Living in an expensive area or environment can come with its own difficulty, especially when it comes to purchasing a home. The cost of a home in these areas is usually a significant amount that veterans or service members may find difficult to purchase with a conventional VA loan.
This is where the VA Jumbo loan is needed. So veterans, active duty service members, members of the National Guard, reservists, or qualified surviving spouses, and you need to purchase or refinance an expensive home or need a loan that is bigger loan, the VA jumbo loan is the best choice.
In this article, we will examine what the VA jumbo loan entails and also the current interest rate for a VA loan. At the end of this post, you will get a better understanding of VA loans and how to go about obtaining them. Contact us to help you with your application process.
What is a VA Jumbo Loan?
A VA jumbo loan is a non-conforming loan that exceeds the loan limit set by the Federal Housing Finance Agency (FHFA). Conforming VA loans are usually backed by the U.S government and in the real sense, don’t have limits placed on their size.
Depending on the limit placed on a VA mortgage, any loan that surpasses such limit is regarded as a jumbo loan. However, it is important to know that the FHFA adjusts these rates to fit some areas where the cost of buying a home is on the rise.
VA Jumbo Loan Advantages
The VA jumbo loan is quite different from other conventional loans. The reason is that, for conventional jumbo mortgage loans, there is no government guarantee. Therefore the loan risks lie solely on the lender.
However, for VA loans, there is a government guarantee of 25% should in case the lender defaults. but, it is essential to note that, for loans above the conforming limit, the Department of Veterans Affairs will not guarantee 25% of the full loan.
The beautiful thing about the VA Jumbo loan is that veterans and active-duty members can utilize their VA loan eligibility to have part of their Jumbo loan guaranteed.
The VA Jumbo Loan Limit
The VA loan limits do not place a fixed rate on the amount you can borrow. Instead, they are applied to determine how much you can borrow before considering if it’s necessary to make a down payment.
There are two figures to put in mind when making reference to VA jumbo loan limits. The first is the minimum amount obtainable before you can classify a loan as Jumbo. The second is the maximum amount of a VA Jumbo loan.
From 2020 to date, the VA offers uniform guaranteed percentages for VA lenders regardless of the loan size. This is given as long as you have a full entitlement. However, your VA guarantee will differ a bit if you have a partial entitlement. The maximum VA loan amount you can obtain depends on if you have existing equity on your home or you’ll be making a down payment.
Although there’s no limit to the amount of VA loan you can obtain, most mortgage lenders consider a loan as Jumbo if it exceeds the local conforming loan limits. You have to pay close attention to the maximum loan limit offered by various mortgage VA-approved lenders for a Jumbo loan.
VA Entitlement
The VA entitlement is an essential concept to know if you own a home with a VA loan and you’re seeking to get another home loan. The VA entitlement is also necessary if you have a home that was short-sold and has yet to completely pay back the difference.
When you have a partial entitlement, a down payment is usually required. Such payment would have been avoided if you have a full entitlement. For situations where you didn’t default on your previous VA loan and still own your home, you can have your entitlement restored fully at a go.
As long as you fully pay off your VA home loan in a home sale, you can use your VA entitlement numerous number of time.
VA Jumbo Loan Requirements
The supporting requirements for VA jumbo loans vary by lender and the size of the loan. More importantly, they are more stringent that a standard VA loan. The following are the necessary requirements if you want to apply for a VA Jumbo loan.
Credit Score
Most Mortgage lenders often place their credit score requirements at 620 and above for a VA jumbo loan. While a credit score of at least 580 may qualify you for a non-VA jumbo loan and another loan type.
VA Cash Reserves
Some mortgage lenders may also request fora VA cash reserves before you qualify for a VA loan of a high cost. What this infers is that you’ll be needing some mortgage monthly payment at the bank at closing. This serves as an extra level of financial security.
Standard Property and Appraisal Requirements
Firstly, it is expected that the reason for applying for a VA jumbo loan is to utilize it for constructing a primary residence. Furthermore, your primary residence needs to pass the basic inspections for safety and soundness.
Debt-to-Income Ratio (DTI)
Your debt-to-income ratio enables your VA lender to compare the minimum monthly mortgage payments on your debts to your monthly income. Sometimes, you may be eligible for a VA loan with a slightly higher DTI ratio than you can’t for another loan program.
The VA Jumbo Loan Rates in 2022
There is not much difference between VA jumbo loan rates and regular VA mortgage rates. The mortgage rates given by your lender are dependent on the bond market situation at the time of applying for your mortgage.
Note that because you’re getting a higher loan amount does not mean that the VA loan rates will be higher. Although it could be, it isn’t usually a result of your loan amount.
Current VA Jumbo Loan Rates
As of August 2022, the average 30-year VA mortgage rate is 4.65% with an APR of 4.74%. Also, the average 30-year VA refinance rate is 4.62% with an APR of 4.8%. A 30-year fixed jumbo rate has an interest rate of 5.21% with an APR of 5.22%, while a 15-year fixed jumbo rate has an interest rate of 4.56% with an APR of 4.57%.
In addition, a 5/1 ARM jumbo rate has an interest rate of 4.44% with an APR of 5.88%, while a 7/1 ARM jumbo rate has an interest rate of 4.85% with an APR of 5.29%.
Is Down Payment Required for a VA Jumbo Loan?
The need for a down payment is dependent on the amount of the VA home loans. For loans that amount to $1.5 million accompanied with a credit score of 640 or more, no down payment is required. However, for VA loans within the range of $1.5 million and $2 million, a 10% down payment or 10% equity in a refinance is required. Coupled with this, you’ll need to have a 680 credit score.
Funding Fee on a VA Jumbo Loan
Veterans Affairs charge borrowers a funding fee. The VA funding fee is a certain percentage of the loan amount. The amount charged is dependent on the loan type and eligibility of the members. Information on this can be found on the website of the Department of Veterans Affairs.
The Va funding fees can range from 3.3% if you are utilizing a VA eligibility for the second time on zero-down Veterans united home loans to 5% for an Interest Rate Reduction Refinance Loan (IRRRL). If you qualify for an exemption, you will certainly save money with a VA jumbo loan.
While it is important to pay the VA funding fee, some veterans are exempted from payment. This includes:
- Veterans who are receiving VA compensation due to a service-connected disability.
- Veterans who did not receive retirement or active duty pay, but are entitled to receive compensation for a service-connected disability.
- The surviving spouses of Veterans who passed away during service or from a disability connected to service.
Ascertain Your Jumbo Loan Eligibility
When you compare VA jumbo loans to conventional VA loans, you’ll figure that it offers you the avenue to pay smaller down payments, save money through lower interest rates, have lower closing costs, and there is no Private Mortgage Insurance (PMI) premiums on the VA loan.
VA jumbo loans come allows you to enjoy better refinance rates and VA loan rates while getting for getting a bigger loan. You also get to enjoy most of the same benefits as that other VA loans.
To ascertain whether you are eligible for a VA jumbo loan, reach out to us at our office. We will gladly help determine your eligibility and walk you through the process of securing a VA jumbo loan.