VA Jumbo Loans | Rates & Requirements 2022
VA loans present an incredible opportunity to eligible active duty service members, veterans, reservists and qualifying surviving spouses. But if you live in an expensive area or need a bigger loan, a regular VA loan might not be enough. Luckily, a VA jumbo loan is an option.
Here’s what you need to know about this mortgage type.
What is a VA jumbo loan?
A VA loan is considered a jumbo loan if it exceeds the conforming loan limits for your county. Technically, there is no maximum VA loan amount. But the loan cannot exceed the appraised value of the home.
What is VA Entitlement?
Essentially, VA entitlement is the amount that the Department of Veterans Affairs will guarantee for a lender. So, if you default on the loan, your VA entitlement is the maximum amount that the VA would repay your lender.
You will have a full entitlement if this is your first time using a VA loan. Another way to get full entitlement is to pay off a previous VA loan in full and sell the property. If you have a full entitlement, the VA will guarantee up to 25% of the loan amount. Importantly, you can only have your full entitlement restored once.
But if you previously purchased a house with the VA loan and haven’t paid off the loan, you may only have a partial entitlement left. With a partial entitlement, otherwise known as an impacted entitlement, you may still qualify for a jumbo loan. But you’ll have to make a down payment if you exceed your entitlement.
VA loan limits & VA jumbo loan limits
As a homebuyer, knowing the limits of a loan type are important.
When it comes to government-backed VA loans, most homebuyers don’t have a limit. As of 2020, the Department of Veterans Affairs announced changes to the loan program. These changes included that it would guarantee the same percentage of the loan amount for lenders without regard to the loan amount.
Of course, this generous guarantee is only available if your full entitlement is intact.
If you have a partial entitlement, the numbers change a bit. You’ll run into a loan maximum that is impacted based on your down payment. Essentially, you’ll multiply your remaining entitlement by 4 to arrive at your maximum loan amount. But if you are making a down payment, you can add that to your remaining entitlement and multiple it by 4 to arrive at your maximum guarantee available through the VA.
What qualifies as a VA jumbo loan?
A VA mortgage loan is considered a jumbo loan when the amount exceeds the conforming loan limits. Although these limits vary by county, the range is from $647,200 to $970,800 for single-family homes. You can find the conforming loan limits through this convenient map provided by the Federal Housing Finance Agency.
But just because the VA is offering to guarantee this amount, it doesn’t mean that you’ll find a lender willing to approve you for a jumbo loan. With this in mind, you won’t run into a loan ceiling set by the VA. But you will run into a loan limit based on your qualifications.
VA jumbo loan requirements
A VA jumbo loan might be an option for you. The requirements to qualify for this large loan will vary based on the lender.
Is a down payment required for a VA jumbo loan?
For those with full entitlement, the loan can exceed the conforming loan limit for your county. With that, you would have access to a VA jumbo loan. You may not even need to make a down payment.
If you have a partial entitlement, you could still qualify for a jumbo loan. But you may need to make a bigger down payment because you’ll likely exceed your entitlement.
Ultimately, the lender will determine whether or not you need to make a down payment on a VA jumbo loan. For example, a lender may offer a loan of $1.5 million without a down payment to a borrower with a high credit score. But the same lender may require a down payment of 10% on a $2 million loan.
When considering a VA jumbo loan, it is critical to shop around. The right lender will be able to provide the ideal loan for your situation.
Requirements to qualify
The requirements for a jumbo VA loan vary based on the lender.
In general, you can expect more stringent requirements than you would find with a regular VA loan.
Most lenders will want borrowers to have a credit score of at least 620. Plus, you may need to have some cash reserves on hand to qualify for this loan.
VA jumbo loan rates
Typically, VA jumbo loan rates are similar to regular VA mortgage rates. The exact fixed rate you see will vary based on the lender and your loan qualifications.
The good news is your VA jumbo loan rates should be lower than they would be for a traditional jumbo loan. Low rates are just one of the many VA loan benefits available for those with the appropriate military service.
VA jumbo loan funding fees
As with all VA loans, you’ll have to pay a funding fee for the jumbo option.
The VA loan funding fee ranges from 0.50% to 3.6% of the purchase price in 2022. The exact fee will vary based on your loan purpose, which can include purchase, refinance (IRRRL), or cash-out refinance. Additionally, any previous usage of the VA loan can impact your fee.
Although there is a funding fee, you won’t have to pay PMI. With that, your monthly mortgage payment won’t have that added cost.
Pros & cons of a VA jumbo loan
Every mortgage product has advantages and disadvantages. Here’s what to keep in mind about the VA jumbo loan.
Pros of a VA jumbo loan
- Lower interest rates: You’ll likely find lower interest rates with a VA jumbo loan than with a traditional jumbo loan.
- Possibility of no down payment: Depending on your situation, you might not have to make a down payment.
Cons of a VA jumbo loan
- Funding fee: You’ll have to pay a funding fee of 0.5% to 3.6%.
- More extensive property requirements: The property will need to pass a VA home inspection.
VA jumbo loans vs. traditional jumbo loans
Like VA jumbo loans, traditional jumbo loans offer amounts over the conforming loan limit. And with that, traditional jumbo loans cannot be sold through the secondary mortgage market based on the guidelines set by Fannie Mae and Freddie Mac.
The limitations on resale of traditional jumbo mortgages make it challenging for borrowers to find these types of home loans. If you are seeking a traditional jumbo loan, you’ll likely need to make a 20% down payment. That’s on top of having great credit and significant cash reserves.
But VA jumbo loans can be securitized through Ginnie Mae, which makes lenders more willing to provide the loan. Plus, the guarantee by the VA makes a VA jumbo loan easier to obtain than a traditional jumbo loan.
VA jumbo loan FAQ
What is a VA jumbo loan?
A VA jumbo loan offers loan amounts over the conforming loan limits for your county.
This loan type is available through VA lenders that work with eligible borrowers. You’ll need to be an active-duty service member, veteran, or surviving spouse seeking a primary residence. If you are eligible for a standard VA loan, you may be eligible for a VA jumbo loan.
Does the VA allow jumbo loans?
Yes, the VA allows jumbo loans as part of its home loan benefit program.
If you have a full entitlement, you won’t encounter a loan limit from the VA.
How does a VA jumbo loan work?
A VA jumbo loan works by allowing eligible borrowers to obtain loans larger than the conforming loan limits. If you are eligible for a VA loan, a lender may be willing to provide a VA jumbo loan.
What is considered a VA jumbo loan?
A VA jumbo loan is considered any VA loan with an amount larger than the conforming loan limits for a particular county.
When making a home purchase in a high-cost area, the conforming loan limit can be higher. But it might not be enough if home prices are too high. That’s when a VA jumbo loan can come in handy because the loan amount can exceed the limits.
How much do you have to put down on a VA jumbo loan?
The required down payment for a VA jumbo loan varies. In some cases, you won’t have to make a down payment. But some lenders will require a down payment.
In either case, you’ll need to cover a VA funding fee of 0.50% to 3.6%. That’s a substantial fee that will add to your closing costs.
Can I get a VA loan for $1,000,000?
It’s possible to get a VA loan for $1,000,000 but you’ll need to meet the unique borrower requirements of a lender. You’ll likely need a great credit score and substantial cash reserves to qualify for a VA loan of this size.