VA loans are a popular form of financing for eligible borrowers who are eager to buy a home, make repairs, or refinance an existing loan. Guaranteed by the U.S. Department of Veterans Affairs (VA) and issued by approved lenders, these loans come with incredibly favorable terms that help to place homeownership within easier reach. However, today’s homebuyers are not the first to utilize these loans. The history of VA loans is a proud one that extends across generations, stretching back nearly 75 years.
The History of VA Loans
As the VA notes, the desire to care for its veterans actually predates the United States’ establishment as a nation. In 1636, the pilgrims passed a law promising that the Plymouth Colony would care for disabled soldiers. In the nation’s earliest days, the states provided resources to support veterans, and in 1811, the federal government opened its first facility for veterans. In the wake of the Civil War, veterans’ homes were established to provide care and support to those who had fought for their country. And after World War I, the federal government began offering new benefits in the form of insurance, disability compensation, and vocational rehabilitation, and it established new agencies to oversee these programs. What about the history of VA loans? These housing benefits were launched after World War II.
The GI Bill
The 1944 Servicemen’s Readjustment Act, which is better known as the original GI Bill, was signed into law by President Franklin D. Roosevelt. Its purpose was to smooth the post-war economic and sociological challenges of the millions of men and women who had served in the military during WWII. As MilitaryTimes explains, the VA loan program was part of this bill. By guaranteeing home loans for eligible veterans, the government found an affordable way to fuel investment, strengthen the overall economy, and help veterans build their credit and become homeowners. At the program’s start, the maximum loan guaranty was $2,000, only veterans of WWII were eligible, loans could last for up to 20 years, and veterans could apply for them for up to five years from the war’s end.
Changing with the Times
As the ArmyTimes makes clear, the VA’s home loan program has gone through many modifications since its inception in 1944 as it evolved to meet the changing needs of the times and remain a viable option for borrowers. Over the years, the amount of the guaranty increased substantially to keep pace with the real estate market. In addition, this benefit was extended to veterans of other wars, service members who served during peace time, surviving spouses, and members of the National Guard and Reserve. The time limit to apply for a VA loan was lengthened before finally being removed. Options to refinance and grants to help disabled veterans adapt a home to meet their needs were added. Also, the Veterans Housing Act of 1974 allowed veterans who had already used their home loan entitlement to regain it, further increasing the flexibility and scope of the program by making it possible for a veteran to secure more than one VA loan in his or her lifetime.
Today’s VA Home Loans
Currently, borrowers who meet the program’s eligibility requirements can use a VA loan to purchase or refinance a suitable property. Connecting with a lender who is familiar with all the ins and outs of the program can help a borrower truly capitalize on their home loan entitlement.
How much can an aspiring homeowner borrow? That depends. When using a VA loan, a borrower must have the income and credit history needed to get approved for the loan that they’re requesting, but the VA doesn’t impose limits on the size of the loan. However, it does impose limits on the size of the guaranty it will provide using county limits that reflect an area’s property values. As a result, borrowers who want to secure either a large loan that exceeds these limits or a second VA loan may need to put down a down payment to make it work. As Zillow indicates, there are several excellent reasons why borrowers opt for a VA loan:
- VA loans come with competitive interest rates and favorable terms.
- No down payment is required as long as the property’s sale price doesn’t outstrip its appraised value.
- Closing costs are limited by the VA and may be paid by the seller.
- The VA funding fee can be financed.
- No private mortgage insurance is required.
- Borrowers can pay their mortgage off early without being penalized.
The history of VA loans is rich, and the program remains vibrant. Could a VA loan play a vital role in your journey towards homeownership? PrimeLending of Manhattan, Kansas, is ready to serve you. Our expert team can show you how to get the most out of the VA home loan program. Contact us today to learn more.