If you are currently serving in the military or National Guard, are in the reserves, are a military Veteran, or are a qualified surviving spouse looking to purchase a home above the VA loan limit, you need to get familiar with the benefits of a VA jumbo loan rate and its guidelines.
Traditional jumbo loans require 20% or higher down payment. Others that allow less down payment, require potentially expensive private mortgage insurance (PMI). Thus, the monthly payment increases. But, a qualified VA borrower with sufficient eligibility could benefit greatly when crossing the VA loan limit threshold. For most counties, the 2019 VA loan limit for a single family home is $484,350. But, we are going to show you what glorious things can happen by using VA jumbo loans.
Believe it or not, many loan officers do not know this product exists, much less understand how it works. I just heard the other day that a loan officer won over a buyer by showing how a VA jumbo loan rate and down payment would save the buyer significantly. The other lender said the maximum VA loan is $484,350! Well, we are going to make sure you are educated in the following areas on this “weapon of mass consumption” so you do not miss out on a huge opportunity!
- Determining VA eligibility
- Down payment requirements
- Mortgage insurance
- Credit guidelines
- Additional benefit for disabled Veterans
- Seller paid concessions
- Open up more housing opportunities
Do I Have Enough VA Eligibility to Get a VA Jumbo Loan Rate?
In order to qualify for any VA loan, a borrower must have sufficient VA entitlement, also called VA eligibility. This maximum loan amount and possibly down payment are determined by reviewing a borrower’s VA certificate of eligibility (COE).
When a lender reviews the VA COE, there are several key areas that are revealed. These include:
- If Veteran has eligibility
- Prior VA loss from short sale or foreclosure
- Existing VA loan that will not be satisfied prior to closing
- Surviving Spouse eligibility
- First time or subsequent use
- Exemption from VA funding fee
All of the above play a key role in determining the loan amount, down payment required, and part of the fees. To learn more details about VA eligibility and using it to get a VA jumbo loan rate, click on the button below.
Even though it works best to have full eligibility when using a VA loan, it is possible to have multiple VA loans at once. One of them can be a VA jumbo loan, too!
VA Jumbo Loan Mortgage Insurance
When compared to other low-to-no down payment home loans, VA jumbo loans have a huge advantage in the area of mortgage insurance. First of all, VA loans do not charge monthly mortgage insurance. Therefore, just the principal, interest, taxes, and insurance are included in the monthly mortgage payment.
This can make a big difference in a monthly payment. Especially when comparing with a conventional jumbo loan with PMI as they can be very expensive.
But, VA loans do have an up-front form of mortgage insurance called a VA funding fee. The financed VA funding fees in most cases range from 2.15% – 3.3% of the loan amount. Although, this depends on the scenario. But, with 5% down payment or equity, it drops to 1.5%. Furthermore, 10% or more down payment drops the VA funding fee to 1.25%. Both of these come in handy, especially with higher jumbo loan amounts that require a down payment.
How Much Down Payment is Required for VA Jumbo Loans?
VA jumbo loans may go up to $1,000,000. Once the loan amount surpasses the VA county loan limit, VA jumbo loans and guidelines take over. Fortunately, many of the same rules apply such as no monthly PMI, same funding fee, closing costs, and seller paid concessions.
However, some guidelines are a little more strict than traditional VA loan amounts. Unlike traditional jumbo loans, a lot of VA jumbo loans do not require a large down payment percentage. Actually, at $500,000, $600,000, or even more, the down payment percentage can be very low. Here’s a couple examples of how low the down payment may be on a VA jumbo loan.
For simplicity, let’s assume the common VA county loan limit of $484,350 and full VA eligibility available by closing.
- $550,000 purchase price requires a $16,412.50 down payment which is only 2.98%
- $600,000 purchase price requires a $28,912.50 down payment which is only 4.82%.
Both scenarios require less than 5% down, there is no monthly PMI, and the VA jumbo loan rate is awesome! If a buyer wants to reduce the VA funding fee down to 1.5%, just put down a little more to get it to 5% down payment! Just another little trick to understand to work in a borrower’s favor!
If you think that a VA jumbo loan could be an option, reach out to an OVM Financial loan officer. The required down payment (if required) can be expertly calculated for you.
Additional Benefit for Disabled Veterans on VA Jumbo Loans
Disabled Veterans have a further advantage in this area. The reason is that if a Veteran is considered by VA to be 10% or more disabled, the VA funding fee is waived- this means no extra fee on top, which saves anywhere from 1.25 – 3.3% of the loan amount! For VA lenders to verify this additional VA loan savings, they will review the certificate of eligibility. If you have your own COE, you would look for the term “exempt”- meaning that the Veteran does not have to pay the funding fee.
Therefore, this is the reason that VA loans are almost always the best choice for a disabled American Veteran.
No Other Jumbo Loan Allows These Seller Concessions!
Most have heard the term seller paid closing costs. Just in case you haven’t, it means the seller includes a certain amount of the purchase price to allocate towards the buyer’s closing costs. Each loan type has a limit on these costs. Like other areas, VA excels over other loans in this area. First of all, VA allows all customary closing costs to be paid by the seller. But, a VA jumbo loan really becomes a thing of beauty in the area of sales concessions.
VA gets creative in this area to help qualifying borrowers buy a home. Yes, it does include VA jumbo too! So, over and above seller paid closing costs, the seller may also pay for…
- First year of insurance
- Escrows set up
- Home repairs not required by the VA appraisal
- Paying off buyer debt or collections
- Buying out of a current lease
- AND down payment
Those are a lot of cool ways VA allows a seller to help a Veteran buy a home! Can you believe that even if a 3% down payment is required, that the seller can cover that? There’s even an additional 1% of the price left for some of the other areas. So, that makes it possible for a no money down luxury home and a VA jumbo loan rate!
What if the buyer doesn’t need this? Well, it could be worth the consideration. Why do this if you don’t need it? Because borrowing the money at a low, VA jumbo loan rate and keeping the extra funds in the bank could make more sense.
If you are not sure, ask an OVM Financial loan officer to explain how it could work and then discuss the option with your financial adviser.
Realtors, Are You Bringing Up VA Jumbo Loans for Higher Priced Homes?
You should always, always, always, ask if a buyer is currently in the military or reserves, a Veteran, or surviving spouse of a deceased Veteran. Why is this so important? Because, we just listed a lot of reasons. Mainly, it is not missing out on potential savings including a low down payment percentage (depending on the loan size and borrower eligibility). Another savings includes potentially lower monthly mortgage payment with no monthly mortgage insurance.
On top of that, a VA jumbo loan rate could make the Realtor’s job easier. One benefit is potentially expanding the home options for a buyer. By lowering the monthly payment and/or the down payment, it opens up the possibilities for an eligible buyer.