What is a VA Jumbo Loan?
When a borrower applies for a VA insured home loan, there are several factors that go into calculating how much the loan will be. One factor is the home’s fair market value. Another is the VA loan limit set by county. According to the VA official site, “The maximum guaranty amount (available for loans over $144,000) is 25 percent” of each year’s VA loan limit.
A qualified VA loan applicant with a full entitlement can borrow up to the county limit–usually up to $417,000–and the Department of Veterans Affairs will guarantee 25 percent of the loan amount. But homes located in high-cost real estate areas such as California might not be available at or below the maximum $417,000 county limit found in other areas. Can a borrower get a higher VA loan amount than $417,000?
Depending on where the new home is located, the answer could be yes, thanks to the VA Jumbo Loan program. VA Jumbo Loans allow a qualifying borrower to apply for a regular VA home loan with no money down on amounts higher than the typical $417,000 limit. How does this program work?
The VA has identified nearly 150 counties across the United States that have much higher housing market costs than elsewhere in the country. The VA county limit in these areas is set much higher than the typical $417,000 maximum found elsewhere–closer to $1 million or even higher in some cases.
In such high-cost housing markets, a veteran applies for the loan as he or she would in any other part of the country, and the VA allows a no-money down loan up to the higher county loan limit. The VA Jumbo Loan–defined as any loan greater than $417 thousand–is available for fixed rate mortgages only, and special terms and conditions may apply depending on circumstance. In some cases, funding fees cannot be financed for loans greater than $417,000, and for certain VA Jumbo Loans a credit score of $650 or better may be required.
If a VA Jumbo Loan is issued for an amount that exceeds the county limit, the borrower is required to pay a 25% down payment–but only on the amount that exceeds the VA county limit. In our next blog post we’ll examine some of the rules for VA Jumbo loans and typical VA loans that exceed the VA county loan limit.