For veterans and active military competing for homes in what is still the hottest real estate market in decades, the U.S. Department of Veterans Affairs has sharpened its loan program with several key adjustments, winning praise from veterans and real estate agents and lenders.

The VA loan is a privately funded mortgage backed by the department and is known for allowing veterans to purchase a home with no down payment. It also boasts some of the lowest interest rates among loans. About 25 million have received VA loans since their creation in 1944.

But in today’s seller’s market, where bidding wars between cash-flush buyers have pushed the value of homes far beyond their appraised values, it’s a tough time for veterans dependent on VA loans, as it is for any buyer on a budget.

“It drives me absolutely nuts,” said Bobby Middleton, a real estate agent who works frequently with buyers using VA loans. “The average veteran is being priced out of housing in San Antonio.”

“It’s been difficult to get a VA loan through, especially if it’s a multiple offer situation,” said Norris Boyd, a veteran and real estate agent with Lifetime Real Estate Services. “But with so much change in pricing, the VA has seen how hard it is for veterans to get homes. They’ve been keeping in line, and it’s gotten easier in some cases.”

The coronavirus pandemic created soaring demand for homes, as buyers sought to take advantage of low mortgage rates, and the proliferation of remote work has allowed many in expensive housing markets like Austin and Denver to sell their homes for a bigger one in relatively affordable markets like San Antonio.

Even as home sales have stabilized, supply remains tight. The median price of a home in the San Antonio area rose to nearly $300,000 in September, a 15% increase over the same month last year, according to the San Antonio Board of Realtors. And houses are still going fast. Homes spent an average of 27 days on the market in September, compared with 53 days the same month in 2020.

In response, the VA has instituted a number of tweaks, some big and some small, over the course of the pandemic. John Bell, deputy director of the Veterans Affairs’ Loan Guaranty Service, walked the San Antonio Report through a few of them.

VA appraisers can now consider the price trajectory of pending sales prices in the area, though they still can’t use those prices as comparable properties. And what comparables they do use can now be automatically generated by a computer, as opposed to manually researched.

Appraisals can be done from the exterior of a home alone, without the need to go inside. And more appraisers overall have been brought into competitive markets where volume has risen, making the process speedier in markets where delays can kill a deal.

Outside the VA, real estate agents and lenders have noticed the loan process becoming more flexible for buyers.

Ben Suttin, a mortgage loan officer for Caliber Home Loans, said the VA has been more likely to adjust values when disputed in recent months. He said in one recent instance, an appraisal was short of the selling price. Though the appraiser wouldn’t budge, he said, the VA overrode it and increased the appraisal by $16,000.

“That helped the buyer a lot,” Suttin said.

These pandemic-era adjustments build on two decades of reforms to the VA’s home loan program, once notorious for bureaucratic excesses that made the appraisals strict, the loans complicated, and the whole process prone to collapsing in the days before a deal closed.

“That was all true, at least in the past,” said Tasha Curtin Koltermann, a real estate agent with Jadestone Real Estate. Koltermann said her most recent VA buyers “didn’t really have a problem, and we were able to find them homes really quickly.”

Today, VA loans actually close at a higher rate than conventional mortgages. For all home purchases in August 2021, 67% of VA loans successfully closed, compared with 51% of all mortgages, according to Ellie Mae, a mortgage application software company. These loans did, however, take 53 days on average to close, which is still five days longer than conventional loans.

Additions in recent years like the “Tidewater” program, which allows for appraisals that fall short of the sale price to be appealed, and an automated eligibility process have made these loans far more streamlined.

But many real estate agents say a wariness of the loans persists among other agents, even in San Antonio, where the city government has trademarked the label “Military City USA.” There are disagreements, though, about who these prejudiced agents are.

“It’s generally agents with less experience,” said Maynard “Doc” Stephens, a real estate agent with Keller Williams.

“It’s older, more seasoned Realtors that have outdated notions,” said Suttin.

Regardless, the loans continue to be very popular with veterans themselves. Bell, from the VA, said for the fiscal year that ended in September, a record-breaking 450,000 veterans used them to buy homes.

In San Antonio, mortgage service companies regularly host public seminars on VA loans to packed audiences, where sales agents present the program’s details with the shouting gusto of a Baptist revival.

At one such seminar held last week at Chicken N Pickle in Northwest San Antonio, Ashley Edmond, in the Army National Guard for more than ten years, said she didn’t use the VA loan to purchase her first house but would like to for her second.

She’s looking for a multifamily property on the Northwest Side to partly rent out.

The VA loan, she said, “seems like a good deal.”

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Waylon Cunningham

Waylon Cunningham covered business and technology for the San Antonio Report.