VA Jumbo Loan: Limits, Rates & Guidelines

The VA home loan benefit allows a qualified borrower who has met the minimum time-in-service requirements to apply for a home loan with no down payment in most cases, and potentially with a lower interest rate than a conventional mortgage for the same type of property.

VA mortgage loans differ from other home loans for this reason: the zero-down option, a more forgiving set of credit requirements, and a government guarantee to the lender make this type of home loan very attractive for lender and borrower alike.

VA Loan Guaranty Limits Explained

As of January 1, 2020, the Department of Veterans Affairs eliminated county-based VA loan guaranty limits for eligible borrowers with full entitlement. Borrowers with partial entitlement may still be subject to county loan limits and additional requirements.

The borrower and lender negotiate the mortgage—including VA jumbo loans—based on the borrower’s creditworthiness, ability to repay, lender standards, and any applicable state or local requirements.

While VA loan guaranty limits existed in the past, the Department of Veterans Affairs has never placed a cap on the specific loan amount a financially qualified borrower may apply for. Instead, the “VA loan limit” refers to the amount the VA will guarantee, not the amount a borrower can borrow.

As a result, there is no maximum loan amount set by the VA, though a down payment may be required if the loan exceeds a lender’s zero-down payment threshold.

Some borrowers may be subject to a down payment requirement even if they are getting a mortgage loan at or below the lender’s zero-money-down loan cap. These situations can include:

• Cases where a borrower’s credit report indicates a higher risk, and the participating VA lender requires money down as a compensating factor.
• Situations where the asking price is higher than the appraised value, and the borrower still wants to proceed with the loan. In such cases, the difference between the appraised value and the asking price must be paid in cash by the borrower and cannot be financed into the VA mortgage.

Understanding VA Jumbo Loans

VA Jumbo Loan Interest Rates

There are a number of variables that will affect the interest rate you are offered on a VA Jumbo Loan. The first is daily fluctuations in mortgage loan interest rates, and the other is the participating lender’s choices about which rates to offer.

But your credit report will also play an important role in determining the rate you are offered. FICO score ranges are not specified by the VA for home loan approval, unlike other government-backed mortgage loans, such as FHA mortgages, which feature FHA-set minimum standards and lender-based additional standards that may exceed the FHA loan minimums.

You will need to ask a participating lender what current interest rates and FICO score ranges are for VA Jumbo Loans and plan accordingly.

Other Considerations For VA Jumbo Loans

You may find that applying for a VA Jumbo Loan requires additional planning and time due to unique down payment requirements for these loans.

Borrowers who are required to make a down payment for an amount above the lender’s limit on a “typical” VA mortgage in the area may find it’s best to take extra time to plan and save up for the loan.

You may find that your participating VA lender requires higher FICO scores and a stronger overall credit history for loans exceeding the VA loan guaranty limit. FICO scores can be an important factor in loan availability, interest rates, and other terms, with better credit often opening more options for borrowers than credit trouble in the past.

It’s always recommended to start planning and saving at least a year ahead of your home loan application, but with Jumbo Loans, you may need to begin saving earlier since the down payment and the VA loan funding fee (where applicable) will both be required as cash to close. Note that borrowers receiving VA disability compensation are exempt from paying the VA funding fee.

Buying real estate with a VA loan involves another important consideration. VA Jumbo Loans cannot be used for homes that the borrower does not intend to live in as their primary residence.

VA loans in general have an occupancy requirement, and your lender will ask you to sign a legally binding agreement that the real estate you purchase with your VA loan, Jumbo or otherwise, is to be your home address.

The VA occupancy rules are non-negotiable, but those who wish later on to use a property purchased with a VA mortgage loan can refinance it with a non-VA loan or with a VA Interest Rate Reduction Refinance Loan (VA IRRRL), which requires the borrower to certify only that the home was used as the primary residence under the original mortgage. VA IRRRLs don’t require the borrower to occupy the property as the home address for the refi loan.

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