Despite the Department of Veterans Affairs’ (VA) home loan being available to millions of eligible veterans, the program continues to be misconstrued and underutilized.
According to an analysis released last October from Veterans United Home Loans, there is $28 billion in untapped funds available through the loan. Each year, more than 58,000 loans are not used across the U.S.
But Eric Bernstein, president and co-founder of LendFriend Mortgage, believes that with the current housing climate, affected by higher interest rates and rising mortgage costs, now could be the ideal time for veterans to consider a VA home loan.
Bernstein, with more than 12 years of experience in financial services and wealth management, has helped many veterans secure loans and find ways to use the program to help lower monthly payments.
Still, some housing markets pose challenges, even with VA-backed loans. Those loans have made up about 10-12% of the mortgage market in the past few years, and have recently fallen to nearly 8%, factors driven mainly by lack of affordability.
Bernstein said one of the main reasons VA loan applications have declined is that it’s harder for first-time buyers and middle-income borrowers – including veterans – to afford a house, a trend he feels was partly brought on by the pandemic housing market and subsequent bidding wars.
“During the peak of the market, sellers heavily favored buyers willing to waive appraisal protections, shorten timelines aggressively, and remove as many contingencies as possible. VA buyers generally could not compete in the same way because VA loans are built to make sure the buyer is protected, which is why the appraisal is mandatory, and the veteran has the option to terminate if the property misses the appraisal,” Bernstein told Military.com.
“As a result, many veterans felt pressure to move toward conventional loans simply to make their offers appear more competitive, even when the VA loan was the stronger financial product for them. The irony is that VA loans have become even more valuable in expensive housing markets because they allow borrowers to preserve liquidity with 0% down financing while still getting lower interest rates and no mortgage insurance. In a market where affordability is strained, a VA loan is a huge benefit. The truth of the matter is that if everyone had access to 0% down financing with lower rates and no PMI (purchasing manager’s index), most people would use it.”
Stigma Against Loans
Another problem is the stigma some veterans have against VA loans. Bernstein sees it often. Veterans become worried that using their VA benefits will hurt them in a competitive offer situation. They might have heard rumors from friends, realtors or online forums that sellers don’t like VA loans, the appraisals are difficult, and the process runs slower. In turn, they don’t explore taking out a loan, even though going through the VA offers more financial flexibility.
“The appraisal stigma is probably the biggest misconception in the entire industry. The VA Lenders Handbook is very clear that VA appraisers are primarily evaluating properties for minimum property requirements tied to safety, sanitation, and structural soundness. They are not there to arbitrarily suppress values or kill transactions,” Bernstein said. “The data simply does not support the idea that VA appraisals are failing at some unusually high rate compared to other financing types. Very rarely does an appraisal miss value in 2026, and even the ones that do typically are not missing by a material amount. If the property is in solid condition, most transactions move through perfectly fine. The problem is that the stigma keeps getting repeated, even though the modern reality of VA lending looks very different from how it did years ago.”
Some veterans choose to go the conventional financing route if they think they’re only going to stay in the home for a short period of time and don’t carry a disability rating that exempts them from the VA funding fee.
“Veterans should be evaluating the loan structure based on long-term financial strategy, not outdated stigma around the product itself,” Bernstein said. “There is a huge number of veterans leaving benefits on the table that could materially improve their financial position and ability to buy homes.”
The amount of financing not being used could have a ripple effect on the nation’s housing market, according to Bernstein.
“Homeownership is still one of the primary drivers of long-term wealth creation in this country,” Bernstein said. “VA financing gives veterans an incredible tool to access it earlier, preserve liquidity, and create flexibility. If more veterans fully utilized their VA eligibility, you would likely see more buyers participating in the housing market overall.”
Options to Refinance
There are also options for veterans who used conventional financing, perhaps during the pandemic buying frenzy, to refinance back into a VA loan to lower mortgage payments.
“For the market overall, it means there are qualified buyers sitting on the sidelines or using less efficient financing structures than they need to,” Bernstein said. “Veterans and active-duty service members represent a very important segment of housing demand, especially in relocation-heavy markets around military bases and high-growth states like Texas, Florida, and Virginia.”
Bernstein believes additional education around VA loans will unlock the potential for higher housing sales.
Other factors for low VA loan applications include potential sellers hesitant to sell their homes and misconceptions related to appraisals. Overall, Bernstein said it boils down to potential buyers having outdated information.
“A lot of listing agents assume the appraisal will be stricter, timelines will be slower, or the borrower is weaker financially because they are using 100% financing. In reality, none of those assumptions are inherently true,” Bernstein said. “One of the biggest things lenders and buying agents can do is proactively educate listing agents upfront. Whenever we have a VA borrower making an offer, we call the listing agent directly. We explain the strength of the borrower, explain the financing, explain the appraisal process, and immediately address the stigma before it becomes a problem.”
Using a VA loan doesn’t necessarily mean closing on the house takes more time, according to Bernstein.
“In most cases, delays come from the same issues that affect every other loan type: appraisal scheduling due to the seller’s schedule, title work, insurance, inspections, borrower documentation, or contract negotiations,” Bernstein said. “A properly structured VA loan handled by an experienced lender should move just as efficiently as conventional financing. Most of the time, once you explain how modern VA lending actually works, the resistance disappears pretty quickly.”
Lenders can also play a critical role in encouraging more veterans to use VA home loans by treating it less like a niche product and realizing their value, Bernstein said.
“That starts with education. Realtors need better education. Listing agents need better education. Consumers need better education. And lenders need to specialize in the product instead of treating VA loans like an occasional side program,” he said. “There is a lot of nuance with VA lending, especially when you get into entitlement restoration, active-duty relocations, VA jumbo loans, and borrowers with more complex income structures. Veterans should absolutely be asking lenders how much VA business they actually do because experience matters in this space.”
Other Misconceptions
Jumbo lending is another gray area where veterans often have more questions than answers.
“Many veterans still incorrectly believe there are hard caps preventing them from buying higher-priced homes with VA financing. That is not true. We regularly help veterans purchase homes above conforming loan limits while still using VA financing, including high-balance and luxury properties,” Bernstein said. “The VA handbook itself specifically allows for loan amounts above conforming limits as long as the borrower has sufficient entitlement and qualifies with the lender. That surprises a lot of people, including some real estate professionals.”
Bernstein also believes it’s important for veterans to shop around and explore different lenders before buying a home.
“Many veterans get a quote from just one lender, whether that’s the bank they already have a relationship with, a large credit union, a referral from a friend who had a positive experience, or a lender they have heard markets heavily to military borrowers. The problem is that many borrowers never compare quotes,” he said. “That can leave veterans paying higher lender fees, paying unnecessary discount points, or accepting a higher interest rate than they otherwise would have needed to.”
Just as a potential car owner should test drive a few models before buying one, home buyers should reach out to different lenders before diving in and making a substantial, life-altering purchase.
“VA loans are no different. Just because a lender advertises heavily to veterans does not automatically mean they offer the best pricing, the best structure, or the best execution. It’s often best to compare 3–4 quotes to make sure you’re getting a good deal,” Bernstein said.
Overall, he said the issue isn’t with the loan program, it’s “that the market still has not caught up to what modern VA lending looks like.”
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