An in-depth examination of the major federally backed home mortgage loan initiatives
The History of the Veterans Administration and the VA Home Loan
The Veterans Administration (VA), according to its own website, has been around in various forms since 1636. As one of the oldest administrative governmental bodies whose sole focus is the wellbeing of soldiers and veterans of war, the agency has oversight of everything from cemetery upkeep to healthcare and post-service support. Though the VA has a rocky history of both helping and ignoring the very people it as created to serve, the overall trajectory of the agency is one that has made transitioning back to civilian life after fighting in war easier than it likely would be without the agency’s various programs.
Of the many programs created to help veterans of war with returning to civilian life and attacking “the harsh aftermath associated with wars,” the VA Loan was singularly created, in 1944, to allow those who had fought wars to have access to the benefits regular civilians had in being able to purchase homes and achieve normalcy.
Since the VA Loan’s inception, nearly 18 million veterans have taken advantage of the program and joined the ranks of homeowners across the nation. Of course, as we outlined in a previous blog post, historically, not all Americans were given access to this particular perk of being a war veteran. Black veterans—as well as Hispanic and Native Americans—were often shut out of the program, which further contributed to the many causes that have brought us to where we are today: 75% of White Americans are homeowners, while only 44% of Hispanic Americans and 42% of Black Americans own their own homes. This, then, is the sole reason for AHP 75’s existence: to bring homeownership rates to 75% for all Americans, regardless of race or income.
Luckily, several recent initiatives coming out of the Biden Administration, spurred on by President Biden’s 2021 National Homeownership Month Proclamation, are attempting to address the racial homeownership disparity by funneling money and enacting policy changes toward homebuyer education, government-backed mortgage program awareness, and other methods of promoting homeownership equality. Hopefully these initiatives will have a significant impact on America’s most underserved communities, but it is an uphill climb to close the homeownership gap, thanks to generations of purposeful tactics to exclude poor and minority Americans from the ranks of homeownership.
VA Loan Variants and Their Many Benefits
Though most people serving in the military are well aware of both the G.I. Bill and the existence of VA loans, there are still questions that arise both about eligibility and how the program works. Like all bureaucracies, the Veteran’s Administration is a sprawling behemoth tasked with an overwhelming number of services to grow and maintain, so easily finding information could be a bit overwhelming for a veteran trying to acclimate to civilian life after the traumatic experience of war.
The VA Loan—and its several associated programs—was created after WWII because the government realized that members of the Armed Forces who sacrificed their lives for the country were also sacrificing valuable years where they could be building their credit and wealth as working civilians. To address this issue, the VA Loan program was designed to makeup for these “lost” years of being able to build a credit history and generate savings.
Of course, despite the best intentions of the U.S. Government, there remains much confusion about what VA Loans are and how they work. Luckily, several military publications have created helpful articles, such as this valuable one at Military.com, designed to give would-be veteran homebuyers a primer on the specifics of the VA Loan program and its evolution over time.
Like the FHA Loan discussed in our previous post, the VA Loan is also a federally backed loan that offers less risk for private lenders because they guarantee a large percentage of the loan if the borrower defaults. While the various benefits have shifted since the origination of the program in 1944, they have only continued to get better, as congressional changes made the benefits of the VA Loan program more inclusive and wide-reaching in its ability to benefits U.S. veterans. Of the many benefits offered through the VA Loan program, these are the four biggest elements of the program that enable veterans to become homeowners in realistic and attainable ways.\
One of the biggest factors that makes the VA Loan such a powerful tool for post-war reintegration into society is that veterans are not required to bring to the table the same things that they do for a conventional loan not backed by any government homeownership program. The biggest benefit offered through the VA Home Loan: no money down. This is, of course, a game-changer, because one of the largest hurdles to homeownership for most Americans starts with the inability to save money for a down payment. Alleviating this particular roadblock is no small feat, and one that has undoubtedly contributed to the more than 18 million homeowners created by the existence of the VA Loan program. Without the stress of saving for a down payment hanging over the head of a potential homebuyer, veterans are free to begin the process as soon as they have met the VA’s eligibility requirements.
An additional benefit of the current VA Loan program is that the U.S. Government caps interest rates for VA Loan-backed mortgages. While the rates do vary slightly with the market, they are usually significantly lower than conventional loan interest rates, and the VA Loan rates are locked in for the life of the entire loan. While current VA Loan interest rates are slightly higher than recent years—largely because of the volatility of COVID economic uncertainty and the recent housing market frenzy—they are still among the cheapest and lowest mortgage rates available. The amount of money this saves the buyer over the lifetime of the loan can be in the tens of thousands of dollars, making this benefit one that can substantially, and positively, impact the buyer’s future savings and wealth generation.
Another change in the VA Loan program that was introduced with the sweeping reforms in the 1970s was the refinance option for veteran homeowners. It allows veterans to refinance their homes at lower interest rates, as well as to cash out equity in their homes to pay for home improvements, pay down debts, pay for dependent children’s college expenses, or invest in other ways. Again, because it is backed by the VA program, refinancing is a lesser risk for banks, which makes this option far easier than it would be for the average civilian trying to get a refinanced mortgage.
Finally, an often overlooked, but equally important aspect to the VA Loan that differs from other government-backed home loan programs is that not only can veterans use VA Loans to purchase a home, they can also use the program to purchase a farm or start a business. Since the purpose of the VA Loan program was not only to help reintegrate war veterans into civilian life in the United States but also to help them make up for “lost years” of credit building, saving money, and starting businesses, this facet of the VA Loan program creates financial opportunities that veterans would otherwise likely never have. While civilians who remain productive members of the workforce during wartime can generate income, savings, and wealth, veterans have no means to do this. The result of the VA Loan program taking this into account and trying to financially assist veterans for a stable financial future is one of the hallmarks of the whole VA Loan program.
Though these four benefits outlined here are significant and meaningful reasons to consider a VA loan—especially as a low-income or minority veteran—there are additional benefits, as well as terms for eligibility that buyers are encouraged to research before moving forward. The Veterans Administration comprehensive homebuyer education site is a valuable place to turn to learn the many ways this mortgage loan program can benefit a first-time homebuyer, and even work with an VA-approved home counselor who can explain the details of the program in full. They also offer foreclosure-prevention programs to assist veterans at risk of losing their homes.
AHP 75 and Our Commitment to American Veterans
At AHP 75, where our mission is to bring the rates of homeownership up to 75% for all Americans regardless of income or race, we encourage all veterans to research VA Loans as a valuable program designed to aid this all-important group of American citizens. Largely considered to be among the best of the many government-backed mortgage programs, the VA Loan is certainly the most generous when it comes to making home buying truly affordable and accessible.
AHP 75 is also pleased to note that our ally company, AHP Mortgage Direct, not only originates VA Loans, but also provides micro mortgages as low as $5,000 up to $100,000 to help buyers purchase homes in America’s most affordable communities. To learn more about our micro mortgage program, as well as to see our entire suite of services designed to help veterans who are prospective buyers through the entire process of buying a home, visit AHP 75 and see which programs are best for you. We can even refer you to a social-justice-oriented Community Impact Real Estate Agent in your area who can assist you in the search for your new home and help you navigate the home-buying process.
Are you a U.S. veteran wishing to become a homeowner? Visit AHP75.com to learn about our homebuyer programs designed specifically to help you join the ranks of homeowners and get onto the path of financial stability and wealth generation.
Aaron Morales is the Social Justice Writer for AHP 75, based out of Chicago, IL.