Veteran Administration loans, or VA loans, were originated by the United States Department of Veterans Affairs to help soldiers and veterans finance their homes. The Department does not give out any loans itself but gives guarantees to the buyer and lender of the loan to facilitate the financing process. In other words, the Veteran Administration loans will guarantee to the buyer a loan from a qualified lender. In exchange, the Department will also ensure to lenders that the loan will be paid for in full, either by the buyer or the department itself.
To enable military men and women to be able access to home financing and purchase of properties with no down payment the loan was implemented. Originally called the Servicemen Readjustment Act (or the G.I. Bill), it was created in 1944 after the Second World War. The driving goal of the act was to get veterans back on their feet in the civilian world by providing them with help, included was quick unemployment compensation and base funds for businesses and homes. When the act started out it only covered the active member of the three main branches of the United States military. Today, it has widened to encompass both active and non-active duty veterans, their spouses, and the National Guard and Reservist units. The law is one of the most supportive laws in the United States for helping American servicemen.
To clarify, the Veterans Administration will most likely not issue loans. The Veterans Housing Benefits Improvement Act of 1978, while expanding housing benefits to veterans, only stipulates that the Department will guarantee approval for mortgages and loans; it is the responsibility of the individual veteran to seek out the loan from approved lenders. Afterward, a form called the Freddie Mac Form 65 describing personal information, current status in the military, tax dependants, benefits recipients (family members), and other information regarding any financial-related history. The Department of Veterans Affairs will decide the procedure that will be used to designate the loan amount and the interest rate after looking at the application.