A Closer Look at VA Jumbo Loans

Home with a VA Jumbo Loan

VA jumbo loans offer veterans and military buyers significant benefits, especially compared to the conventional jumbo landscape.

First, let’s define “jumbo.” Regardless of the VA’s county limit, anytime a veteran wants a loan greater than $424,100, they’re likely looking at a jumbo mortgage loan. That figure represents the “conforming” loan limit for conventional loans, and it’s also the current VA loan limit for most of the country.

While VA loans operate under their own rules regarding county-specific loan limits, most lenders still consider anything above $424,100 to be a jumbo loan. VA loan limits in the continental United States top out at $636,150.

VA Jumbo Loan Guidelines

Borrowers will usually encounter tougher credit and underwriting requirements for VA jumbo loans compared to a conforming VA loan. You might need a higher credit score and a lower debt-to-income ratio, for example.

You might also need enough cash reserves to cover a certain number of months’ worth of mortgage payments. Veterans United currently requires two months’ worth of reserves in most cases, and this money can’t come from gift funds.

Ultimately, jumbo mortgage guidelines will vary depending on the lender, the size of the loan, the type of property you’re seeking to purchase and other factors. But credit and underwriting requirements for VA jumbo loans are often considerably more lenient than what veterans and military buyers will need for conventional jumbo loans.

Jumbo Down Payments

Whether you need a down payment will depend on a couple things, chiefly the county loan limit and how much VA loan entitlement you have.

A veteran with full VA loan entitlement wanting to purchase a $600,000 home in a county where the loan limit is $636,150 doesn’t have to worry about a down payment. The loan size is definitely in jumbo territory, but it’s also below the VA county loan limit.

Now, let’s say that same veteran decides to purchase a $700,000 home. Because that’s above the $636,150 county loan limit, the borrower in this case would need to make a down payment. The down payment in situations like this needs to be at least 25 percent of the difference between the loan limit and the mortgage loan amount.

Here’s how the math breaks down: [($700,000 – 636,150) = $63,850] x 25 percent = $15,962

The veteran would need a down payment of $15,962 in order to move forward. To put that in perspective, this down payment represents just 2.3 percent of the loan amount. For a conventional jumbo loan, it’s not uncommon for buyers to need 10 or 20 percent down, which would be anywhere from $70,000 to $140,000.

Needless to say, the down payment structure is a huge benefit of VA jumbo financing.

Keep in mind the required down payment can increase significantly if you’ve already used some of your VA loan entitlement and it can’t be restored, either because you currently have a VA loan or your lost one to default.

VA Jumbo Loan Rates

VA jumbo loans often come with slightly higher rates compared to VA Loans below the conforming loan limit. However, VA jumbo loan rates are still very competitive and between the more relaxed guidelines and down payment setup, VA jumbo financing can offer a tremendous purchasing opportunity for qualified borrowers.