VA Jumbo Loans and the Certificate of Eligibility
When a veteran or current military member wants to apply for a VA home loan, the first step is to request a Certificate of Eligibility or COE from the Department of Veterans Affairs. The COE tells the lender several things.
The first is the VA loan applicant’s basic eligibility for a VA home loan. The COE is required in most cases as proof that the borrower is able to use this military benefit. In addition, the COE has a section which states how much the borrower’s basic entitlement is, and how much remains if the entitlement has been used before.
The amount of a basic VA home loan entitlement, the amount that the VA promises to pay the lender should the borrower default or go into foreclosure on the mortgage, is $36,000. That information is found on the COE. What the VA certificate of eligibility does not say sometimes leads to confusion for a first-time borrower who wants to apply for a VA Jumbo Loan.
In areas where high-cost housing is typical, the VA has higher loan limits than for other areas. These loan limits can exceed one million dollars in some counties. But a borrower who sees the $36,000 in VA loan entitlement on the COE could wrongly assume that’s all they are eligible for. The VA Lender’s Handbook states otherwise.
“For certain loans in excess of $144,000, additional entitlement may be available. For loans greater than $144,000, but less than $417,000, the maximum entitlement is 25 percent of $417,000, which equals $104,250. For loans greater than $417,000, the maximum entitlement is 25 percent of the appropriate “loan limit” which can vary by county.”
The important part of all this comes next;
“Even though the veteran may have entitlement for certain loans greater than $144,000, the COE will never reflect this potential “extra” entitlement. Instead, an asterisk by the word ‘available’ refers to a note, which explains the possibility of additional entitlement.”
Essentially, the message is that the borrower should not assume that the basic entitlement of $36,000 is all they are eligible to get. A borrower who is qualified to get a VA Jumbo Loan based on their income, debt ratio, the VA loan limit for their location and other factors will work with the lender and the VA to get the additional VA mortgage loan amount. Don’t assume you can’t get more until you’ve spoken with your lender and the VA Regional Loan Center in your area.