---
kind: "section"
citation: "38 U.S.C. § 3708"
title: "38"
title_heading: "Veterans’ Benefits"
number: "3708"
heading: "Authority to buy down interest rates: pilot program"
release: "119-102"
date: "2026-07-12"
url: "https://uscodex.org/usc/38/3708"
units:
  - "Part III — Readjustment and Related Benefits"
  - "Chapter 37 — Housing and Small Business Loans"
  - "Subchapter I — General"
---

# §3708. Authority to buy down interest rates: pilot program

- (a) In order to enable the purchase of housing in areas where the supply of suitable military housing is inadequate, the [Secretary](/usc/38/4101.md?p=8) may conduct a pilot program under which the [Secretary](/usc/38/4101.md?p=8) may make periodic or lump sum assistance payments on behalf of an [eligible veteran](/usc/38/3202.md?p=1-A) for the purpose of buying down the interest rate on a loan to that [veteran](/usc/38/3701.md?p=b-2) that is guaranteed under this chapter for a purpose described in paragraph (1), (6), or (10) of [section 3710(a) of this title](/usc/38/3710.md?p=a).
- (b) An individual is an [eligible veteran](/usc/38/3202.md?p=1-A) for the purposes of this section if—
  - (1) the individual is a [veteran](/usc/38/3701.md?p=b-2), as defined in [section 3701(b)(4) of this title](/usc/38/3701.md?p=b-4);
  - (2) the individual submits an application for a loan guaranteed under this chapter within one year of an assignment of the individual to duty at a military installation in the United States designated by the [Secretary of Defense](/usc/38/3002.md?p=5) as a housing shortage area;
  - (3) at the time the loan referred to in [subsection (a)](#a) is made, the individual is an enlisted member, warrant officer, or an officer (other than a warrant officer) at a pay grade of O–3 or below;
  - (4) the individual has not previously used any of the individual’s entitlement to [housing loan](/usc/38/3701.md?p=a) [benefits](/usc/38/4303.md?p=2) under this chapter; and
  - (5) the individual receives comprehensive prepurchase counseling from the [Secretary](/usc/38/4101.md?p=8) (or the designee of the [Secretary](/usc/38/4101.md?p=8)) before making application for a loan guaranteed under this chapter.
- (c) Loans with respect to which the [Secretary](/usc/38/4101.md?p=8) may exercise the buy down authority under [subsection (a)](#a) shall—
  - (1) provide for a buy down period of not more than three years in duration;
  - (2) specify the maximum and likely amounts of increases in mortgage payments that the loans would require; and
  - (3) be subject to such other terms and conditions as the [Secretary](/usc/38/4101.md?p=8) may prescribe by regulation.
- (d) The [Secretary](/usc/38/4101.md?p=8) shall promulgate underwriting standards for loans for which the interest rate assistance payments may be made under [subsection (a)](#a). Such standards shall be based on the interest rate for the second year of the loan.
- (e) The [Secretary](/usc/38/4101.md?p=8) or lender shall provide comprehensive prepurchase counseling to [eligible veterans](/usc/38/3202.md?p=1-A) explaining the features of interest rate buy downs under [subsection (a)](#a), including a hypothetical payment schedule that displays the increases in monthly payments to the mortgagor over the first five years of the mortgage term. For the purposes of this subsection, the [Secretary](/usc/38/4101.md?p=8) may assign personnel to military installations referred to in [subsection (b)(2)](#b-2).
- (f) There is authorized to be appropriated $3,000,000 annually to carry out this section.
- (g) The [Secretary](/usc/38/4101.md?p=8) may not guarantee a loan under this chapter after September 30, 1998, on which the [Secretary](/usc/38/4101.md?p=8) is obligated to make payments under this section.

## Source credit

(Added Pub. L. 104–106, div. B, title XXVIII, § 2822(b)(1), Feb. 10, 1996, 110 Stat. 556.)

## Notes

### Statutory Notes and Related Subsidiaries

### Authority of Secretary of Defense

Pub. L. 104–106, div. B, title XXVIII, § 2822(c), Feb. 10, 1996, 110 Stat. 557, directed the Secretary of Defense to reimburse the Secretary of Veterans Affairs for interest rate buy down costs paid to mortgagees under this section and authorized the Secretary of Defense to designate housing shortage areas with respect to housing loans guaranteed on or before Sept. 30, 1998.