When Congress created the VA home loan program in 1944, the maximum loan guaranty was $2,000.
That was one of the shortcomings of the original version of the program, and is one of the many aspects that have changed in 73 years. Now, service members and veterans can borrow up to $424,000 without a down payment in most areas of the country. The limits are higher in certain high-cost areas.
The VA home loan program is one of the most popular benefits offered to veterans, and was conceived in 1944 “as part of an attack on the harsh aftermath associated with wars,” according to the Legislative History of the VA Home Loan Guaranty Program (PDF), compiled by the Veterans Affairs Department.
The objectives were to ease as much as possible the economic and sociological problems of the post-war readjustments of millions of men and women who served in the military, the document states. The idea was an alternative to a cash bonus, because it would be much less expensive to the government and would provide more help to veterans.
Supporters of the concept felt this would be a way for the government to help veterans obtain favorable credit. There was a concern that military members, because of their service, hadn’t yet been able to establish a credit rating in order to borrow money for a home or to establish a business. The program “was an attempt to place the veteran on a par with his/her nonveteran counterpart,” the VA document states.
It also helped the economy by providing an investment outlet for large amounts of money that became available after wartime restrictions eased.
Between the end of World War II and 1966, one-fifth of all single-family residences built were financed by the home loan program for veterans of World War II or the Korean War. From 1944 through 1993, the VA guaranteed 13.9 million home loans. Now, that, number is well over 20 million.
The VA loan program was part of the original Servicemen’s Readjustment Act of 1944, also known as the World War II GI Bill. According to the VA, the VA home loan program is the only part of the original GI Bill that is still in force.
In addition to a $2,000 initial maximum guaranty, those loans were limited to a maximum term of 20 years, and no applications were to be received more than five years after the end of the war. In 1945, amendments to the law increased the maximum guaranty to $4,000, and allowed veterans to buy a home within 10 years of the end of the war.
Various changes in law brought the program to where it is today. It was first extended to Korean War veterans in 1952. Over the years, Congress extended the amount of time veterans would be eligible for the loans and eventually removed the limitations. Congress has added the ability to refinance loans; and they’ve added Special Housing Adaptation Grants for severely disabled veterans and service members.
The Veterans Housing Act of 1974 expanded the VA home loan benefit by making it possible for veterans who had already used their benefit, to regain the use of that entitlement.
The law also repealed VA’s authority to guarantee farm and business loans, although VA can still guarantee loans for veterans to purchase or build farm houses where the veteran will live.
There have been various iterations of the VA funding fee; in 1982, the law set a funding fee for all VA loans, except for certain individuals such as those receiving VA compensation; that has gradually increased over time.
Through the many changes, more service members and veterans are more easily able to use their VA home loan benefit.
And according to VA statistics, even 72 years after the program started to benefit World War II veterans, it’s still benefiting World War II veterans and certain surviving spouses who are eligible. There were 492 VA loans made in 2016 that were based on World War II service or entitlement.
Karen has covered military families, quality of life and consumer issues for Military Times for more than 30 years, and is co-author of a chapter on media coverage of military families in the book "A Battle Plan for Supporting Military Families." She previously worked for newspapers in Guam, Norfolk, Jacksonville, Fla., and Athens, Ga.