Active duty military members, veterans, and their surviving spouses could qualify for VA Jumbo loans – the combination of Jumbo VA loans limits exceeding traditional loan limits. VA loans no longer come with restrictions if you’re eligible to claim full entitlement. No down payment is required upfront and in case of default on your loan, VA guarantees to provide 25 percent of its amount as compensation to your lender. These loans were specifically created for those eligible but do not yet meet full entitlement or need loans that exceed lender limitations.
Jumbo VA loans might be your perfect solution if you live in an area with high costs, or are looking to purchase the most costly home. But what exactly is its definition, and will this type of loan work for your entire family?
What Is a VA Jumbo Loan?
A VA Jumbo loan combines the advantages of both types of loans to offer maximum benefit to applicants in high-cost regions using their VA benefits for as little as 0% down payments on purchases of homes in these high-cost regions.
Once your Jumbo VA loans exceed their loan limit, it becomes a jumbo loan. Loan limits differ based on county as well as how much of their entitlement remains; otherwise loan limits dictate what amount can be borrowed without incurring an upfront down payment requirement.
If your VA loan falls into the category of “jumbo loan”, a down payment may be required. Lenders determine if a VA Jumbo Loan exists based on the loan amount and degree of risk involved.
Guidelines on what constitutes VA “jumbo loans” vary between lenders. Each can set its own down payment requirements; however, many rely on conforming loan limits as an indicator of risk when deciding if a VA loan qualifies as VA Jumbo loan.
VA Jumbo Loan Benefits
Veterans Advantage Jumbo VA loans provide many advantages to those eligible, enabling them to utilize their benefits from the VA to cut costs and get into their dream home loan sooner.
Below are the advantages of taking out such a loan:
Jumbo VA loans do not impose a maximum limit; however, lenders could consider VA loans to be “jumbo” if their total amount exceeds conventional limits – giving borrowers more funds to purchase higher-priced homes in more expensive areas and also helping prevent multiple mortgages from being taken out to buy one home.
Sizeable Down payment
First-time buyers eligible for Veterans Loans are not required to make a down payment since they possess full rights of ownership, making the purchase possible without out-of-pocket expenses (excluding closing costs ).
Traditional jumbo loans typically require a down payment, however with jumbo VA loans being guaranteed by the military they allow borrowers to make any sizeable down payment they wish. A higher down payment can reduce interest rates, thus decreasing monthly payments over the life of your loan.
Furthermore, making a larger down payment will reduce your Jumbo VA loans and monthly payment fees, and thus decrease the total amount you need to borrow. Even making just a smaller down payment could save thousands over the life of the loan; additionally it would create immediate equity for your house should you opt to take out an equity loan later on.
Competitive Interest Rates
VA Jumbo mortgage loan rates are comparable to loans of other kinds, providing attractive interest rates. Many lenders provide lower rates to VA loan borrowers than for other kinds of loans – though since VA jumbo loans present greater risks, you could find similar or even lower interest rates than with true jumbo loans. Rates of interest depend on your lender; therefore we suggest researching multiple lenders before making your choice. It may also be worthwhile considering preapproval before beginning house hunting to understand how much you could borrow and the rates of interest that could apply.
Flexible Eligibility Requirement
Conventional loans typically have stringent eligibility requirements when it comes to credit scores. But thanks to VA loans’ flexible criteria, even those with poor credit may still get approved – making the dream of homeownership that much closer. Most conventional loans require at least an 620 minimum credit score; with VA loans it is possible to be approved even with scores below 500!
Higher credit scores typically translate to reduced interest. With low scores on credit, however, qualifying for Jumbo VA loans might still be possible but will cost more over time due to increased rates of interest. Most lenders provide lower rates of interest when someone has scores 620 or above on credit; those with 740+ ratings tend to get the highest rates available.
Lower debt-to-income ratios accepted
The income (DTI) ratio measures how much of your tax-free earnings go toward repaying debts to determine if a loan can be repaid successfully.
Most lenders require a DTI ratio no higher than 36 percent. This means that less than 36% of your earnings go toward repaying debts like credit card and student loan debt. VA jumbo loans often allow higher DTI ratios – typically at least 43%!
Similar to credit criteria, Debt-to-Income Ratio (DTI) requirements differ by lender and can accept DTI ratios up to 55 percent. A higher DTI indicates you may not be able to afford your monthly debt payments and therefore could hinder obtaining a mortgage for your home; even if it were possible however, your payments might be late every month.
Eligibility for Jumbo VA Loans
Qualification for a VA Jumbo loan is similar to qualifying for a conventional VA loan, with the only significant distinction being that you are entitled to up to the full loan amount regardless of its conforming loan limit.
But, you might need to make a down payment if your entitlement doesn’t match up perfectly with what’s available to you. The lender determines the amount that must be paid; for example, they might provide you with a loan of $1.2 million with no down payment required but require an upfront payment to secure their $2 million loan amount.
- Loan requirements differ between lenders; however, to meet eligibility standards for VA Jumbo loans you should meet various VA Jumbo loan criteria that follow below.
- Not all veterans qualify for Jumbo VA loans; each lender follows strict criteria in deciding who may receive these loans.
- Current military personnel must fulfill 90 continuous days of active duty service while the minimum requirements for veterans depend on how long they were in the military.
- Certain spouses could also qualify for the VA Jumbo loan if their service member died as a result of service, or suffered disabilities as a result of service. For more information regarding eligibility requirements contact the VA.
If you meet all of the VA requirements, including eligibility requirements, then an official Certification of Eligibility (COE) can be requested and used for mortgage preapproval by your chosen lender. Dream Home Mortgage funding can work directly with the VA to secure the COE on your behalf before helping with an application process for mortgage preapproval at any point during your process.