VA jumbo loans: Another great option for veterans
If you’re looking to take full advantage of your VA benefits, and you’re VA–eligible, a VA jumbo loan may be an ideal home loan solution.
Thanks to VA’s relaxed guidelines and down payment requirements, VA jumbo financing can offer a tremendous opportunity for qualified veterans looking to purchase or refinance.
And, finding a lender for your VA jumbo loan should be easy, as many lenders now offer VA jumbo loan products.
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What’s considered a VA jumbo loan?
VA loans are usually considered to be “jumbo” when they exceed local conforming loan limits. If your loan is classified as a VA jumbo loan, that typically means you’ll have to make a down payment. In addition, the requirements to qualify for a VA jumbo loan can be stricter than for a VA loan below conforming loan limits.
About VA loan limits
Generally, VA loans limits correspond with conforming loan limits. In 2022, those limits max out at $ in most of the U.S. but can reach $ in areas deemed high–cost.
It’s important to note that VA loan limits don’t represent a cap on how much home you can buy. Thanks to VA loan limits being abolished in 2020, there is no maximum VA loan amount set by the government.
VA loan limits do not represent a cap on the amount you can borrow. Rather, they determine how much you can borrow before needing to make a down payment.
Instead, VA loan limits help determine how much veterans without their full VA loan entitlement can borrow before needing to make a down payment.
These rules can vary by lender because each one gets to set its own loan caps and down payment rules. But many use the conforming limit as a baseline. Anything above the conforming limit is typically considered a higher–risk loan and might require a bigger down payment or better financials.
VA jumbo loan requirements
Underwriting guidelines for VA jumbo loans vary according to the size of the loan and the lender. But you can expect the rules to be tougher than for a standard VA loan.
Most lenders want to see a credit score of at least 620 for a VA jumbo loan. For a non–jumbo VA loan, on the other hand, you may be able to qualify with a credit score of 580 or above.
Depending on the lender, you may also need cash reserves to qualify for a high–cost VA loan. That means you’ll need a certain number of months worth of mortgage payments in the bank at closing, as an extra level of financial security.
Standard VA loans, on the other hand, typically do not require any cash reserves.
VA jumbo loan rates
VA jumbo loan rates are mostly comparable to regular VA loan rates. Your rate won’t necessarily be higher just because the loan amount is higher. It can be, however, depending on the lender.
Today’s 30–year fixed VA loan rates start at % (% APR) according to our lender network.
Like other VA loans, VA jumbo loan interest rates are lower than for a conventional jumbo loan. And the underwriting guidelines are looser than for a conventional loan option, too.
VA jumbo loan down payments
For VA loans, jumbo or otherwise, a down payment may be required if you no longer have full entitlement. That may be the case due to either a prior VA foreclosure or having one or more active VA loans at the same time.
With full VA loan entitlement, veterans technically do not need a down payment for a jumbo loan, regardless of the loan amount. According to the VA’s rulebook, if your lender says you can afford it, the VA will back it.
But, as explained above, many lenders require a down payment for VA jumbos loans despite the Department of Veterans Affairs rules. That’s because bigger loan amounts are higher–risk, and a down payment lessens the financial risk to the lender.
- A lender might allow VA jumbo loans of up to $1.5 million with no down payment. But you may need a slightly higher credit score for loans above $1 million
- The same lender may allow a loan amount of up to $2 million, but only with a 680 score and a 10 percent down payment. On an $850,000 home, a 10% down payment comes out to $85,000
- A conventional jumbo loan, on the other hand, may require up to 20% down to qualify for financing. A 20% down payment on an $850,000 home comes out to $170,000
Since the rules can vary so much by lender, it’s important to shop around and explore various options if you’re planning to buy a high–priced home with a VA loan.
VA jumbo loan funding fees and entitlement
Fortunately for VA jumbo mortgage borrowers, the funding fee for a VA jumbo loan is the same as it would be on a traditional VA loan.
In 2022, VA funding fees can range from 0.50% to 3.6% of the loan amount depending on your loan purpose (purchase, refinance, or cash–out refinance) and whether you’ve used your VA loan benefit before.
When it comes to VA entitlement, there’s more good news.
Previously, the VA capped the amount it would guarantee, which impacted the amount you could borrow.
Today, since there’s no longer a maximum loan amount, your entitlement works the same on a VA jumbo loan as it does on a standard VA loan.
Other types of VA loans
VA home loans, also known as Department of Veteran Affairs home loans, were designed to help active–duty service members, reservists, National Guard members, veterans, and eligible surviving spouses.
According to VA Secretary Robert Wilkie, VA home loans have helped over 25 million families since the program’s inception in 1944.
VA loans are a specialized loan program offered exclusively to qualified veterans. But, being a specialty product doesn’t mean they’re more difficult or cumbersome than their counterparts.
In fact, they tend to be easier to obtain when compared to other home loans.
VA home loans come in various shapes and sizes:
- VA purchase loan: Veterans and service members can use a VA loan to purchase a new or existing home with $0 down payment and no mortgage insurance
- VA IRRRL: The VA Interest Rate Reduction Refinance Loan, also known as a VA Streamline, is a simple, low–cost refinance that typically requires no credit underwriting, income verification, or even an appraisal
- VA cash-out refinance: Eligible veterans can use a VA cash–out refinance to access cash from their home’s equity. Most lenders allow qualified veterans to access 90 percent of their home’s value, while some allow up to 100 percent.
- VA energy efficient mortgage: VA’s energy efficient mortgage allows vets to borrow additional funds above and beyond the purchase price for energy efficiency home improvements.
VA loans are also known for having more flexible qualifying terms and lower interest rates.
Check your jumbo loan eligibility
Home prices have been on a steep incline in recent years. That means more homeowners will be looking to finance their home purchase with a jumbo loan.
Thanks to the VA’s generous lending rules, service members and veterans can finance high–priced homes with less money down and low mortgage rates.
The information contained on The Mortgage Reports website is for informational purposes only and is not an advertisement for products offered by Full Beaker. The views and opinions expressed herein are those of the author and do not reflect the policy or position of Full Beaker, its officers, parent, or affiliates.