VA Loan Volume Grows 8% Amid Tight Conventional Lending

VA-backed mortgage originations rose 8% year-over-year in the first quarter of 2026, providing a bright spot in an otherwise challenging lending environment. The Department of Veterans Affairs reported 115,200 loans originated during the quarter, compared with 106,700 in the same period last year.

The growth outpaced both conventional lending, which was up 2% year-over-year per Mortgage Bankers Association data, and FHA volume, which declined 3%. Purchase loans drove the VA increase, with 88,400 purchase originations, up 11% from the prior year. Refinance volume remained subdued at 26,800 loans, up 1%.

"VA continues to be a highly competitive program for eligible borrowers," said John Bell, executive director of the VA Loan Guaranty Service. Bell pointed to the program's zero-down-payment structure and lower interest rates as key advantages. The average rate on a VA 30-year fixed loan closed the quarter at 6.54%, compared with 6.78% for conventional 30-year fixed, according to Optimal Blue data.

The average loan amount on VA purchases climbed to $432,000 in March, up 5.1% from a year earlier. VA borrowers skew toward higher-price markets in the South and West, with Texas, California, Virginia, Florida, and Washington accounting for 43% of VA purchase volume. The Department of Defense concentration in those states drives the distribution.

Lenders have expanded VA-focused operations. Veterans United Home Loans, the largest VA-exclusive lender, reported first-quarter volume of $8.9 billion, up 12% year-over-year. Rocket Mortgage, PennyMac, and Freedom Mortgage all rank among the top-five VA originators, per HMDA data. NewDay USA expanded its salaried loan officer headcount by 14% in January.

The improved VA volume has not been without friction. Under the 2024 revision of Circular 26-24-28, VA buyers may negotiate to pay their own real estate agent commission when the seller refuses to cover it, a change implemented in response to the National Association of Realtors litigation settlement. Lender surveys show roughly 22% of VA transactions in 2025 involved some form of agent-commission contribution from the borrower, compared with less than 1% the year before.

The VA expects volume to remain strong through the year. Bell said the bureau is expanding its guaranty certificate processing system to handle higher volumes and is piloting a new electronic certificate of eligibility platform with 14 large lenders. Completion is targeted for the fourth quarter of 2026.