 864 are aspiring/prospective homeowners. Fieldwork was undertaken between Jan. 24-26, 2024. The survey was carried out online and meets rigorous quality standards. It employed a non-probability-based sample using both quotas upfront during collection and then a weighting scheme on the back end designed and proven to provide nationally representative results. For this survey, Bankrate defined aspiring/prospective homeowners as those who have owned a home in the past but currently do not, and those who have never owned a home in the past but hope to someday.
Dulles International Airport (IAD) is one of three airports servicing the U.S. capital. It is situated about 26 miles outside Washington, D.C., in the Northern Virginia suburbs.
Compared to its counterpart in Virginia, Ronald Reagan Washington National Airport, Dulles’ footprint is at least 12 times larger, sitting on more than 11,000 acres.
Washington-Dulles is known for its vast international flight options, for being a major United Airlines hub, and for its iconic main terminal, designed by well-known architect Eero Saarinen (the same architect who brought the New York-JFK terminal that’s now the TWA hotel to life).
Washington-Dulles is comprised of a main terminal building which features ticketing, security and a small set of “Z” gates, plus baggage claim and customs on the bottom floor.
There are two separate midfield terminals that run parallel to the main terminal: one long building housing the A and B concourses, and another housing the C and D concourses.
Map of IAD terminals
Dulles Airport main terminal
The Washington-Dulles main terminal building is the immediately-recognizable structure most people think of when picturing the airport, with its vaulted ceiling and all-glass facade.
(Photo by Sean Cudahy)
Inside, the building is huge, spanning 1.1 million square feet, and is close to a quarter-mile in length.
The main terminal is divided two floors: departures upstairs and arrivals downstairs.
Upper level
Inside the main terminal on the upper level, there are four large islands with ticket counters for domestic and international airlines.
(Photo by Sean Cudahy)
All passengers pass through security in the main terminal, so if you’re a Clear member, you’ll be able to use the service no matter which airline you’re flying.
The standard TSA checkpoint is downstairs.
Once you pass through security, you’ll catch the Aerotrain or people movers to your specific departure terminal.
Downstairs
Downstairs on the arrivals level is baggage claim with 15 carousels, as well as the airport’s customs facilities, which include Global Entry access.
Food options
Pre-security: Cafe Americana, District Chophouse, Capitol Gounds Coffee.
Retail
International Currency Exchange, Dulles Gourmet Market.
Lounges
The main terminal building houses a brand new Capital One Lounge just beyond the TSA PreCheck lanes.
(Photo by Sean Cudahy)
Capital One Venture X Rewards Credit Card
NerdWallet Rating
Annual fee
$395
Transportation
Since Dulles operates out of three main terminal buildings, travelers have to take transportation to move between each.
Aerotrain
(Photo by Sean Cudahy)
The most convenient option is the Washington-Dulles Aerotrain, an automated train system that runs between a few of the terminals. It’s usually a quick ride, with a maximum of two minutes between stations.
(Photo by Sean Cudahy)
You can take the Aerotrain if you have a flight in the A gates, B gates or C gates. However, note that it is a decent walk from the station to the C gates.
People movers
(Photo by Sean Cudahy)
One of Dulles’ best-known quirks is its “mobile lounges,” or “people movers.” These Star Wars-esque machines haven’t entirely been phased out with the Aerotrain.
Inside, the people movers feel like a combination of a waiting room and a bus, and they take passengers from one terminal to another.
You’ll typically ride the people movers if you’re:
Flying out of the D gates (one of United’s concourses).
Connecting between United’s D gates and Terminal A (gates A1A through A6F).
Arriving on an international flight to get to the customs area in the main terminal.
Passenger walkway
If you’d rather get some steps in, there’s also a 1,000-foot underground pedestrian walkway that connects the main terminal with Concourse B, featuring moving sidewalks in both directions.
Dulles Terminal A
(Photo by Sean Cudahy)
Airlines
United (regional United Express flights, gates A1A through A6F).
International airlines occupy the main portion of terminal.
Lounges
Air France Lounge, near gate A20.
Open daily from 10:30 a.m. until last flight
Priority Pass eligible.
Virgin Atlantic Clubhouse, across from gate A32
Open starting around four hours before Virgin Atlantic flights.
Priority Pass eligible.
Other amenities
Food and beverage
Jersey Mike’s Subs.
Smashburger.
Starbucks.
Extreme Pita.
Cacao Chaser.
Capitol City Ink.
Duty Free America.
Gen X Wireless.
Hudson News.
International Currency Exchange.
Souvenir Library.
Terminal B
(Photo by Sean Cudahy)
Airlines
American Airlines.
Delta Air Lines.
Southwest Airlines.
International carriers like Aer Lingus, ANA, Lufthana, TAP Air Portugal and others.
Lounges
British Airways Lounge, located near Aerotrain station: Open daily from 6:00 a.m. to 10:30 p.m.
Lufthansa Business Lounge, located across from gates B49 and B51: Open 1:30 p.m. to 10:00 p.m. daily. Priority Pass eligible.
Turkish Airlines Lounge, located next to gate B43: Open 7:15 a.m. to 11:00 p.m. daily. Priority Pass eligible.
Other amenities
Food and beverage
Bracket Room.
Capitol Grounds Coffee.
Carrabba’s Italian Grill.
Chick-fil-a,
Commanders Burgundy & Gold Club.
DC-3 Hot Dog Joint.
Five Guys.
Peet’s Coffee.
Potbelly Sandwich Shop.
Vino Volo.
Wendy’s.
Cacao Chaser.
Chanel & Christian Dior.
DC Marketplace.
Duty Free Americas.
Eden’s Boutique.
Estée Lauder / M.A.C. Flag World.
Gen X Wireless.
Montblanc.
Ralph Lauren Polo.
See’s Candies.
Stellar News.
Sunglass Hut.
Travel Tech.
Vera Bradley.
Vineyard Vines.
Washingtonian.
Terminal C
(Photo by Sean Cudahy)
Airlines
Lounges
United has four lounges in Concourse C:
A United Club near gate C4: Open 2 p.m. – 7 p.m. daily.
A United Club near gate C7: Open 5:30 a.m. – 10 p.m. daily.
A United Club near gate C17: Open 5:30 a.m. – 10 p.m. daily.
Other amenities
Food and beverage
Au Bon Pain.
Auntie Annie’s.
Be Right Burger.
Chef Geoff’s.
Devil’s Backbone Taproom.
Starbucks.
Brookstone.
Capitol City Ink.
Duty Free Americas
Hudson News.
International Currency Exchange
Terminal D
Airlines
Lounges
United Club near gate D8: Open 5:30 a.m. to 10:00 p.m. daily.
Food and beverage
Bistro Atelier.
Dulles Gourmet Market.
Pizza Hut.
Rusty Taco.
Starbucks.
Duty Free Americas.
Forbes News.
International Currency Exchange.
NBC4 Travel Store.
A ‘bonus’ concourse of sorts, Dulles has a small handful of Z gates located in the main terminal building. A mix of airlines service these gates, and the only food and beverage options are Dunkin and Subway.
Washington-Dulles has several parking options. The priciest are right near the terminal and in garages, and the most affordable is a cheaper, satellite economy lot requiring a shuttle. You can reserve your parking online or take your chances of finding a free spot at the airport.
Terminal parking
Located just in front of terminal.
$29 per day or $6 per hour.
Follow covered walkway to terminal (brief walk).
There’s an additional “Valet” parking option for $39 per day that allows convenient pickup in front of the terminal parking lot for ultra convenience.
Garage 1 or Garage 2 Parking
Parking garage close to terminal.
$21 per day or $6 per hour.
Walk to the terminal via an underground or covered pedestrian walkway or take a shuttle.
Garage 2 is the most convenient for international departures.
Economy parking
Satellite parking lot.
$14 per day.
Shuttle service runs every 15 minutes. Give yourself at least 15 minutes of travel time to the terminal.
Rental cars
To get to and from the rental car facilities, you’ll have to take one of the airport’s free shuttle buses, a few minutes’ ride.
Dulles has most major rental car companies, including:
Enterprise.
Washington Metro Access
Dulles has direct access to the Washington Metro system via the Silver Line station. It’s located opposite the main terminal, across the terminal parking parking facilities. You’ll take an underground path with moving walkways to get to the Silver Line station.
From there, you can catch a Metro train that will take you through Tyson’s Corner, and eventually through Rosslyn and into downtown D.C. Metro’s trip planner shows it’s a ride of more than 50 minutes to Metro Center, a key connecting station in downtown D.C.
Check Metro’s website for information on hours of operation and fares.
Uber/Lyft from Dulles
Customers hoping to use a rideshare service like Uber and Lyft when they get off the airplane can be picked up on the arrivals level outside baggage claim outside Doors 2, 4 and 6.
(Top photo courtesy of Sean Cudahy)
How to maximize your rewards
You want a travel credit card that prioritizes what’s important to you. Here are our picks for the best travel credit cards of 2024, including those best for:
The VA home loan: Unbeatable benefits for veterans
For many who qualify, VA home loans are some of the best mortgages available.
Verify your VA loan eligibility. Start here
Backed by the U.S. Department of Veterans Affairs, VA loans are designed to help active-duty military personnel, veterans and certain other groups become homeowners at an affordable cost.
The VA loan asks for no down payment, requires no mortgage insurance, and has lenient rules about qualifying, among many other advantages.
Here’s everything you need to know about qualifying for and using a VA loan.
In this article (Skip to…)
Top 10 VA loan benefits
1. No down payment on a VA loan
Most home loan programs require you to make at least a small down payment to buy a home. The VA home loan is an exception.
Verify your VA loan eligibility. Start here
Rather than paying 5%, 10%, 20% or more of the home’s purchase price upfront in cash, with a VA loan you can finance up to 100% of the purchase price.
The VA loan is a true no-money-down home mortgage opportunity.
2. No mortgage insurance for VA loans
Typically, lenders require you to pay for mortgage insurance if you make a down payment that’s less than 20%.
This insurance — which is known as private mortgage insurance (PMI) for a conventional loan and a mortgage insurance premium (MIP) for an FHA loan — would protect the lender if you defaulted on your loan.
VA loans require neither a down payment nor mortgage insurance. That makes a VA-backed mortgage very affordable upfront and over time.
3. VA loans have a government guarantee
There’s a reason why the VA loan comes with such favorable terms.
The federal government guarantees these loans — meaning a portion of the loan amount will be repaid to the lender even if you’re unable to make monthly payments for whatever reason.
This guarantee encourages and enables private lenders to offer VA loans with exceptionally attractive terms.
4. You can shop for the best VA loan rates
VA loans are neither originated nor funded by the VA. They are not direct loans from the government. Furthermore, mortgage rates for VA loans are not set by the VA itself.
Instead, VA loans are offered by U.S. banks, savings-and-loans institutions, credit unions, and mortgage lenders — each of which sets its own VA loan rates and fees.
This means you can shop around and compare loan offers and still choose the VA loan that works best for your budget.
5. VA loans don’t allow a prepayment penalty
A VA loan won’t restrict your right to sell the property partway through your loan term.
There’s no prepayment penalty or early-exit fee no matter within what time frame you decide to sell your home.
Furthermore, there are no restrictions regarding a refinance of your VA loan.
You can refinance your existing VA loan into another VA loan via the agency’s Interest Rate Reduction Refinance Loan (IRRRL) program, or switch into a non-VA loan at any time.
6. VA mortgages come in many varieties
A VA loan can have a fixed rate or an adjustable rate. In addition, you can use a VA loan to buy a house, condo, new-built home, manufactured home, duplex, or other types of properties.
Or, it can be used for refinancing your existing mortgage, making repairs or improvements to your home, or making your home more energy-efficient.
The choice is yours. A VA-approved lender can help you decide.
Verify your VA loan eligibility. Start here
7. It’s easier to qualify for VA loans
Like all mortgage types, VA loans require specific documentation, an acceptable credit history, and sufficient income to make your monthly payments.
But, compared to other loan programs, VA loan guidelines tend to be more flexible. This is made possible because of the VA loan guarantee.
The Department of Veterans Affairs genuinely wants to make the loan process easier for military members, veterans, and qualifying military spouses to buy or refinance a home.
8. VA loan closing costs are lower
The VA limits the closing costs lenders can charge to VA loan applicants. This is another way that a VA loan can be more affordable than other types of loans.
Money saved on closing costs can be used for furniture, moving costs, home improvements, or anything else.
9. The VA offers funding fee flexibility
VA loans require a “funding fee,” an upfront cost based on your loan amount, your type of eligible service, your down payment size, and other factors.
Funding fees don’t need to be paid in cash, though. The VA allows the fee to be financed with the loan, so nothing is due at closing.
And, not all VA borrowers will pay it. VA funding fees are normally waived for veterans who receive VA disability compensation and for unmarried surviving spouses of veterans who died in service or as a result of a service-connected disability.
10. VA loans are assumable
Most VA loans are “assumable,” which means you can transfer your VA loan to a future home buyer if that person is also VA-eligible.
Assumable loans can be a huge benefit when you sell your home — especially in a rising mortgage rate environment.
If your home loan has today’s low rate and market rates rise in the future, the assumption features of your VA become even more valuable.
VA loan rates
The VA loan is viewed as one of the lowest-risk mortgage types available on the market.
Verify your VA loan eligibility. Start here
This safety allows banks to lend to veteran borrowers at lower interest rates.
Today’s VA loan rates*
Loan Type
Current Mortgage Rate
VA 30-year FRM
% (% APR)
Conventional 30-year FRM
% (% APR)
VA 15-year FRM
% (% APR)
Conventional 15-year FRM
% (% APR)
*Current rates provided daily by partners of the Mortgage Reports. See our loan assumptions here.
VA rates are more than 25 basis points (0.25%) lower than conventional rates on average, according to data collected by mortgage software company Ellie Mae.
Most loan programs require higher down payment and credit scores than the VA home loan. In the open market, a VA loan should carry a higher rate due to more lenient lending guidelines and higher perceived risk.
Yet the result of the Veterans Affairs efforts to keep veterans in their homes means lower risk for banks and lower borrowing costs for eligible veterans.
VA mortgage calculator
Eligibility
Am I eligible for a VA home loan?
Contrary to popular belief, VA loans are available not only to veterans, but also to other classes of military members.
Find and lock a low VA loan rate today. Start here
The list of eligible VA borrowers includes:
Active-duty service members
Members of the National Guard
Reservists
Surviving spouses of veterans
Cadets at the U.S. Military, Air Force or Coast Guard Academy
Midshipmen at the U.S. Naval Academy
Officers at the National Oceanic & Atmospheric Administration.
A minimum term of service is typically required.
Minimum service required for a VA mortgage
VA home loans are available to active-duty service members, veterans (unless dishonorably discharged), and in some cases, surviving family members.
To be eligible, you need to meet one of these service requirements:
You’ve served 181 days of active duty during peacetime
You’ve served 90 days of active duty during wartime
You’ve served six years in the Reserves or National Guard
Your spouse was killed in the line of duty and you have not remarried
Your eligibility for the VA home loan program never expires.
Veterans who earned their VA entitlement long ago are still using their benefit to buy homes.
The VA loan Certificate of Eligibility (COE)
What is a COE?
In order to show a mortgage company you are VA-eligible, you’ll need a Certificate of Eligibility (COE). Your lender can acquire one for you online, usually in a matter of seconds.
Verify your VA home loan eligibility. Start here
How to get your COE (Certificate of Eligibility)
Getting a Certificate of Eligibility (COE) is very easy in most cases. Simply have your lender order the COE through the VA’s automated system. Any VA-approved lender can do this.
Alternatively, you can order your certificate yourself through the VA benefits portal.
If the online system is unable to issue your COE, you’ll need to provide your DD-214 form to your lender or the VA.
Does a COE mean you are guaranteed a VA loan?
No, having a Certificate of Eligibility (COE) doesn’t guarantee a VA loan approval.
Your COE shows the lender you’re eligible for a VA loan, but no one is guaranteed VA loan approval.
You must still qualify for the loan based on VA mortgage guidelines. The guarantee part of the VA loan refers to the VA’s promise to the lender of repayment if the borrower defaults.
Qualifying for a VA mortgage
VA loan eligibility vs. qualification
Being eligible for VA home loan benefits based on your military status or affiliation doesn’t necessarily mean you’ll qualify for a VA loan.
You still have to qualify for a VA mortgage based on your credit, debt, and income.
Verify your VA loan eligibility. Start here
Minimum credit score for a VA loan
The VA has established no minimum credit score for a VA mortgage.
However, many VA mortgage lenders require minimum FICO scores of 620 or higher — so apply with many lenders if your credit score might be an issue.
Even VA lenders that allow lower credit scores don’t accept subprime credit.
VA underwriting guidelines state that applicants must have paid their obligations on time for at least the most recent 12 months to be considered satisfactory credit risks.
In addition, the VA usually requires a two-year waiting period following a Chapter 7 bankruptcy or foreclosure before it will insure a loan.
Borrowers in Chapter 13 must have made at least 12 on-time payments and secure the approval of the bankruptcy court.
Verify your VA loan home buying eligibility. Start here
VA loan debt-to-income ratios
The relationship of your debts and your income is called your debt-to-income ratio, or DTI.
VA underwriters divide your monthly debts (car payments, credit cards, and other accounts, plus your proposed housing expense) by your gross (before-tax) income to come up with your debt-to-income ratio.
For instance:
If your gross income is $4,000 per month
And your total monthly debt is $1,500 (including the new mortgage, property taxes and homeowners insurance, plus other debt payments)
Then your DTI is 37.5% (1500/4000=0.375)
A DTI over 41% means the lender has to apply additional formulas to see if you qualify under residual income guidelines.
VA residual income rules
VA underwriters perform additional calculations that can affect your mortgage approval.
Factoring in your estimated monthly utilities, your estimated taxes on income, and the area of the country in which you live, the VA arrives at a figure which represents your “true” costs of living.
It then subtracts that figure from your income to find your residual income (e.g. your money “left over” each month).
Think of the residual income calculation as a real-world simulation of your living expenses.
It is the VA’s best effort to ensure that military families have a stress-free homeownership experience.
Here is an example of how residual income works, assuming a family of four which is purchasing a 2,000 square-foot home on a $5,000 monthly income.
Future house payment, plus other debt payments: $2,500
Monthly estimated income taxes: $1,000
Monthly estimated utilities at $0.14 per square foot: $280
This leaves a residual income calculation of $1,220.
Now, compare that residual income to for a family of four:
Northeast Region: $1,025
Midwest Region: $1,003
South Region: $1,003
West Region: $1,117
The borrower in our example exceeds VA’s residual income standards in all parts of the country.
Therefore, despite the borrower’s debt-to-income ratio of 50%, the borrower could get approved for a VA loan.
Verify your VA loan eligibility. Start here
Qualifying for a VA loan with part-time income
You can qualify for this type of financing even if you have a part-time job or multiple jobs.
You must show a 2-year history of making consistent part-time income, and stability in the number of hours worked. The lender will make sure any income received appears stable. See our complete guide to getting a mortgage when you’re self-employed or work part-time.
VA funding fees and loan limits
About the VA funding fee
The VA charges an upfront fee to defray the costs of the program and make it sustainable for the future.
Veterans pay a lump sum that varies depending on the loan purpose and down payment amount.
The fee is normally wrapped into the loan. It does not add to the cash needed to close the loan.
Find out if you qualify for a VA loan. Start here
VA home purchase funding fees
Type of Military Service
Down Payment
Fee for First-Time Use
Fee for Subsequent Use
Active Duty, Reserves, and National Guard
None
2.3%
3.6%
5% or more
1.65%
1.65%
10% or more
1.4%
1.4%
VA cash-out refinance funding fees
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
2.3%
3.6%
VA streamline refinances (IRRRL) & assumptions
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
0.5%
0.5%
Manufactured home loans not permanently affixed
Type of Military Service
Fee for First-Time Use
Fee for Subsequent Uses
Active Duty, Reserves, and National Guard
1.0%
1.0%
VA loan limits in 2024
VA loan limits have been repealed, thanks to the Blue Water Navy Vietnam Veterans Act of 2019.
There is no maximum amount for which a home buyer can receive a VA loan, at least as far as the VA is concerned.
However, private lenders may set their own limits. So check with your lender if you are looking for a VA loan above local conforming loan limits.
Verify your VA loan eligibility. Start here
Eligible property types
Houses you can buy with a VA loan
VA mortgages are flexible about what types of property you can and can’t purchase. A VA loan can be used to buy a:
Detached house
Condo
New-built home
Manufactured home
Duplex, triplex or four-unit property
Find out if you qualify for a VA loan. Start here
You can also use a VA mortgage to refinance an existing loan for any of those types of properties.
VA loans and second homes
Federal regulations limit loans guaranteed by the Department of Veterans Affairs to “primary residences” only.
However, “primary residence” is defined as the home in which you live “most of the year.”
Therefore, if you own an out-of-state residence in which you live for more than six months of the year, this other home, whether it’s your vacation home or retirement property, becomes your official “primary residence.”
For this reason, VA loans are popular among aging military borrowers.
Buying a multi-unit home with a VA loan
VA loans allow you to buy a duplex, triplex, or four-plex with 100% financing. You must live in one of the units.
Buying a home with more than one unit can be challenging.
Mortgage lenders consider these properties riskier to finance than traditional, single-family residences, so you’ll need to be a stronger borrower.
VA underwriters must make sure you will have enough emergency savings, or cash reserves, after closing on your house. That’s to ensure you’ll have money to pay your mortgage even if a tenant fails to pay rent or moves out.
The minimum cash reserves needed after closing is six months of mortgage payments (covering principal, interest, taxes, and insurance – PITI).
Your lender will also want to know about previous landlord experience you’ve had, or any experience with property maintenance or renting.
If you don’t have any, you may be able to sidestep that issue by hiring a property management company. But that’s up to the individual lender.
Your lender will look at the income (or potential income) of the rental units, using either existing rental agreements or an appraiser’s opinion of what the units should fetch.
They’ll usually take 75% of that amount to offset your mortgage payment when calculating your monthly expenses.
VA loans and rental properties
You cannot use a VA loan to buy a rental property. You can, however, use a VA loan to refinance an existing rental home you once occupied as a primary home.
For home purchases, in order to obtain a VA loan, you must certify that you intend to occupy the home as your principal residence.
If the property is a duplex, triplex, or four-unit apartment building, you must occupy one of the units yourself. Then you can rent out the other units.
The exception to this rule is the VA’s Interest Rate Reduction Refinance Loan (IRRRL).
This loan, also known as the VA Streamline Refinance, can be used for refinancing an existing VA loan on a home where you currently live or where you used to live, but no longer do.
Check your VA IRRRL eligibility. Start here
Buying a condo with a VA loan
The VA maintains a list of approved condo projects within which you may purchase a unit with a VA loan.
At VA’s website, you can search for the thousands of approved condominium complexes across the U.S.
If you are VA-eligible and in the market for a condo, make sure the unit you’re interested in is approved.
As a buyer, you are probably not able to get the complex VA-approved. That’s up to the management company or homeowner’s association.
If a condo you like is not approved, you must use other financing like an FHA or conventional loan or find another property.
Note that the condo must meet FHA or conventional guidelines if you want to use those types of financing.
Veteran mortgage relief with the VA loan
The U.S. Department of Veterans Affairs, or VA, provides home retention assistance. The VA intervenes when a veteran is having trouble making home loan payments.
The VA works with loan servicers to offer loan options to the veteran, other than foreclosure.
Find out if you qualify for a VA loan. Start here
In fiscal year 2019, the VA made over 400,000 contact actions to reach borrowers and loan servicers. The intent was to work out a mutually agreeable repayment option for both parties.
More than 100,000 veteran homeowners avoided foreclosure in 2019 alone thanks to this effort.
The initiative has saved the taxpayer an estimated $2.6 billion. More importantly, vast numbers of veterans and military families got another chance at homeownership.
When NOT to use a VA loan
If you have good credit and 20% down
A primary advantage to VA home loans is the lack of mortgage insurance.
However, the VA guarantee does not come free of charge. Borrowers pay an upfront funding fee, which they usually choose to add to their loan amount.
The fee ranges from 1.4% to 3.6%, depending on the down payment percentage and whether the home buyer has previously used his or her VA mortgage eligibility. The most common fee is 2.3%.
Find out if you qualify for a VA loan. Start here
On a $200,000 purchase, a 2.3% fee equals $4,600.
However, buyers who choose a conventional mortgage and put 20% down get to avoid mortgage insurance and the upfront fee. For these military home buyers, the VA funding fee might be an unnecessary expense.
The exception: Mortgage applicants whose credit rating or income meets VA guidelines but not those of conventional mortgages may still opt for VA.
If you’re on the “CAIVRS” list
To qualify for a VA loan, you must prove you have made good on previous government-backed debts and that you have paid taxes.
The Credit Alert Verification Reporting System, or “CAIVRS,” is a database of consumers who have defaulted on government obligations. These individuals are not eligible for the VA home loan program.
If you have a non-veteran co-borrower
Veterans often apply to buy a home with a non-veteran who is not their spouse.
This is okay. However, it might not be their best choice.
As the veteran, your income must cover your half of the loan payment. The non-veteran’s income cannot be used to compensate for the veteran’s insufficient income.
Plus, when a non-veteran owns half the loan, the VA guarantees only half that amount. The lender will require a 12.5% down payment for the non-guaranteed portion.
The Conventional 97 mortgage, on the other hand, allows down payments as low as 3%.
Another low-down-payment mortgage option is the FHA home loan, for which 3.5% down is acceptable.
The USDA home loan also requires zero down payment and offers similar rates to VA loans. However, the property must be within USDA-eligible areas.
If you plan to borrow with a non-veteran, one of these loan types might be your better choice.
Explore your mortgage options. Start here
If you apply with a credit-challenged spouse
In states with community property laws, VA lenders must consider the credit rating and financial obligations of your spouse. This rule applies even if he or she will not be on the home’s title or even on the mortgage.
Such states are as follows.
Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Texas
Washington
Wisconsin
A spouse with less-than-perfect credit or who owes alimony, child support, or other maintenance can make your VA approval more challenging.
Apply for a conventional loan if you qualify for the mortgage by yourself. The spouse’s financial history and status need not be considered if he or she is not on the loan application.
Verify your VA loan home buying eligibility. Start here
If you want to buy a vacation home or investment property
The purpose of VA financing is to help veterans and active-duty service members buy and live in their own home. This loan is not meant to build real estate portfolios.
These loans are for primary residences only, so if you want a ski cabin or rental, you’ll have to get a conventional loan.
If you want to purchase a high-end home
Starting January 2020, there are no limits to the size of mortgage a lender can approve.
However, lenders may establish their own limits for VA loans, so check with your lender before applying for a large VA loan.
Spouses and the VA mortgage program
What spouses are eligible for a VA loan?
What if the service member passes away before he or she uses the benefit? Eligibility passes to an unremarried spouse, in many cases.
Find and lock a low VA loan rate today. Start here
For the surviving spouse to be eligible, the deceased service member must have:
Died in the line of duty
Passed away as a result of a service-connected disability
Been missing in action, or a prisoner of war, for at least 90 days
Been a totally disabled veteran for at least 10 years prior to death, and died from any cause
Also eligible are remarried spouses who married after the age of 57, on or after December 16, 2003.
In these cases, the surviving spouse can use VA loan eligibility to buy a home with zero down payment, just as the veteran would have.
VA loan benefits for surviving spouses
Surviving spouses have an additional VA loan benefit, however. They are exempt from the VA funding fee. As a result, their loan balance and monthly payment will be lower.
Surviving spouses are also eligible for a VA streamline refinance when they meet the following guidelines.
The surviving spouse was married to the veteran at the time of death
The surviving spouse was on the original VA loan
VA streamline refinancing is typically not available when the deceased veteran was the only applicant on the original VA loan, even if he or she got married after buying the home.
In this case, the surviving spouse would need to qualify for a non-VA refinance, or a VA cash-out loan.
A cash-out mortgage through VA requires the military spouse to meet home purchase eligibility requirements.
If this is the case, the surviving spouse can tap into the home’s equity to raise cash for any purpose, or even pay off an FHA or conventional loan to eliminate mortgage insurance.
Qualifying if you receive (or pay) child support or alimony
Buying a home after a divorce is no easy task.
If, prior to your divorce, you lived in a two-income household, you now have less spending power and a reduced monthly income for purposes of your VA home loan application.
With less income, it can be harder to meet both the VA Home Loan Guaranty’s debt-to-income (DTI) guidelines and the VA residual income requirement for your area.
Receiving alimony or child support can counteract a loss of income.
Mortgage lenders will not require you to provide information about your divorce agreement’s alimony or child support terms, but if you’re willing to disclose, it can count toward qualifying for a home loan.
Different VA-approved lenders will treat alimony and child support income differently.
Typically, you will be asked to provide a copy of your divorce settlement or other court paperwork to support the alimony and child support payments.
Lenders will then want to see that the payments are stable, reliable, and likely to continue for another 36 months, at least.
You may also be asked to show proof that alimony and child support payments have been made in the past reliably, so that the lender may use the income as part of your VA loan application.
If you are the payor of alimony and child support payments, your debt-to-income ratio can be harmed.
Not only might you be losing the second income of your dual-income households, but you’re making additional payments that count against your outflows.
VA mortgage lenders make careful calculations with respect to such payments.
You can still get approved for a VA loan while making such payments — it’s just more difficult to show sufficient monthly income.
VA loan assumption
What is VA loan assumption?
One benefit for home buyers is that VA loans are assumable. When you assume a mortgage loan, you take over the current homeowner’s monthly payment.
Verify your VA loan home buying eligibility. Start here
That could be a big advantage if mortgage rates have risen since the original owner purchased the home. The buyer would be able to acquire a low-rate, affordable loan — and it could make it easier for the seller to find a willing buyer in a tough market.
VA loan assumption savings
Buying a home via an assumable mortgage loan is even more appealing when interest rates are on the rise.
For example:
Say a seller-financed $200,000 for their home in 2013 at an interest rate of 3.25% on a 30-year fixed loan
Using this scenario, their principal and interest payment would be $898 per month
Let’s assume current 30-year fixed rates averaged 4.10%
If you financed $200,000 at 4.10% for a 30-year loan term, your monthly principal and interest payment would be $966 per month
Additionally, because the seller has already paid four years into the loan term, they’ve already paid nearly $25,000 in interest on the loan.
By assuming the loan, you would save $34,560 over the 30-year loan due to the difference in interest rates. You would also save roughly $25,000 thanks to the interest already paid by the sellers.
That comes out to a total savings of almost $60,000!
How to assume (take on) a VA loan
There are currently two ways to assume a VA loan.
The new buyer is a qualified veteran who “substitutes” his or her VA eligibility for the eligibility of the seller
The new home buyer qualifies through VA standards for the mortgage payment. This is the safest method for the seller as it allows the loan to be assumed knowing that the new buyer is responsible for the loan, and the seller is no longer responsible for the loan
The lender and/or the VA needs to approve a loan assumption.
Loans serviced by a lender with automatic authority may process assumptions without sending them to a VA Regional Loan Center.
For lenders without automatic authority, the loan must be sent to the appropriate VA Regional Loan Center for approval. This loan process will typically take several weeks.
When VA loans are assumed, it’s the servicer’s responsibility to make sure the homeowner who assumes the property meets both VA and lender requirements.
VA loan assumption requirements
For a VA mortgage assumption to take place, the following conditions must be met:
The existing loan must be current. If not, any past due amounts must be paid at or before closing
The buyer must qualify based on VA credit and income standards
The buyer must assume all mortgage obligations, including repayment to the VA if the loan goes into default
The original owner or new owner must pay a funding fee of 0.5% of the existing principal loan balance
A processing fee must be paid in advance, including a reasonable estimate for the cost of the credit report
Find out if you qualify for a VA loan. Start here
Finding assumable VA loans
There are several ways for home buyers to find an assumable VA loan.
Believe it or not, print media is still alive and well. Some home sellers advertise their assumable home for sale in the newspaper, or in a local real estate publication.
There are a number of online resources for finding assumable mortgage loans.
Websites like TakeList.com and Zumption.com give homeowners a way to showcase their properties to home buyers looking to assume a loan.
With the help of the Multiple Listing Service (MLS), real estate agents remain a great resource for home buyers.
This applies to home buyers specifically searching for assumable VA loans as well.
How do I apply for a VA loan?
You can easily and quickly have a lender pull your certificate of eligibility (COE) to make sure you’re able to get a VA loan.
Most mortgage lenders offer VA home loans. So you’re free to shop and compare rates with just about any company that catches your eye.
Getting a VA loan for your new home is similar in many ways to securing any other purchase loan. Once you find an ideal home in your price range, you make a purchase offer, and then undergo VA appraisal and underwriting.
VA appraisal ensures that the home meets its minimum property requirements (MPRs) and is structurally sound and safe for occupancy.
What’s more, VA-specific mortgage lenders are actually some of the highest-rated (and lowest-priced) on the market. Here are a few we’d recommend checking out.
Time to make a move? Let us find the right mortgage for you
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Rajesh Pandit, Getty Images
The average rate on a 30-year fixed mortgage is 7.56%, and on a 15-year fixed-rate mortgage, it’s 6.76%. The average rate on a 30-year jumbo mortgage is 7.38%.
*Data accurate as of February 22, 2024, the latest data available.
30-year fixed mortgage rates
The average mortgage rate for 30-year fixed loans rose today to 7.56% from 7.40% last week, according to data from Curinos. This is up from last month’s 7.17% and up from a year ago when it was 6.11%.
At the current 30-year fixed rate, you’ll pay about $706 each month for every $100,000 you borrow — up from about $699 last week.
Ready to buy? Compare the best mortgage lenders
15-year fixed mortgage rates
The mortgage rates for 15-year fixed loans inched up today to 6.76% from 6.64% last week. Today’s rate is up from last month’s 6.42% and up from a year ago when it was 5.52%.
At the current 15-year fixed rate, you’ll pay about $888 each month for every $100,000 you borrow, up from about $882 last week.
30-year jumbo mortgage rates
The mortgage rates for 30-year jumbo loans rose today to 7.38% from 7.06% last week. This is up from last month’s 7.06% and up from 5.88% last year.
At the current 30-year jumbo rate, you’ll pay around $695 each month for every $100,000 you borrow, up from about $693 last week.
Methodology
To determine average mortgage rates, Curinos uses a standardized set of parameters. For conventional mortgages, the calculations are based on an owner-occupied, one-unit property with a loan amount of $350,000. For jumbo mortgages, the loan amount is $766,550. These calculations assume an 80% loan-to-value ratio, a credit score of 740 or higher and a 60-day lock period.
Frequently asked questions (FAQs)
Mortgage rates are determined by a variety of factors, including the overall economy, inflation and the actions of the Federal Reserve. Mortgage lenders then set their loan rates based on these economic elements.
The rate you’re offered on a mortgage will also depend not only on the lender but also on your credit score, income, debt-to-income (DTI) ratio and other parts of your financial profile.
If you opt for a rate lock, you can typically do so for 30 to 60 days, depending on the lender. In some cases, you might be able to lock in your rate for up to 120 days.
Keep in mind that while some lenders allow you to lock in a mortgage rate for free, you’ll likely have to pay a fee for a longer lock period. This fee generally ranges from 0.25% to 0.5% of your loan amount. You could also be charged a fee if you want to extend the lock period — usually 0.375% of the loan amount.
There are several strategies that could help you qualify for the best mortgage rate, such as:
Checking your credit: When you apply for a mortgage, the lender will review your credit to determine your creditworthiness as well as your interest rate. In general, the higher your credit score, the lower your rate will be. So before you apply, it’s a good idea to check your credit to see where you stand. If you find any errors in your credit report, dispute them with the appropriate credit bureau to potentially boost your score.
Comparing lenders: Taking the time to shop around and compare your options from as many lenders as possible can help you find the best deal. In addition to rates, make sure to also consider each lender’s terms, fees and eligibility requirements.
Improving your credit score: If you have less-than-perfect credit and can wait to apply for a mortgage, it could be worth working to improve your credit beforehand to qualify for better rates in the future. Some possible ways to boost your credit include paying all of your bills on time and aiming to keep your credit utilization (the amount of credit you’ve used compared to your credit limits) on credit cards and lines of credit at 30% or less.
Reducing debt: Paying down debt could help lower your DTI ratio, which is how much you owe in monthly debt payments compared to your income. Having a lower DTI ratio can make you look like less of a risk in the eyes of a lender, which can result in a lower rate.
Choosing a shorter repayment term: Lenders typically offer lower rates to borrowers who opt for shorter terms. For example, you’ll likely get a lower rate on a 15-year mortgage compared to a 30-year loan.
Blueprint is an independent publisher and comparison service, not an investment advisor. The information provided is for educational purposes only and we encourage you to seek personalized advice from qualified professionals regarding specific financial decisions. Past performance is not indicative of future results.
Blueprint has an advertiser disclosure policy. The opinions, analyses, reviews or recommendations expressed in this article are those of the Blueprint editorial staff alone. Blueprint adheres to strict editorial integrity standards. The information is accurate as of the publish date, but always check the provider’s website for the most current information.
Jamie Young is Lead Editor of loans and mortgages at USA TODAY Blueprint. She has been writing and editing professionally for 12 years. Previously, she worked for Forbes Advisor, Credible, LendingTree, Student Loan Hero, and GOBankingRates. Her work has also appeared on some of the best-known media outlets including Yahoo, Fox Business, Time, CBS News, AOL, MSN, and more. Jamie is passionate about finance, technology, and the Oxford comma. In her free time, she likes to game, play with her two crazy cats (Detective Snoop and his girl Friday), and try to keep up with her ever-growing plant collection.
Megan Horner is editorial director at USA TODAY Blueprint. She has over 10 years of experience in online publishing, mostly focused on credit cards and banking. Previously, she was the head of publishing at Finder.com where she led the team to publish personal finance content on credit cards, banking, loans, mortgages and more. Prior to that, she was an editor at Credit Karma. Megan has been featured in CreditCards.com, American Banker, Lifehacker and news broadcasts across the country. She has a bachelor’s degree in English and editing.
Ashley is a USA TODAY Blueprint loans and mortgages deputy editor who has worked in the online finance space since 2017. She’s passionate about creating helpful content that makes complicated financial topics easy to understand. She has previously worked at Forbes Advisor, Credible, LendingTree and Student Loan Hero. Her work has appeared on Fox Business and Yahoo. Ashley is also an artist and massive horror fan who had her short story “The Box” produced by the award-winning NoSleep Podcast. In her free time, she likes to draw, play video games, and hang out with her black cats, Salem and Binx.
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Hong Kong CNN
—
China’s central bank has cut its key mortgage reference rate by a record amount, as it ramps up efforts to stem a prolonged property crisis.
The People’s Bank of China (PBOC) announced Tuesday that it would cut its five-year loan prime rate (LPR) from 4.2% to 3.95%, while keeping the one-year LPR unchanged at 3.45%.
The 25 basis point cut to the five-year LPR is the biggest reduction the central bank has made since it revamped its LPR system in 2019. That August, the central bank announced that the LPR would become the new reference rates for lending by Chinese banks.
The latest cut was also the first reduction to the five-year LPR since June 2023.
The LPR is the rate at which commercial banks lend to their best customers. The five-year rate usually serves as a reference for mortgages.
“Today’s 25 (basis point) cut to the five-year LPR is clearly aimed at supporting the housing market,” analysts from Capital Economics said in a note on Tuesday.
“On its own, it will not revive new home sales. But coupled with efforts to provide increased credit support to developers, today’s cut should help to reduce pressure on the property sector somewhat,”they said.
China’s economy has been hobbled by a real estate downturn since 2021, when a government crackdown on developers’ borrowing triggered a liquidity crisis in the sector.
The property market has since entered a prolonged slump, marked by an ongoing decline in both investment in and sales of property. Dozens of major developers have defaulted on their debt, with Evergrande, once the country’s second largest homebuilder, ordered to liquidate last month.
The crisis has triggered widespread protests by unpaid construction workers, buyers of unfinished homes and frustrated investors facing financial losses. It has also spilled over to the country’s massive shadow banking industry, with Zhongrong Trust declaring itself severely insolvent last year after failing to repay its debt.
Beijing has scrambled to revive the property sector, which accounts for as much as 30% of China’s gross domestic product.
Measures unveiled include slashing interest rates, reducing the size of down payments, encouraging banks to extend maturing loans to developers and loosening restrictions on home purchases in Chinese cities.
Capital flight
China’s economy faces a litany of other problems, including deflation, low confidence and accelerated capital flight.
The country’s direct investment liabilities, a measure of foreign direct investment, reached $33 billion in 2023, according to data released by the State Administration of Foreign Exchange on Sunday.
The gauge, which measures direct investments by foreign-owned entities in China, was down 82% from 2022 and stands at its lowest level since 1993.
While an uncertain economic outlook and rising geopolitical tensions are partly to blame for the exodus, foreign companies and investors have also grown wary of increasing political risks in China, including the possibility of raids and detentions.
The country’s stock markets have suffered a prolonged slump since their recent peaks in 2021, with more than $6 trillion in market value having been wiped out from the Shanghai, Shenzhen and Hong Kong markets.
A plan by the Department of Veterans Affairs to introduce a low-interest refinancing option for veterans with VA-backed loans facing foreclosure drew ire from a House lawmaker who complained some homeowners might choose to default for lower monthly payments. (Stars and Stripes)
WASHINGTON — A plan by the Department of Veterans Affairs to introduce a low-interest refinancing option for veterans with VA-backed loans facing foreclosure drew ire of a House lawmaker who complained some homeowners might choose to default for lower monthly payments.
Rep. Merrick Van Orden, R-Wis., chairman of the House Committee on Veterans’ Affairs subpanel on economic opportunity, on Thursday questioned whether the new VA Servicing Purchase program — also known as VASP — will cause some homeowners to forgo paying back home loans to qualify for VA refinancing at the lower rate of 2.5% offered by the program.
The average interest rate now for a 30-year fixed mortgage is 7.24%, according to Bankrate, a consumer financial services company that surveys major lenders weekly.
“It is essential that we support the dream of home ownership for veterans who served our country,” said Van Orden, a Navy veteran who used a traditional VA home loan to buy his house. “I have used this program myself, and it is awesome.”
But he also said he has “grave reservations” that the new VASP program would result in unintended consequences that could destroy the VA home loan program.
The refinancing option is expected to be rolled out in spring, according to the VA.
Under the program, the VA would purchase the loan from the servicer to hold it in its own portfolio. Qualifying veterans would be allowed to refinance their mortgages under the VASP rate of 2.5% after falling behind on at least two mortgage payments.
“I am concerned that this program poses a moral hazard and will encourage veterans to become delinquent on their loans to let VA take over the servicing of their payments,” Van Orden said at a House hearing about the home loan program.
He said if the VA then experienced high delinquency rates under the VASP program, it could end up being responsible for thousands of home loans it serviced.
Van Orden questioned whether the VA should be in the business of servicing loans and expressed concern that the VA would force veterans out of their homes if they failed to pay down their mortgages.
Given that veterans are 50% more likely to be homeless than others, Van Orden said he could not imagine “the VA would go so far as to be kicking people out of their homes — default or no default.”
Under those circumstances, Van Orden speculated the federal government would end up owning mortgage-delinquent properties and letting the veterans stay in their homes.
“It is no longer private property. It is public property with private citizens living in public property. That was tried in the Soviet Union. I am not signing up for that,” he said.
Van Orden said the House subcommittee has received little information on how the VASP program will operate, its costs and its overall effect on the mortgage markets.
“All of this is a cause for concern,” he said. “We need answers on VASP.”
The VA announced the VASP program in November 2023 in the Federal Register that stated “VA is initiating an expanded program using existing refund provisions. Under this program, VA will exercise its statutory option to purchase the loan from the servicer and VA will hold the loan in VA’s own loan portfolio.”
VA-guaranteed loans comprise more than 10% of the mortgage market, according to the VA.
The VA worked to assist thousands of veterans during the coronavirus pandemic who fell behind on mortgage payments, said Rep. Mike Levin of California, the top Democrat on the subcommittee. He said many financial relief measures implemented during the pandemic have ended.
Levin said the VA in December 2023 paused foreclosures on VA home loans through May 31. The measure allows veterans who have defaulted on their loans to stay in their homes.
Under the foreclosure pause, the VA extended its coronavirus refund modification program that allowed the VA to purchase past due payments — along with additional principal amounts as necessary — and give veterans a second mortgage with no interest.
Lenders meanwhile are encouraged by the VA to work with delinquent homeowners to modify payments with plans that are more affordable. Last year, the VA helped more than 145,000 veterans and their families stay in their homes through various programs, the agency said.
“I understand that the VA cannot prevent every foreclosure. But I expect it to exhaust every option,” Levin said, in reference to VASP and other VA assistance programs.
VASP would provide refinancing at an interest rate lower than the current market rate, which would continue over the life span of the loan, said John Bell, executive director of the VA Home Loan Guaranty Program.
The VA estimates under a VASP Program loan — with a 2.5% fixed interest rate for 30 or 40 years — there would be an average payment reduction of 20%, in principal and interest, for homeowners.
“It is so important that we get this right,” said Levin, who urged the VA to let Congress know what additional tools it might need to assist borrowers in default and ensure that foreclosures occur only “in the most extreme circumstances.”
Bell said job loss, divorce and catastrophic illness can impact financial stability for homeowners.
The VA home loan program — established in 1944 during World War II for soldiers returning home — helps veterans, active-duty personnel, members of the reserves and National Guard, as well as their family members, buy homes, refinance loans and pay for home improvements.
VA has guaranteed more than 28 million loans, valued at nearly $4 trillion, since the program’s inception, Bell said.
One of the attractions of the VA home loan program is the offer of 100% financing without requiring a down payment. A veteran purchasing a home at $386,000 — the median rate now — could avoid a traditional 20% down payment of $77,000, he said.
In fiscal 2023, the VA received 860,000 calls from veterans seeking information and assistance with their home loans. He said 65,000 borrowers are at least 90 days late on their VA home loans.
Bell doubted homeowners would default on home loan payments, damage their credit and face foreclosure to secure a 2.5% interest rate through the VASP program.
“The VASP program is simply a more sustainable option for veterans who cannot afford other available loss mitigation options, such as repayment plans, special forbearances and traditional loan modifications,” he said.
But Van Orden disagreed.
“My focus is to ensure that veterans remain in their homes whenever possible,” he said. “But I am concerned that this program could evolve into a financial burden of billions of dollars in bailouts that fall on the shoulders of taxpayers.
News that Capital One has struck a deal to buy Discover shook up the normally quiet Presidents Day banking holiday on Monday, teeing up the possibility of making Capital One the nation’s largest credit card issuer.
The Wall Street Journal reported the potential merger on Monday, followed by other outlets like Bloomberg and the New York Times. Capital One then released a statement confirming the planned acquisition.
Capital One Financial Corp., based in McLean, Virginia, is the nation’s ninth-largest bank by total assets, with 259 physical branch locations, 55 “Capital One Cafes” across the country and a major online banking operation. Discover Financial, based in Riverwoods, Illinois, is a mostly online bank with a single physical branch in Delaware. The all-stock deal is valued at $35.3 billion.
See the best Capital One cards
Capital One has cards for earning rewards and cards for building credit. Some even do both.
Is Discover on board?
Michael Rhodes, CEO and president of Discover, touted the deal in Capital One’s press release: “The transaction with Capital One brings together two strong brands with enhanced ability to accelerate growth and maximizes value for our shareholders, enabling them to participate in the tremendous upside of the combined company.”
What happens next?
Bank mergers must be approved by bank regulators and by shareholders of each company. If the deal goes through, Capital One estimates that it will close in late 2024 or early 2025.
What would it mean for customers?
During the approval process, little is expected to change as the companies continue to operate independently. Even if the deal is approved, though, current customers may see little effect.
“I think it’s not going to be a big change for credit card customers,” says David Robertson, editor and owner of the Nilson Report, a payment card industry trade journal. Discover cards, he says, are primarily cash-back cards, while Capital One offers a variety of rewards cards. A merger, Robinson says, “might allow for better rewards programs for both companies.”
While the Wall Street Journal reported that Capital One plans to keep the Discover name on at least some cards, details have not been confirmed by either company. Likewise, there is no detail yet on how banking customers will be affected.
Why merge?
Item no. 1: Discover’s payment network.
Transactions on Capital One cards are processed over the Visa and Mastercard payment networks. Discover, however, operates its own network, making it both a card issuer and a payment processor, similar to American Express. Robertson says acquiring a payment network and building direct relationships with more merchants is likely a driving factor in Capital One’s acquisition, which puts a 26.9% premium on Discover’s Feb. 16 closing stock price.
”From Capital One’s founding days, we set out to build a payments and banking company powered by modern technology,” Richard Fairbank, founder and CEO of Capital One, said in the news release. “Our acquisition of Discover is a singular opportunity to bring together two very successful companies with complementary capabilities and franchises, and to build a payments network that can compete with the largest payments networks and payments companies.”
In addition, Robertson notes, there is not a great deal of overlap between the two banks’ customer bases. “One would assume that everyone that has a Discover Card also has a Visa or MasterCard,” he says. “Capital One may get access to that spending.”
Capital One is the fourth largest credit card issuer in the United States by loan volume; Discover is ranked sixth, according to Nilson Report data. Combined, they would nudge ahead of Chase to become the largest card issuer.
Sheer economy of scale is another factor. “Should [the merger] occur, Capital One would be the largest credit card issuer” as measured by outstanding debt, says Robertson.
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Significantly more Americans own a home now than a decade ago, but the disparity between Black homeownership rates and those of other racial and ethnic groups has grown wider, according to the National Association of Realtors.
Overall, U.S. homeownership increased over the decade to 2022, with 10.5 million more homeowners across the country, the study by the trade group found, drawing on Census data. Asian Americans experienced the sharpest increase over the period, with ownership rates soaring to a historic high of 63.3%. Hispanic Americans saw a gain of 3.2 million households, to reach a new peak of 51.1%.
While Black Americans also saw homeownership advance, the gain was modest. And at 44.1%, their rate is notably lower than that for Asian, Hispanic and White Americans. The gap between Blacks and Whites – the highest among the four major groups – widened by a percentage point from 2012, to 28 percentage points.
“Minority homeownership gained ground,” Jessica Lautz, NAR deputy chief economist and vice president of research, said in a statement. “While the gains should be celebrated, the pathway into homeownership remains arduous for minority buyers.”
The NAR’s analysis showed 55% of Asian and 51% of Black and Hispanic howe owners were first-time buyers, something that places them at a particular disadvantage in a market marked by high prices and limited supply. That’s because first-timers “must rely on down-payment sources beyond gained housing equity,” Lautz said.
Other challenges for would-be buyers of color include difficulties in saving for a down payment — as they typically spend higher proportions of their income on rent and paying back student loans.
Black homebuyers, for instance, reported the highest levels of student-loan debt among all groups, with 41% carrying a record high median debt of $46,000, while 29% of Hispanic buyers had student loan debt with a median of $33,000. The NAR has also cited data showing Black Americans draw on pension or 401(k) savings more than any other group.
Citing data from the Home Mortgage Disclosure Act, the NAR last year said Black and Hispanic homebuyers face additional barriers in securing mortgages, such as higher denial rates compared with their White and Asian counterparts.
For those who do obtain mortgages, the interest rates tend to be higher on average, Tuesday’s report showed. For loans originated in 2022, 20% for Blacks and 21% for Hispanics exceeded 6%, in contrast with lower percentages among Asian and White borrowers.
Capital One’s $35.3 billion all-stock deal to purchase Discover could make it the largest credit card issuer in the country, in addition to expanding both its digital banking presence and Discover’s global payment network.
The deal arrives as consumers are struggling to keep up with inflated prices — and they’re carrying more credit card debt than before the pandemic. A report by the Federal Reserve Bank of New York, released on Feb. 6, found that Americans held a collective $1.129 trillion in credit card debt at the end of 2023. By comparison, by the end of 2019, Americans held $930 billion in credit card debt.
The report also showed that borrowers are having trouble repaying their debt. Serious delinquencies among credit card borrowers rose 6.36% in the fourth quarter of 2023 compared with a 4.01% increase at the same time in 2022. Both Capital One and Discover show an increase in delinquency rates, but Discover’s fourth-quarter results reported a larger spike in consumer card delinquencies than Capital One’s.
After a Capital One call for investors on Tuesday morning, the markets responded: Discover’s stock rose while Capital One shares dipped slightly.
In the call, Capital One indicated it expects the deal to be complete by the end of 2024 or early 2025 — that is, if federal regulators allow it. The acquisition is expected to face close scrutiny in the coming year.
Here’s what you need to know about Capital One’s Discover acquisition.
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1. Capital One would be a formidable credit cards competitor
The deal opens the door for Capital One to become the nation’s largest credit card issuer by outstanding debt, outpacing JPMorgan Chase and Citigroup, according to the payment industry trade journal the Nilson Report. The company will remain based in McLean, Virginia, while maintaining a significant presence in Chicago, where Discover is based.
In the call with investors on Tuesday, Richard Fairbank, CEO and chairman of Capital One, touted the benefits of acquiring Discover’s global payment network, which will allow Capital One to more directly deal with merchants as opposed to a network intermediary. The more merchants Capital One can reach, the more money it stands to make over time.
While Capital One still holds contracts with Visa and Mastercard for many of its credit products, it will move at least some of its cards onto the Discover network over time, thus keeping a larger slice of the lucrative merchant fees its customers generate.
By owning a payment network, Capital One is poised to compete with its most direct competitor, American Express, and reduce its dependency on the two biggest players in global payments: Visa and Mastercard.
Fairbank says the company is also hoping to expand Discover’s network deeper into the global market.
2. Capital One hopes to expand its digital banking reach
Capital One is the ninth-largest bank in the U.S. with both physical branches and an online presence. Meanwhile, Discover’s banking presence is overwhelmingly online. But both are credit card-first, banking-second companies. The acquisition won’t change that, but it will enable Capital One to expand further into banking.
The deal would accelerate Capital One’s banking business by allowing the company to tap in to Discover’s network for banks. In the call with investors, Fairbank said Capital One plans to move its debit card business over to the Discover Signature debit network to help Discover compete with the other three networks.
Fairbank said that branding for Discover’s banking network would remain Discover. “Capital One as the network might not be as ideal a thing for other banks to choose as the Discover brand,” he said.
3. Discover would remain its own brand
Discover will remain its own brand in the combined company. In the investor call, Fairbank said Capital One will keep Discover’s branding and continue to market it. “Over time, customers would understand this is part of Capital One,” he said.
Fairbank indicated that it was unrealistic to convert the Discover brand into Capital One. “Think about all those stickers that are out there at every point of sale and all the real estate that’s now on every online checkout page and so on,” he said. “It would be a really big lift to convert that to the Capital One brand.”
Fairbank noted that while Discover is accepted nearly universally in the U.S., it has an image problem that Capital One hopes to change. He said, “Our research confirms that customers are very satisfied with acceptance, but the perception of acceptance among noncustomers lags the reality.”
Fairbank says Capital One plans to move some of its credit card volume to Discover’s network in order “to enhance its scale.” He also said the company “will lean hard into further building the brand and the perceived acceptance of the credit card network here in the United States.”
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4. The deal faces regulatory hurdles
Consumers won’t see any changes from the acquisition anytime soon. That’s because the deal won’t be complete until shareholders and regulators approve it.
The Justice Department, banking regulators and the Federal Deposit Insurance Corp. are likely to scrutinize the proposed deal. The Biden Administration has toughened its approach to mergers and acquisitions, including those still underway like the Kroger and Albertsons grocery chain merger and Alaska Airlines’ takeover of Hawaiian Airlines. And last month, a federal judge blocked JetBlue’s buyout of Spirit Airlines under antitrust laws.
The U.S. Office of the Comptroller of the Currency has also said it plans to institute a more complex, and ultimately slower, process for bank acquisitions. Capital One’s Discover proposal faces standard regulatory procedures, so it’s unclear whether these stricter requirements would apply to this acquisition.
Fairbank noted in the call with investors that both Capital One and Discover will be filing approval applications with the federal government in the next few months and said “we believe that we are well-positioned for approval.”
5. The bigger the company, the higher the interest rates
Credit card interest rates are now much higher than in recent years, mirroring the broader rate environment. The average APR among credit cards that incurred interest was 22.75% in the fourth quarter of 2023, according to data from the Federal Reserve.
When it comes to interest rate offers, bigger companies aren’t always better, at least not for consumers. An analysis of 2023 credit card interest rate data by the Consumer Financial Protection Bureau, released on Feb. 16, found that the largest credit card issuers offer high interest rates — a maximum APR over 30% among nearly half of those issuers.
The report found a broad disparity between the median APRs on credit cards offered by large and small financial institutions based on credit scores. The biggest difference is among customers with good credit scores (620 to 719 in this report): Large card issuers offer a median APR of 28.2% — a difference of 10.02 percentage points compared with the median APR offered by smaller card issuers.
Big companies are also more likely to include an annual fee, and those fees are 70% higher than at small banks and credit unions, according to the CFPB report.
Still, big companies do tend to offer more generous rewards and discounts, like cash back and travel points, with their credit cards compared with small institutions. But the best perks are offered to the wealthiest customers, who make the most money through frequent and larger spending at merchants.
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