history va home loans

VA Loans

History of VA Home Loans in the United States

VA home loans have enabled millions of Americans in the armed forces to fulfill their dream of homeownership. Eligible borrowers enjoy benefits like low-interest rates, zero money down, no PMI, and low closing costs.

If you are thinking about buying a home with a VA loan or are currently a VA borrower, you may have found yourself wondering, how did this fantastic program get started? Below, we’ve provided a brief overview of the history of VA home loans in the United States. 


How Did the VA Loan Program Get Started?

On June 22, 1944, President Franklin D. Roosevelt signed the Servicemen’s Readjustment Act, otherwise known as the GI Bill of Rights. The law was enacted shortly after the end of World War II and was meant to express gratitude for those who had served by providing them with a viable means of pursuing the American Dream of homeownership. 

At the time, the program was designed only for Veterans of World War II. Applicants must have served at least 90 days between September 16, 1940, and September 2, 1945, in order to qualify. Veterans could apply anytime within two years of separating from the military or up to two years after the end of the war. Additionally, the VA’s guarantee was limited to 50 percent of the loan and was not to exceed $2,000. The repayment terms could not exceed twenty years and interest rates could be no higher than 4%. 

In 1945, these terms were amended as the result of rising home prices. The application time frame was expanded from 5 years to 10. Loan terms were also expanded to make payments more affordable for Veterans. Additionally, the VA raised its guarantee from $2,000 to $4,000. 


Additional Changes to the VA Home Loan Program

As time went on, many other changes were made to the VA home loan program to make it more accessible to borrowers. Here is a timeline of important changes:

  • 1950-1960: Congress opened the VA loan program to more service members. Eight major changes were made to the program at this time, including the expansion of loan terms to 30 years, an increase in the VA guarantee, and access to surviving spouses. Congress also expanded the benefits to include Korean War Veterans.
  • 1960-1970: The VA loan program underwent a new round of changes, known as the Cold War GI Bill. Post-Korean War Veterans also became eligible. At this time the VA funding fee was introduced. 
  • 1970-1980: In 1970, President Nixon signed the Veterans Housing Act. VA loan benefits no longer had any expiration. Furthermore, a refinance component was also introduced to the program. Many additional changes were introduced in the Veterans Housing Act of 1974 and in subsequent years.
  • 1980 – early 2000’s: In the 1980s the VA Guarantee was raised once again. A streamlined refinance program was also introduced. In the 1990’s Persian Gulf War Veterans and National Guard and Reserve members with at least 6 years of experience also became eligible. 
  • Early 2000s-present: Over the subsequent years, the VA loan program continued to be changed and updated in many ways. The VA guaranteed its 20 millionth home loan in 2013. Another milestone was reached 6 years later when the VA guaranteed its 24 millionth home loan. In the last five years, the VA has backed more loans than in its previous 10 years combined. 

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