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History Veterans Administration Financing

In an effort to reward World War II veterans for service to their country, the U.S. Congress passed the Serviceman's Readjustment Act of 1942. This act among other things provided for home loans to veterans that served their military duty honorably. This act has been amended numerous times since 1942 and now allows qualified veterans to not only obtain home loans but mobile home loans, condominium loans and business loans, which are all guaranteed by the United States Government.

The Veterans Administration does not make the actual loan to the veteran, a private lender loans the funds and the Veterans Administration guarantees up to 60% of the loan amount, in the event the veteran defaults on the loan.

The VA loan program for owner-occupied housing is one of the best loan programs in the free world.  It  is possible for a veteran to obtain 100% loans up to $184,000 with absolutely no down payment  and  the seller or builder is allowed to pay all of the veterans closing costs. Making the total cash required to purchase in some instances, zero. If the veteran desires higher priced homes, he generally is required to make a down payment on the amount over $184,000. Generally, the Veterans Administration is a little more liberal than conventional lenders would be with regard to the veteran?s credit standing and qualifying for the VA loan, although recent VA underwriting changes make the qualifying criterion similar to conventional mortgages.

Veterans make up a much larger part of the general population than most people would assume. Presently there are some 33 million veterans in the U.S. and approximately 25 million are married. This brings the total veteran population including their spouses to some 58 million people when you  subtract individuals too young to purchase real estate (under age 18). We find that almost 40% of the adult population of the U.S. are veterans or married to a veteran!

At the time of this writing, only 11 million VA loans had been made since 1944. Leaving 22 million veterans  or about 2/3 of all veterans who have never used their loan benefits. The reason they haven't used these benefits are: 1. The veterans do not know what the benefits are; 2. They are discouraged from using these benefits by real estate people that represent sellers.

Other facts about the Veterans Administration that few people may be aware of:

  • Widows of veterans who have not re-married are eligible for VA home loans, if the veteran died  while  in the service or of a service connected death after release from service. Widows of veterans  who are missing in action (MIA) may also be eligible to obtain VA loans.
  • Two or more veterans can team up as co-borrowers to qualify and purchase owner occupied properties together. Duplexes, triplexes and fourplexes may be purchased as well as single-family homes.
  • The VA considers a common-law spouse to be the same as a spouse with a marriage certificate, when considering benefits and qualifying for joint home loans.
  • VA loans made before Mar. 1, 1988 are fully assumable, contain no pre-payment penalties and do not contain any "due on sale clauses". Since there is no due on sale clause, VA loans can be "creatively financed" upon sale of the property (on loans made after Mar. 1, 1988, the buyer is required to qualify).
  • Veterans can obtain loans that exceed the purchase price, so that additional improvements can be made to the house being purchased. The additional loan amounts could be used to add rooms, finish basements, add insulation, update electrical or plumbing or add a garage, etc.
  • Veterans are allowed to refinance their existing mortgages from conventional or FHA loans to VA loans. If they already have VA loans, they may refinance to lower interest rate VA loans without re- qualifying for the refinance.
  • The VA allows some U.S. citizens who fought with our allies during World War II, to obtain VA home loans, even though they were never members of the U.S. Armed Forces. Those countries eligible: Australia, Canada, England, France, India, Northern Ireland, South Africa and Taiwan.

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