In most areas of the country, the VA offers loan limits of $453,100, though in certain counties throughout the country the standard limit goes higher, up to $679,650. But, some borrowers need even more than that to find a suitable home for their families. Families who need to borrow one million dollars or even more to purchase homes will need to consider a VA jumbo loan to cover their purchase.
What Is a VA Jumbo Loan?
Jumbo VA loans are loans that exceed standard VA loan limits for a specific area of the country. Whether you live in an area with the standard VA loan maximums or one of the areas that offer higher maximums for VA borrowing, the jumbo loan program allows borrowers to purchase homes that exceed those values without sacrificing the benefits so commonly associated with the VA loan program, such as:
- Relaxed paperwork requirements.
- No down payment on the standard loan amount (with borrowers only paying a down payment on the difference between the total loan amount and the VA loan limit for that county).
- No monthly private mortgage insurance requirement.
- Limited closing costs.
- No early payment limits.
- Lower interest rates than other loan types (on average).
- Slightly more forgiving credit requirements for borrowers.
Jumbo VA loan rates, while slightly higher than standard VA loan rates are still better, for most borrowers than traditional jumbo loan rates will be.
What Do Jumbo VA Loans Mean for Borrowers?
One of the biggest differences between a traditional VA loan and a jumbo loan is not the jumbo VA loan rates, which may be slightly higher, but in the necessity to pay a down payment on the difference. For instance, if you live in most of the country and purchase a home that is $50,000 more than the standard VA loan limit you will need to pay 25 percent of that $50,000, or $12,500 as a down payment.
The other difference is that the credit requirements may be stricter with VA jumbo loan applications than with standard VA loans. One interesting reason is that VA jumbo loan rates are often highly competitive with standard jumbo loans offering lower costs because of the reduced risks to lenders, making them excellent choices for veterans and their families.
What Borrowers Need to Know About VA Loans
VA loans are different than traditional loans in many ways. With limits determined by county and an impressive range of terms to consider, one thing many veterans do not realize is that the VA does not offer the loan. They simply guarantee up to 25 percent of the loan.
This 25 percent guarantee makes veterans with this type of loan more attractive to lenders who remain averse to risk after the housing crash of 2008. The more attractive veterans are to lenders, the more options they have available to them when the time comes to borrow money to purchase a home.
The problem is that even with what would be generous housing limits for much of the country, veterans stationed in some areas of the country find it difficult to find decent housing in certain price ranges. For instance, finding a nice home for a family of five in or around San Diego within the standard limits is far more challenging than finding one in Columbia, SC (where Fort Jackson is located).
That is why the jumbo loan program is essential for military families who may have to relocate to areas where housing prices are so much larger than the national average. It helps these veterans secure safe housing for their families, so they can focus their attention on the quality of life and their duties to country and not where their families are safe when they are away serving their countries.
You should also understand that the VA itself does not establish a maximum loan limit for borrowers. Their maximum limit only involves how much of the loan they will guarantee. Anything beyond that is the responsibility of the qualifying veteran borrower to secure, including down payment, credit eligibility, etc.
Another word of caution relates to lenders. There are some lenders who do not offer the jumbo loan program for VA borrowers. Most, however, do. If veterans shop around a little before the time to borrow, there should be no trouble finding a lender that is willing to work with them. After all, lenders really do love the guarantee the VA offers lenders willing to lend to their veterans.
The better veterans understand jumbo loans from the VA, the better prepared they are to deal with the realities of buying homes in areas where the housing prices are higher than average or purchasing homes that exceed the limits of standard VA loan programs.
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