VA Home Loans

The Veterans Administration loan guarantee program was created in 1944 to assist service personnel returning home from World War II to obtain no-down payment home financing at reasonable interest rates. Since that time, any veteran who has served a minimum time in active duty in a regular component of the United States Armed Forced has become eligible for VA benefits for use toward the purchase of a home. Unmarried, surviving spouses of veterans who died because of service injured are also eligible for VA financing, as are spouses of MIAs or POWs on active duty, listed as missing for more than 90 days.

Like FHA, VA is not a direct lender. VA guarantees a certain portion of the loan amount to enable private lenders to make 100% loans with some protection against foreclosure loss.

The lender determines the amount of the loan a veteran can obtain, not the VA. The VA does, set a limit on the amount of the loan that it will guarantee.

One funded, most FHA and VA loans are pooled into Government National Mortgage Association (GNMA, called "Ginnie Mae") mortgage backed securities and then sold into the secondary mortgage market with guarantees by GNMA which represent the full faith and credit of the Federal Government. Ginnie Mae is a division of HUD.

FHA Home Loans

The Federal Housing Administration (FHA) was created in 1934 under the National Housing Act to encourage and facilitate home ownership; and to exert a stabilizing influence on the mortgage and building industries after the devastating impact of the Depression. FHA was consolidated into the newly established Department of Housing and Urban Development (HUD) in 1965.

FHA neither builds homes nor lends the money itself. Rather, it insures loans on real property made by approved lending institutions. FHA does not insure the property, but it does insure the lender against foreclosure loss.

With the protection provided by this type of insurance, approved lenders are able to make low-interest, low-down payment loans to borrowers.

Once funded, most FHA (and VA) loans are pooled into Government National Mortgage Association (GNMA; "Ginnie Mae") mortgage-backed securities and then sold into the secondary mortgage market.