The History of VA Loans

During World War II, politicians wanted to avoid the postwar confusion about veterans’ benefits that became a topic of much debate in the 1920s and 1930s. President Franklin D. Roosevelt wanted a postwar assistance program to help veterans transition from wartime to normal life. So many politicians from many parties, such as Harry W. Comery, Ernest McFarland, and Edith Nourse Rogers, helped write and sponsor the legislation. The Servicemen’s readjustment Act of 1944, known informally as the G.I. Bill, was the legislation that provided a range of benefits for returning World War II veterans (commonly referred to as G.I.s). An important provision of the G.I. Bill was low interest, zero down payment home loans for servicemen, later known as VA Loans. This enabled millions of American families to move out of urban apartments and into suburban homes. The VA loan guarantee program was especially important to veterans.  Under the law, as amended, the VA is authorized to guarantee or insure home, farm, and business loans made to veterans by lending institutions. Despite a great deal of confusion and misunderstanding, the federal government generally does not make direct loans under the act. The government simply guarantees loans made by ordinary mortgage lenders after veterans make their own arrangements for the loans through normal financial circles.  The Veterans Administration than appraises the property in question and, if satisfied with the risk involved, guarantees the lender against loss of principal if the buyer defaults. In association with the VA’s program, the Service members’ Civil Relief Act was passed in 1940 to protect the millions of active soldiers, sailors, airmen, marines, coast guardsmen, and other service members during World War II from financial woes on their home loan that may occur as a result of active duty commitments. It continues today to protect active service members from bankruptcy, being sued, and even freezes their interest rates at 6%, so those in service don’t have to worry about their home and family while away on duty. The Veterans Housing Act of 1970 removed all termination dates for applying for VA-guaranteed housing loans, a waiver on funding fees for post Korean War Veterans, and provision for direct loans to Veterans eligible for Specially Adapted Housing Grant, which is a grant given to Veterans who are entitled to compensation for permanent and total service-connected disability.  This 1970 amendment also provided for VA-guaranteed loans on mobile homes. More recently, the Veterans Housing Benefits Improvement Act of 1978 expanded and increased the benefits for millions of American veterans by increasing the maximum loan guaranty entitlement to $25,000 for home and condominium loans, and reduced the minimum service requirement for eligibility purposes for Vietnam Era veterans from 181 days to 90 days in order to equate Vietnam service that performed in prior wartime periods. Until 1992, the VA loan guarantee program was available only to veterans who served on active duty during specified periods. However, with the enactment of the Veterans Home Loan Program Amendments of 1992, program eligibility was expanded to include Reservists and National Guard personnel who served honorably for at least six years without otherwise qualifying under the previous active duty provisions. Such personnel are required to pay a slightly higher funding fee when obtaining a VA home loan. Qualifying for VA Loans has been fairly painless for many Veterans. The VA Loan program is designed for Veteran’s who meet the minimum number of days of completed service. The program does allow for benefits to Surviving Spouses. The VA does not have a minimum credit score used for pre-qualifying for a mortgage loan. However, most lenders require a minimum credit score of at least 620, so research the different venders available to you that will meet your credit score.  After you have found a lender, you will need to fill out the appropriate application with the appropriate documents needed. On October 26, 2012, the Department of Veterans Affairs announced it has guaranteed 20 million home loans since its home loan program was established in 1944. With guaranteed home loans that have no down payments, no private mortgage insurance (PMI), and even an option for a refinance of up to 100% of the loan amount, VA Loans are one of the biggest benefits and blessings to those who have served our country.

One thought on “The History of VA Loans

  1. Interesting history of how the VA was formed. Veterans are so blessed to have this organization to help them out with their financial needs. It is not easy to be in their shoes especially since they have gone through a lot of mixed experiences and emotions. They deserve the help.

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