VA Jumbo Loans
Most lenders have a maximum amount they will lend to a borrower regardless of the actual qualifications of that borrower. Traditional loan limits may not be enough to cover everyone’s needs, though. When high property values are present, it may be necessary to consider a jumbo loan. A VA jumbo loan is simply a VA loan worth a higher amount than is traditionally lent.
What Are Jumbo VA Loans?
When considering jumbo VA loans, it is important to understand these limits carefully. The Department of Veteran’s Affairs does not, itself set a loan limit on the borrower. Rather, the VA’s job is to provide a guarantee to the lender offering the loan. If the home buyer obtains a VA loan and then does not pay on that loan, the Department of Veteran’s Affairs will provide a payment to the lender for 25 percent of the loan amount. This is much like an insurance plan given to the lender to encourage them to lend to those borrowers that meet VA loan terms.
What Are VA Jumbo Loan Limits for 2018?
VA jumbo loan limits are based on the current guidelines set by the federal government. The standard VA loan limit as of 2018 is $453,100 in most areas. That means that the VA will guarantee up to 25 percent of this amount to lenders. Borrowers can obtain a VA loan up to that amount through a traditional VA mortgage. VA jumbo loan limits can be higher in some counties. This is typically in areas such as California or New York where home values are significantly higher. In this case, the maximum amount is $679,650.
For a VA jumbo loan, California residents will need to live in a county recognized as one having high home values. If so, then a VA jumbo loan California purchase is more likely to occur. If a consumer lives in another area of the country without high home values, this maximum may not be this high. Typically, Los Angeles and surrounding counties have these home values.
What Are Current VA Jumbo Loan Rates?
Current VA jumbo loan rates depend on the lender and the individual borrower’s qualifications. Typically, jumbo VA loan rates will be lower than interest rates for a conventional, jumbo loan. The VA is still backing the value of the loan, which reduces some of the risks to the lender. As a result, it becomes more affordable to obtain the loan. However, jumbo VA loan rates will differ from one lender to the next as well as numerous times throughout the year.
For borrowers who qualify for a VA loan, and those living in a county where the home values are significantly higher than the national average, it is typically ideal to obtain a jumbo VA loan instead of a conventional loan or an FHA loan.
What Are the Benefits of a VA Jumbo Mortgage?
With any type of VA jumbo mortgage, there are likely to be benefits. For those that qualify, these loans typically offer lower interest rates and easier qualifications. Here are some examples of the benefits of these loans.
With a traditional VA loan, the home buyer does not need to have a down payment. With a jumbo loan, VA guidelines state that there may be a down payment requirement. If the home buyer purchases a home above the loan limit for that county, he or she may be required to make a down payment. The down payment is often 25 percent of the total borrowed amount. This may vary by lender. Down payments here are still usually significantly lower than they are with a traditional loan.
VA Jumbo Loan Rates
Because of the reduced risk, home buyers can find lower VA jumbo loan rates than they would a traditional conventional mortgage. However, limitations exist here as well. For example, an individual’s credit score and credit history will play a role in the rates charged. Some borrowers will want to compare numerous lenders to determine which one offers the best overall rates. Rates can vary significantly, and that means borrowers seeking the most affordable option need to take the time to discuss options with various lenders.
Key VA Jumbo Loan Guidelines to Know
It is important to know a few key VA jumbo loan guidelines before obtaining these loans.
- Individuals must meet the same qualifications as a VA loan in that they need to be a member of the U.S. Armed Services as an active duty member or a retired veteran. They may also be a spouse of an individual who has served.
- Individuals will need to have verifiable funds. That is, they must be able to show they have the income to make payments on the loan according to the terms set by the lender.
- For a jumbo loan, VA requirements may include a down payment. This depends on the size of the loan and the lender’s requirements. Generally, a down payment of 25 percent above and beyond the VA loan limit is necessary.
- Any veteran who is considering the purchase of a home that is above the county limit set by Freddie Mac and Fannie Mae (which the VA typically follows) will need to consider jumbo financing. It is important to remember that these loans are still very much at the discretion of the lender and the creditworthiness of the borrower.
With lower VA jumbo loan rates than conventional, jumbo loans and lower down payment requirements, many individuals will benefit from obtaining this type of loan for their needs. Individuals seeking out these loans will need to work with a mortgage lender approved by the Department of Veterans Affairs to offer VA loans. Typically, most mortgage brokers and lenders meet this requirement. Individuals should also consider the opportunities available to them from other types of loans, depending on their needs. Most often, borrowers will find VA loans are the most effective and affordable option available.
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