The specific ways in which the VA assists veterans include (1) guaranteeing home mortgages from private lenders (through the Loan Guaranty Program, a form of insurance) to help veterans obtain financing for home purchases, improvements, or refinancing; (2) providing direct loans for home purchases to Native American veterans and to purchasers of homes that are in the VA inventory due to default and foreclosure; and (3) extending grants and loans to veterans with service-connected disabilities so that they can adapt housing to fit their needs through the Specially Adapted Housing Program. While the VA also provides housing assistance for homeless veterans, this report does not address these programs. The VA Loan Guaranty Program

The VA Loan Guaranty Program is a mortgage insurance program through which eligible veterans enter into mortgages with private lenders, and the VA guarantees that it will pay lenders a portion of losses that may be suffered as a result of borrower default. Over time, the loan guaranty has been expanded to include all veterans who served on active duty from World War II on, with varying length of service requirements, as well as those who served in the selected reserves; the amount of the guaranty has grown; business purchases are no longer eligible and farm purchases have been limited; and the uses have expanded to include refinancing, energy efficiency improvements, and the purchase of manufactured homes. This section of the report describes eligibility for the loan guaranty (" Borrower Eligibility "), ways in which it can be used (" Uses of the Loan Guaranty "), coverage (" Amount of Coverage Provided by the Loan Guaranty "), and how the VA loan guaranty differs from the Federal Housing Administration (FHA) mortgage insurance program (" How the VA Loan Guaranty Differs from FHA Insurance "). Veterans who served or are serving on active duty . See Table 1 for more details. Construction

In addition to purchasing property, an eligible veteran may enter into a guaranteed loan for the construction of housing. In most cases, the VA guaranty covers at least 25% of the principal balance of a loan. Down Payment: Veteran borrowers who participate in the VA loan guaranty program are not required to make a down payment. The Original Direct Loan for Veterans in Rural Areas, Now Limited to Veterans with Disabilities

The VA first made direct housing loans available to veterans who were unable to obtain mortgages through private lenders and were therefore unable to participate in the loan guaranty program. Direct Loans Resulting from Borrower Delinquency or Default (Acquired and Vendee Loans)

The VA may also enter into a direct loan arrangement in two situations involving a veteran's delinquency and/or default on a guaranteed loan. Acquired Loans: In situations where a veteran borrower with a guaranteed loan has difficulty making payments, the VA may purchase the loan from the lender (or current servicer) and continue to hold and service the loan. In addition, the number of VA acquired loans has fallen in recent years. Factors Determining VA Loan Fee: The amount of a borrower's fee is based on several factors: the amount of down payment, if any; whether the loan is extended through the loan guaranty or direct loan program; whether the borrower had active duty service or was a reservist; when the loan closed; whether the loan is purchase money or a refinance; whether the borrower is accessing the guaranty for the first time or entering into a subsequent loan; and whether the property is purchased under the manufactured housing portion of the loan guaranty statute. (See Table 6 .) Waiver of VA Loan Fee: Fees may be waived for veterans receiving compensation for a service-connected disability, for the surviving spouse of a servicemember who died of a service-connected disability, or for the surviving spouse of a veteran who died while receiving (or was entitled to receive) compensation for certain service-connected disabilities. The Specially Adapted Housing Program

The Specially Adapted Housing Program provides grants to veterans and servicemembers with certain service-connected disabilities to assist them in constructing, purchasing, or remodeling homes to fit their needs. Use of Grants to Modify the Home of a Family Member

The law provides that veterans may use the Special Housing Adaptation grant (§2101(b)) to modify homes of family members in cases where a veteran or servicemember plans to continue living there.
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 veterans who fulfill specific duration of 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, and (3) spouses of veterans who died in action, of service-connected disabilities, or who died while receiving (or were entitled to receive) benefits for certain service-connected disabilities (see Table 1). Under the loan guaranty, the VA agrees to reimburse lenders for a portion of losses if borrowers default. Unlike insurance provided through the Federal Housing Administration (FHA) insurance program, the 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 3).
Veterans who enter into VA-guaranteed loans must pay an up-front fee based on a number of factors that include the type of loan entered into (for example, purchase or refinance), whether service was active duty or in the reserves, whether the loan is the first or subsequent VA loan a borrower has entered into, and the amount of down payment (see Table 6). Borrowers are not required to make a down payment for a VA-guaranteed loan, but the up-front fee is reduced if there is a down payment of 5% or more. Most borrowers (80% of purchasers in FY2017) do not make a down payment.
In addition to guaranteeing loans from private lenders, the VA also makes direct loans to borrowers in certain circumstances. The original VA direct loan, which was targeted to veterans in rural areas, is now available only 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 veterans living in American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands. In addition, the VA may enter into direct loans in cases where a borrower is delinquent or defaults on a VA-guaranteed loan. The VA may either acquire a loan from a lender and continue servicing the loan itself (called acquired loans) or, in cases of foreclosure, the VA may purchase the property and resell it. In these cases, the VA may enter into a loan with a purchaser whether or not he or she is a veteran (called vendee loans).
A third way in which the VA provides housing assistance to both veterans and active duty servicemembers is through the Specially Adapted Housing (SAH) Program. Through the SAH program, veterans with certain service-connected disabilities may obtain grants from the VA to purchase or remodel homes to fit their needs. The amount of a grant depends on the disability, and in some cases grants can be used to modify the homes of family members with whom veterans or servicemembers are staying (see Table 7).
This report discusses these three types of housing assistance—the loan guaranty program, direct loan programs, and Specially Adapted Housing program—their origins, how they operate, and how they are funded. The report also briefly describes a home rehabilitation pilot program designed to help veterans who have low incomes or disabilities repair or modify their homes, and has a section that discusses the default and foreclosure of VA-guaranteed loans.