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Difference between a VA Guaranty and a VA Loan

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TERMINOLOGY

There are a few misconceptions when it comes to a VA guaranty and a VA loan. A VA loan is not made by the United States Department of Veterans Affairs. It is made by a bank, a mortgage company or one of various private lenders. A VA guaranty concerns the amount of a VA loan that the VA will guarantee the lender will not lose if a borrower defaults on the loan.

VA Guaranty Limits

When a lender provides a VA loan to a qualified military member, the VA will guarantee only 50 percent of the loan if the loan amount is for $45,000 or less. The VA will guarantee only 40 percent of the loan if it is for an amount between $45,000 and $144,000.

The highest dollar amount the VA will guarantee to repay a lender in the event a borrower defaults on a VA loan is $36,000. However, this is not, of course, the maximum amount a military member can borrow from the lender.

VA Loan Maximum

A VA loan can be obtained for the purchase amount of a home or for the appraised value, whichever is lower. Down payment limitations may apply, which the borrower must clarify with his or her lender before getting the loan.