Military VA Loans
How Military VA Loans Began
The first Military VA loans came after the United States Congress passed the Servicemen’s Readjustment Act in 1944, an act conferring various benefits to veterans. Of particular importance was the VA loan guarantee program outlined in the act. Essentially, the act gave the VA the authority to guarantee or insure home and business loans that lending institutions make to veterans. The VA can also give loans directly to veterans so they can purchase or build a home or make repairs and improvements.
The Reasoning Behind Military VA Loans
The Servicemen’s Readjustment Act of 1944 was created in an attempt to deal with the harsh realities veterans faced after returning home from war. After serving in the Armed Forces, veterans came home to a slew of economic, sociological, and mental health problems and had many difficulties readjusting. Included in the 1944 act was the Loan Guarantee Program, which was more cost-efficient for the government and also helped veterans.
The intention behind offering credit to veterans and guaranteeing their loans was that they would be able to provide a roof and shelter over their families’ heads and be able to start new businesses. The government legislators who passed the law saw it as a way to compensate for the inability of veterans to begin building their credit rating while their served in the Armed Forces. The Servicemen’s Readjustment Act and its VA loan guarantees were an effort to even out the playing field, so to speak, between veterans and civilians.
Additional Acts for Veterans
In 1970, the Congress passed The Veterans Housing Act, which took away any termination dates for veterans applying for VA-guaranteed housing loans. Therefore, any veteran who meets the VA loan requirements will be eligible for the rest of his or her life. The Veterans Housing Act of 1970 also guaranteed mobile home loans for veterans as well.
Congress also passed the Veterans Housing Benefits Improvement Act in 1978, which expanded upon and improved veteran housing loan benefits. In 1992, the Veterans Home Loan Program Amendments were made which extended benefits to National Guard and Reserve personnel who honorably served for at least six years. They servicemen and women do have to pay a minimally higher funding fee on their VA home loans than their active duty counterparts do, but since 1992 they now have the options of receiving a VA Loan.
In accordance with the Servicemembers Civil Relief Act, the VA protects recipients of VA Loans from any financial hardships or defaults on their home loans that are caused by active duty. The Servicemembers’ Civil Relief Act keeps the interest rates for veterans at 6%.
The Veterans’ Benefits Improvement Act of 2008
Many benefits and alterations to the VA loan program for veterans were made in the Veterans’ Benefits Improvement Act of 2008, including:
- Guarantees on adjustable rate mortgages (ARMs) and hybrid ARMs
- Cash-out refinancing loans, where the new mortgage amount exceeds the original one and the veteran can get cash from the equity in his or her home
- Assistance with transferring subprime mortgages, (i.e. mortgage received under qualifications that aren’t ideal) into better VA loans with lower rates
- Guaranteed refinancing loans
- Help preventing foreclosures by increasing loan amounts
- No private mortgage insurance (PMI) necessary
- No down payment required
Over 18 Million VA Loans Issued
Since 1994, the government has insured more than 18 million VA home loans. The Department of Veteran Affairs has insured loans to buy or build homes, repair existing homes, and refinance previous VA loans or traditional home loans with better terms. Many veterans have received loans through the VA home loan program they otherwise wouldn’t have gotten, and the program has helped many a United States serviceman and woman returning from duty with home loans and benefits.