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VA Loans

The 1944 Servicemen’s Readjustment Act, better known as the GI Bill of Rights, first introduced VA loans to the nation. The program permitted former service men and women to receive government-insured loans without having to come up with a down payment. Millions of World War II-era veterans purchased homes, and the American economy grew in the 1940s, ’50s, and ’60s.

Not all veterans qualify for a VA loan. The applicant must have good credit and must meet certain financial requirements. For the purposes of the loan, the Department of Veterans Affairs says that those who were members of a branch of the U.S. military before September 1980 must have served on active duty and have an honorable discharge after being in the military for at least 90 days during wartime or at least 181 continuous days during peacetime. Those who enlisted and began service after September 1980 or for officers who began service after October 1981 are required to have served for two years. Those in the National Guard or in the military reserve are required to have served at least six years and meet certain other conditions. There are other rules for surviving spouses of veterans.

Guaranteed by the Department of Veterans Affairs

A VA loan is guaranteed by the Department of Veterans Affairs for a quarter of the price. The maximum amount of the loan is now $359,650, which means the department guarantees an amount as much as $89,912. The veteran is permitted to borrow the appraised value of the property, which is the reasonable value as assessed by the VA appraiser, or the purchase price, whichever is smaller, plus the VA funding fee of two percent of the loan amount. (This funding fee is 2.75% for reservists and may be waived entirely for veterans or reservists with a disability.) An eligible veteran may be able to secure a $0 down loan for a loan amount up to $240,000.

VA fixed rate loans are offered for periods of 15, 20, 25 or 30 years. The loans are assumable under certain conditions and there is no prepayment penalty. Loans may be used to buy single family attached or detached homes and multiple family units. Condominiums and manufactured homes may also be purchased with a VA loan.