Rising VA Loans in 2025: Boosted by Market Conditions and Lower Rates
The housing market's positive momentum in 2025 led to a notable increase in the use of VA loans, a key benefit for U.S. military personnel. The Department of Veterans Affairs reported that lenders issued 528,343 VA loans during the 2025 fiscal year, reflecting a 27% increase from 2024. The surge encompassed a rise of 8.5% in home purchase loans and a significant 73% jump in refinancing loans, driven by decreasing mortgage rates in the second half of the year.
Veterans United Home Loans emerged as the leading VA loan originator, processing over 71,154 loans, outpacing its competitors by a wide margin. Other prominent lenders included Freedom Mortgage Corporation and Rocket Mortgage, which originated 29,734 and 29,647 loans, respectively.
Interest in VA loans and other mortgage types peaked during the pandemic due to historically low interest rates, declining with rate increases in 2022. The renewed increase in 2025 brings loan origination numbers closer to pre-2020 levels. Over half of the VA loans were for purchasing homes, benefiting from improved affordability as interest rates fell from 6.89% to 6.15% for a 30-year fixed-rate mortgage during the latter part of 2025.
Conditions affecting the housing market also improved, with higher inventory levels reducing buyer competition and stabilizing home prices. These developments created the most favorable environment for homebuyers witnessed in recent years. Additionally, VA borrowers capitalized on declining rates through the Interest Rate Reduction Refinance Loan (IRRRL) program, with refinances increasing by 135% from 2024 to 2025.
Home prices' significant rise during the pandemic also spurred refinancing activities, as homeowners tapped into approximately $11 trillion in home equity, according to Cotality. This equity access led to 85,050 cash-out refinance loans, marking a 26.5% year-over-year rise.
VA loans provide crucial support for service members by offering competitive interest rates and favorable terms such as waived private mortgage insurance requirements and reduced closing costs. Borrowers may be responsible for a one-time funding fee, determined by factors including loan type and down payment size, unless exempt due to specific criteria.
The VA's streamlined refinancing through the IRRRL offers an efficient process, not requiring home appraisals or credit checks, enhancing refinancing for those with existing VA loans. The VA's cash-out refinance option also permits conversion of conventional loans to VA loans, enabling borrowing up to 100% of home equity.
A defining feature of the VA loan program is the entitlement, which covers up to 25% of the loan amount. Basic and bonus entitlements help borrowers secure homes with minimal or zero down payments, facilitating greater housing affordability, especially for borrowers with low credit scores.