Excerpt from : VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits

The following is an excerpt from Chris Birk’s The Book on VA Loans: An Essential Guide to Maximizing Your Home Loan Benefits. Chris writes about military homebuying and the mortgage industry, and is the chief writer behind the VA Loans Insider blog. Connect with Chris on Facebook at VA Loans Insider or on Google+.


With the Second World War still raging in Europe, U.S. officials started planning to address the inevitable struggles American soldiers would face upon returning to civilian life.


The government created its concept of a home loan guaranty in 1944, part of a more widespread movement to shift from a wartime economy to a peacetime one. The idea was to provide those who proudly served our country with a simple and streamlined path to homeownership in the wake of the war.

Service abroad made it difficult for some soldiers and service members to build a solid financial profile. A home loan guaranty program would mitigate that concern and help level the playing field for those who spent months and even years fighting for American freedom.

Instead of providing loans, the Department of Veterans Affairs would guarantee a portion of every loan made to a qualified borrower. That layer of protection would spur lenders to issue loans to veterans and active duty service members who might otherwise struggle to obtain financing.

Almost 70 years later, the Department of Veterans Affairs and its VA Home Loan Guaranty Program have helped more than 18 million veterans and active duty service members achieve the dream of homeownership.

Today, the financial flexibility and purchasing power behind the VA loan is more important than ever.

Tighter Requirements
Mortgage lenders have ratcheted up requirements in the wake of the subprime mortgage meltdown. Industry experts and government officials are working to redefine the concept of sustainable homeownership in America.

For some borrowers, that means securing a home loan is becoming more difficult than ever before.

But the VA loan program has helped ensure service members are in a prime position to succeed. VA loans feature flexible requirements and significant financial benefits, chiefly the ability to purchase a home with no money down. In an era of tight credit and cautious lending, that kind of opportunity seems anachronistic. But it’s a cornerstone of the program.

So is reliability.

VA loans have weathered the subprime collapse and proved incredibly resilient in the face of foreclosure. In fact, given the fiscal tumult of the last few years, VA loans have emerged as “a model of stability,” as Thomas J. Pamperin, a VA deputy under secretary, told a Congressional subcommittee in spring 2010.

To the average service member, VA loans represent the clearest and most cost-effective path to homeownership. They come with an array of benefits that no other lending program can match. They are, in many ways, a lifeline for scores of service members who might otherwise struggle to become a homeowner.

“Most people don’t realize, especially younger people and first time-homebuyers, what a benefit it is,” said Scott Dow, of Charleston, S.C., a former Coast Guard officer and Reservist who has purchased two homes using his VA benefit. “I would not have been able to purchase a home without a VA loan.”

Neither would most military buyers.

Rising Popularity
About eight in 10 VA borrowers could not have qualified for conventional home financing. Nearly 90 percent of the VA loans issued in fiscal year 2011 came with no down payment.

Falling home prices and a watertight credit market have brought new attention to the long-cherished VA home loan program. Loan volume skyrocketed in 2011, as military buyers flocked to the VA’s more flexible and less costly alternative. Overall volume has increased more than 165 percent since 2007.

The VA loan and military borrowers have also proved resilient in the face of foreclosure.

Despite their wide-ranging benefits, VA loans have been utilized by only a fraction of the nation’s 24 million veterans. Fewer than 10 percent have taken advantage of the program to purchase or refinance a home.

What’s worse is nearly 20 percent of veterans are not even aware of the program’s existence, according to a 2004 report from the VA.

Thousands of service members are set to return from abroad in the coming months. Millions more who have proudly served our country in years past remain unsure or unaware of the benefits created to honor their service and sacrifice. Please make sure the veterans, active duty service members and military spouses in your life are fully aware of the VA’s vast array of benefits, covering everything from medical and mental health assistance to job training and home lending.



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