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What is a VA Jumbo Loan?

Home prices in some areas of the United States (i.e. California, Colorado, Ohio, Alaska and Hawaii) are higher than the presumed nominal value. In these states, where typical VA home financing is not enough, veterans turn to a VA Jumbo Loan.

Features of a Jumbo Loan

When calculating for the allowable loan entitlement, the home's fair market value and the VA loan limit are both taken into consideration. Fundamentally, a VA Jumbo Loan is still pretty much like the average VA loan; all standard procedures and benefits still apply. The difference is determined by how much higher the loan is from the base county value.

  • A qualified veteran may still waive the initial down payment but only up to the amount approved by VA for that particular county. The borrower must pay 25% of the amount exceeding the pre-approved limit.
  • You may be required to pay the funding fee on the loan that is higher than the county ceiling.
  • You might also be asked for a minimum credit score of 640 to qualify for a loan more than $650,000.
  • This type of loan may not allow you to buy manufactured housing.
  • Jumbo loan interest rates are not negotiable, are higher than conforming mortgages, and tend to be fixed mortgages.

Jumbo loans undergo a similar as normal loans except that they have a higher loan ceiling. You may be required by your lender to submit additional documentation.

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Is There a Maximum Limit?

There are no hard and fast rules with regards to setting a cap on the VA Jumbo Loan that can be disbursed; they tend to vary from one county to the next. The standard loan rates are set by Freddie Mac (FHLMC) and Fannie Mae (FNMA).

  • In a 2013 announcement by FNMA, for houses in Puerto Rico, the District of Columbia and the Contiguous States, the high-cost limit is $625,500 for one unit; $800,775 for two units; $967,950 for three units; and $1,202,925 for four units.
  • In the same report, for houses in Alaska, Guam, Hawaii, and the United States Virgin Islands the high-cost limit is $938,250 for one unit; $1,201,150 for two units; $1,451,925 for three units; and $1,804,375 for four units.

It is safe to say that yes, jumbo loans do have a limit. These limits, however, may vary depending on the region of the country you'd like to buy a home. For our location in Orange County, CA, the maximum VA limit is $687,500 and amounts above that would mean the veteran has to come in with 25% of the difference. However, it's best to discuss your transaction with us and check your eligibility so you will know with confidence the exact amount.

Are There Risks and Added Costs?

High cost housing could be risky specifically for lenders and that is why they charge higher initial payments from veteran jumbo loan seekers. Since luxury homes are difficult to sell in a mainstream market, lenders may subject the VA borrower to appraise a jumbo loan at least twice.

There may also be some unforeseen potential costs.

  • The difference of the interest rates of jumbo loans and normal VA loans can go as high as 1.5%.
  • Refinancing can also be problematic because of higher closing costs. Some lenders may offer extensions or consolidation agreements. though these might not be sure-fire methods of easing the refinancing process.

In the end, if you are a veteran seriously considering a VA Jumbo Loan, it is advisable for you to ask the assistance of a competent professional that is familiar with these types of loans.

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1st Nationwide Mortgage Corporation
65 Enterprise
Aliso Viejo, CA 92656
(949) 207-3399

An Equal Housing Lender -   NMLS #1281