R42504 — VA Home Loan Programs

The Department of Veterans Affairs (VA) has assisted veterans with homeownership since 1944, when Congress enacted the loan guaranty program to help veterans returning from World War II purchase homes. The loan guaranty program assists veterans by insuring mortgages made by private lenders, and is available for the purchase or construction of homes as well as to refinance existing loans. The loan guaranty has expanded over the years so that it is available to (1) all active duty servicemembers and veterans who fulfill specific active service requirements or who were released from active duty due to service-connected disabilities, (2) members of the reserves who completed at least six years of service or who served at least 90 days of full-time National Guard duty, 30 of which were consecutive, and (3) spouses of veterans who died in service, of service-connected disabilities, or while receiving (or being entitled to receive) benefits for certain service-connected disabilities (see Table 1). Under the loan guaranty, VA agrees to reimburse lenders for a portion of losses if borrowers default. Unlike insurance provided through the Federal Housing Administration insurance program, VA does not insure 100% of the loan, and instead the percentage of the loan that is guaranteed is based on the principal balance of the loan (see Table 2). Veterans who enter into VA-guaranteed loans pay an up-front fee based on factors that include the type of loan entered into (for example, purchase or refinance), whether the loan is the first or subsequent VA loan a borrower has entered into, and the amount of down payment (see Table 3). The fee is waived for veterans with service-connected disabilities. Borrowers are not required to make a down payment on a VA-guaranteed loan, but the up-front fee is reduced if there is a down payment of 5% or more. Most borrowers (74% of purchasers in FY2024) do not make a down payment. In addition to guaranteeing loans from private lenders, VA makes direct loans to borrowers in certain circumstances. The original VA direct loan is currently available to veterans or servicemembers with certain service-connected disabilities. Another direct loan program, originally enacted as a demonstration program in 1992, serves Native American veterans, including members of federally recognized tribes, Native Hawaiians, and veterans native to American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. In addition, VA may enter into direct loans in cases where a borrower is delinquent or defaults on a VA-guaranteed loan. VA may either acquire a loan from a lender and continue servicing the loan itself (called “acquired loans”) or, in cases of foreclosure, VA may purchase the property and resell it. In these cases, VA may enter into a loan with a purchaser whether or not they are a veteran (called “vendee loans”). Loss mitigation processes may protect borrowers who face default or foreclosure (see Table 4). Available loss mitigation options for VA-guaranteed loans changed in the years during and after the COVID-19 pandemic. The VA Home Loan Program Reform Act (P.L. 119-31), enacted on July 18, 2025, and amended by Division G, Section 7307 of the Continuing Appropriations, Agriculture, Legislative Branch, Military Construction and Veterans Affairs, and Extensions Act, 2026 (P.L. 119-37), created a partial claim program to assist veterans who defaulted on their VA loans both during and after the pandemic.

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