Contrary to the implied misconception, the Department Of Veterans Affairs does not make home loans, but they do offer a home loan guarantee to eligible veterans. The Veteran home loan guarantee was part of a package of benefits, created by the Servicemen's Readjustment Act of 1944, commonly referred to as the GI Bill.
Veteran Eligibility
To qualify for the home loan benefit, a veteran must have been discharged under other than dishonorable conditions. Beyond this requirement, veterans of WWII, Korea, and Vietnam, must have served at least 90 days on active duty. Veterans who served during peace time and have completed 24 months of active duty service, or veterans who have served at least 181 days before being discharged under other than dishonorable conditions, are also eligible. This is true for Gulf war veterans too.
Certificate of Eligibility
Once the veterans eligibility has been established, they will need to obtain a Certificate of Eligibility from the VA. The Veteran can accomplish this directly by completing and filing VA Form 26-1880 with the VA. In most cases, the lender will usually take care of this detail on behalf of the veteran.
Buying a Home
With certificate in hand, the veteran is ready to shop around for the optimum lone, assuming that they have already found that perfect home to buy. Most banks and mortgage companies will be eager to grant a lone for a veteran who is gainfully employed and can qualify for the loan amount. It pays to shop around a little and get the best interest rate you can. In many cases, if you haggle a little with the lender, and pit one against the other, you can usually shave a half a point or more off the interest rate.
Something that most veterans don't pay attention to, is the fact that when and if you pay off your loan, whether buy sale of the property, or completion of the mortgage payment schedule, you remain eligible to use your GI Bill loan guarantee again. If on the other hand, you default on the loan, or allow the loan to be assumed by someone who qualifies, you lose your GI Bill home loan guarantee benefit forever.
At the end of WWII, so many veterans took advantage of the GI Bill loan guarantee to buy their first home, that the U.S. experienced a housing boom and robust economy, in addition to the baby boom, which continued until the start of the Korean war. It appears that the GI Bill home loan guarantee turned out, not only to be a great deal for veterans, but a pretty good investment by the American people in their own prosperity.