Homeowners who have their eyes set on a dream home may find themselves in need of VA jumbo loans to make their wish come true.
There are usually loan limits imposed by the Department of Veterans Affairs and the amount they will guarantee on any particular loan.
While it is possible to surpass this amount, you may lose some of the beneficial features that are inherent to the financing program. You might find these small sacrifices worthwhile if it means you can own a larger and much nicer home than you could otherwise afford.
Before you commit to one of these VA jumbo loans, you should know a few of the key details so you can be prepared for what lies ahead.
VA Jumbo Loan Rates
One of the first questions that prospective buyers ask is what the VA jumbo loan rates are.
Unfortunately, this is a very difficult question to answer precisely because the VA doesn’t set specific rates on any of their financing programs.
It would be impossible for them to mandate one set interest rate because all of the loans are technically issued by private lenders.
Your lender will be responsible for determining your interest rate based on a number of key factors. The VA jumbo loan rates will be heavily influenced by the economy and the current state of the real estate market in your area.
Economic indicators can have a tremendous impact on interest rates, and these factors will be largely out of your control.
Lenders will also examine your credit profile to help determine your interest rates. They may examine your credit score, debt-to-income ratio, and the amount you wish to borrow over a certain timeframe before making a final decision.
In general, a higher credit score with lower amounts of debt tends to yield the lowest possible interest rates.
Be certain to shop around with several lenders in your area to find the lowest rates. After all, a small difference in your interest rate could save you thousands of dollars over the course of your VA jumbo loan.
VA Jumbo Loan Limits
For the ordinary VA home loan, there are typically loan limits established for each county across the country.
Most counties have a loan limit of $453,100, but some areas with a higher cost of living may have an increased limit.
Borrowers aren’t limited to this amount, but the VA loan limits tend to dictate the maximum cutoff point where lenders will start to take away one of the major benefits of the financing program – no down payment.
Once you exceed the loan limit for your area, the mortgage is now considered to be a jumbo loan. As a result, lenders will require some form of down payment to help secure the financing they are issuing above and beyond the guaranteed amount from the Department of Veterans Affairs.
How much of a down payment can you expect to pay for a new VA jumbo loan? Well, the answer really depends on how much the house is worth.
Generally speaking, homebuyers are typically required to put down 25 percent of the difference between the county loan limit and the list price of the home.
What does that really mean?
Let’s suppose that you wanted to purchase a home that cost $653,100 – a full $200,000 above the county loan limit for your area ($453,100). You would need to put down $50,000 to make up for one-quarter of the difference in price between your loan limit and the list price.
You may be required to put down more money if your entitlement has already been partly used on past home purchases.
While it does erase the inherent benefit of not needing to make a down payment, this is still extremely generous in terms of upfront savings.
A prospective home buyer can still save thousands of dollars and make homeownership a reality much sooner with the reduced down payment required.
It may take more work to find a lender willing to issue a VA jumbo loan, but it is possible. You will need to check around with the lenders in your area to see what you might be approved for and which programs they offer.
VA Jumbo Loan Requirements
The requirements for a VA jumbo loan are the same as those for the smaller home loans guaranteed by the VA.
They are available to service members and veterans who qualify for a Certificate of Eligibility based on their service commitment and previous duties.
The details regarding criteria for a COE will vary based on the branch of service and the type of service you committed to, but they are generally considered to be:
- Active duty status for at least 181 continuous days during peacetime (90 days during war)
- Active duty status for less than 181 continuous days during peacetime (90 days during war) and discharged for a service-connected disability
- Discharged with other than dishonorable discharge
Spouses may qualify under certain circumstances, including a spouse that died in service or from a service-connected disability. The specific requirements to obtain a Certificate of Eligibility are listed in greater detail on the VA website here. Check to see if you qualify before you head to your lender to ask more questions about the VA jumbo loan.
Credit Score
There are no minimum credit scores required to receive a VA home loan. Lenders are encouraged to take a look at the overall application and profile of each potential borrower.
This gives borrowers who may not qualify for conventional financing an opportunity to still become homeowners. How does this process work?
Because the VA works with so many different lenders to guarantee home financing, they allow the lenders to set the minimum standard they will accept for borrowers.
The guarantee of the federal government grants a little more security to a lender and makes them more likely to take on a riskier client. Most lenders have a standard benchmark they use to determine eligibility, but they aren’t set in stone.
A private lender is likely to look for a credit score of 620 or above. This will be particularly true for individuals seeking a VA jumbo loan. You will be borrowing far more money than you would be the standard VA home loan, so they want to ensure that you are likely to repay it.
Don’t worry too much though. If you’re denied at one lender, you can always try somewhere else. As long as you can find a lender who is willing to work with you and your credit score, the federal government will still back the loan.
Debt-to-Income Ratio
Your debt-to-income ratio plays a huge role in determining your eligibility for a VA jumbo loan.
This number compares the total amount of debt your family has and compares it to your gross income.
Debt can include anything from student loans to auto loans to credit card debt you racked up over the years.
This is rather simple to determine. Pull out all of your monthly bills and tally up their total cost each month. You won’t need to include things like groceries, electricity, or the phone bill unless you put them on your credit card.
These are recurring and necessary monthly expenditures, but they don’t represent money that you’ve borrowed from someone else.
You will take this figure and divide it by your total income. Multiply your answer by 100 to receive your debt-to-income ratio.
Many lenders prefer for borrowers to have a debt-to-income ratio of 41 percent or less. This demonstrates that you have some financial flexibility for other miscellaneous obligations that don’t fall under the debt umbrella.
It also ensures that you have some money to potentially stash away in a savings account, making you more likely to pay your mortgage than someone who is completely maxed out on their income.
While there may not technically be a maximum debt-to-income ratio set by the VA, this is a pretty good rule of thumb.
You can lower your ratio by paying off some of your credit card debts or loans if this is the reason you can’t qualify for a VA jumbo loan.
Frequently Asked Questions
What is the down payment on a VA jumbo loan?
The down payment on a VA jumbo loan is typically 25 percent of the difference between the county loan limit and the purchase price of the home.
What is the VA jumbo loan maximum?
There is no VA jumbo loan maximum. However, you must be able to put down 25 percent of the difference between the county loan limit and the list price of the home in order to use this type of financing.
Can a VA jumbo loan cover more than one property?
No, a VA jumbo loan can only cover one property at a time.
VA Jumbo Loans Conclusion
Applying for a VA jumbo loan could be the perfect opportunity for you to purchase the house of your dreams. Imagine the luxury that your family could reside in if you could somehow obtain the financing for this new property.
VA jumbo loans might not offer the exact same benefits as the more traditional home loans, but they do still make homeownership more accessible to veterans and service members. Don’t hesitate to reach out to your lender today to see if you might qualify for one of these jumbo loans.
