History of the VA Loan

A VA loan is a mortgage loan that is guaranteed by the US Departments of Veterans Affairs. The VA loan program assists Veterans who have served in the armed services become homeowners. The basic intention of the VA direct home loan program is to supply home financing to eligible veterans in areas where private financing is not generally available and to help veterans purchase properties with no down payment.

The Current VA loan mortgage is a byproduct of the Servicemen’s Readjustment Act, more commonly called the GI Bill of Rights, which was passed by Congress in 1944. Harry W. Colmery, a World War I Veteran, wrote the first draft of the G.I. Bill. The G.I. Bill provided college or vocational education for returning World War II veterans, one-year compensation for out of work veterans and also provided different loan types to Veterans to buy homes or start a business. The G.I. bill provided low interest, zero down payment home loans for servicemen. The G.I. bill was created to prevent a repetition of the Bonus March of 1932, in which World War I Veterans marched on Washington DC demanding payments of their World War I bonuses. The Bonus March was dispersed by the army and the Veterans were not paid.

The G.I. Bill is considered one o the most significant pieces of legislation ever passed by the U.S. Congress. The education benefits opened College education to the masses, in 1947, veterans made up almost half of the nation’s college students. It allowed millions of families to purchase their first homes and moved many families out of urban apartments and into suburban homes and resulted in the suburbanization of the American in the 1950’s and the postwar baby boom. Prior to the war, suburbs tended to be the homes of the wealthy and upper class. The G.I. bill effectively created the American middle class that we know today.

The Success of the 1944 G.I. bill prompted the government to offer similar measures to later generations of Veterans. The Veterans Adjustment Act of 1952 offered veterans of the Korean Conflict that served for more than 90 days, similar benefits that were offered through the G.I. Bill. These bills eventually lead to the Veterans Readjustment Benefits Act of 1966. Whereas the G.I. Bill of 1944 and 1952 compensated veterans of wartime service, the new bill extended benefits to Veterans who served in war and peace.

Further acts were passed in Congress in following years. The Veterans Housing Act of 1970 removed all termination dates for applying for VA housing loan and also provided VA loans for mobile homes. The Veterans Housing Benefits Improvement Act of 1978 expanded and increased previous benefits given to Veterans. In 1992, the VA loan guarantee program was enlarged to include Reservists and National Guard personnel who served honorably for at least six years. In association with the VA’s program, the Servicemembers’ Civil Relief Act protects service members from financial woes on their home loan that may occur as a result of active duty commitments, freezing their interest rates at 6%. These acts have allowed Veterans through the years to buy homes when the might not have been able to on their own.

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