 TITLE: What Is a VA Loan? CONTENT: How Does a VA Loan Work?\n------------------------\nBanks, credit unions and mortgage lenders issue VA loans with the understanding that the VA will cover a big portion of the lender's loss if the borrower fails to repay the loan.\nWhen you take out a VA loan, the government provides you an entitlement (or guarantee) of up to 25% of the value of a home you're buying as your family's primary residence, up to a maximum value based on the cost of local housing.\nTo determine that maximum value, the VA uses purchase-price limits—known as conforming loan limits—that apply to mortgages backed by other government home loan agencies. You can look up those limits, which are subject to annual revision, at the Federal Housing Finance Agency's website.\nThe 2019 baseline limit, applicable to most counties in the U.S., is $484,350. The VA loan entitlement for those counties is 25%, or $121,087.50. The top limit for 2019, which applies to counties where housing costs are highest, is $726,525. The VA entitlement in those counties is $181,631.25.\nNote that if you can afford a home that costs more than the top conforming loan limit for your county, you can still use your VA entitlement toward the purchase—but you'll have to finance (or put down cash) to cover the additional cost yourself. This option will still result in significant savings versus financing the whole property yourself.\nConversely, you don't have to use your full entitlement if you find a property you like at a price lower than the conforming limit, and you may be able to apply any unused portion of your entitlement to a future home purchase. END