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The VA home loan is a benefit available to VA-eligible borrowers who qualify. Private lenders fund VA mortgages and the U.S. Department of Veterans Affairs provides those lenders with a guaranty to back up the loan, in part. Have you wondered how the VA Loan Guaranty Program came to be?

America has a long history of taking care of its veterans. Benefits can be traced back to 1636 when the Pilgrims of Plymouth Colony were at war with the Pequot Indians. The Pilgrims passed a law then in which the Colony supported its disabled soldiers.

In fact, there are many historic events that have resulted in action taken by the Federal Government to improve veterans' benefits and to develop what the VA Loan Guaranty Program and VA home loans are today.

The Veterans Administration was established in 1930. Brigadier General, Frank T. Hines, was the first administrator. Though many directors have followed Hines, and the Department's name has changed (it is now called the U.S. Department of Veterans' Affairs), the mission is still the same, "to care for America's veterans."

Following World War II and the return of 16 million veterans, the VA experienced tremendous growth. Congress passed the GI Bill along with education and housing benefits. The home loan guaranty program began in 1944 with the original Servicemen's Readjustment Act that was passed by the United States Congress in order to extend a wide variety of benefits to eligible veterans.

The VA loan benefit was established to help veterans become homeowners after the war. As a result of serving in war, returning servicepersons had "missed opportunities" to establish credit and climb the same economic ladders as civilian workers. Not having means to purchase homes had serious sociological impacts on millions of men and women who served in the Armed Forces making post-war readjustments. The establishment of the loan guaranty program was government's way of placing veterans "on par" with their civilian counterparts.

Under the original VA loan guaranty program, the maximum amount of guaranty was limited to 50% of the loan, but not to exceed $2,000. Loan durations were limited to 20 years, with a maximum interest rate of 4%.

In 1950, the maximum amount of guaranty was changed to 60% of the amount of the loan and not to exceed $7,500 and the maximum maturity of loans was lengthened to 30 years. The funding fee associated with obtaining a VA loan was established for certain veterans. Unremarried spouses of veterans who had died in service or as a result of service-connected injury or disease were extended the same loan privileges as veterans. Another change was to include protection for veterans if their homes were lost.

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