VA loans are home loans for veterans that are guaranteed by the federal government. The VA Loan Guaranty Service within the Department of Veterans Affairs administers the Veterans Administration loan program. The mission of the program is to help Americans who have served in a branch of the armed services to purchase and keep a home in recognition of their service to the country.
History
The VA home loan program started in 1944 in response to the thousands of veterans who returned home after World War II and were unable to secure a mortgage because of their insufficient work and credit history. In lieu of cash bonuses to returning vets, the government set up the loan guarantee program under the Servicemen's Readjustment Act. Originally, the loan guarantee covered 50 percent of a home loan, not to exceed $2,000 at a maximum interest rate of four percent.
Rules
According to the Veterans Administration, the government has guaranteed more than 18 million home loans for veterans as of 2009. The loans can be used to buy a new home, construct a house or refinance a current mortgage to get better terms. Rules that guide the VA loan program continue to change. For example, in 2008, the Veterans Benefits Improvement Act allowed veterans to receive 100 percent of the cost of a home versus the 80 percent that was previously covered.
Benefits
Veterans can apply for a VA loan through any bank or mortgage underwriter. Proof of eligibility is required and is obtained through the service person's military unit or by the lender through a Web-based program. While most consumers use the loan program to buy their first house, many veterans reuse the loan under special circumstances, such as if they paid off their first loan and still own the house. Surviving spouses who have not remarried can use the program to purchase a home, but children of deceased military personnel cannot.
Considerations
Under the VA home loan program, disabled veterans are eligible to receive grants to pay for modifications to their homes. The Specially Adapted Housing Grant Program provides funds to vets that assist them in making their home barrier-free. The grant pays for up to 50 percent of the costs of adaptive equipment up to $63,780 as of October 2009. Common adaptations covered by the grant include ramps and lifts, bathroom and kitchen modifications, and new construction of accessible homes.
Regulations
There are a number of regulations that govern the VA loan program. The most important rule is that the veteran who received the loan must occupy the home financed through the agency and move into it within 60 to 90 days of closing. A VA home loan is not available to finance vacation homes or rental property. VA home loan benefits are available to military personnel who have served at least 90 days during wartime and at least 181 consecutive days in peacetime.
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