The VA Jumbo loan is a less frequently used hybrid version of a VA mortgage, however for Veteran home buyers who are purchasing a home that costs more than the conventional $417,000 loan limit the jumbo version of the VA Home loan can often be the best financing option for them. Here is how it works.
The Department of Veterans Affairs guarantee a VA mortgage loan amount of up to $417,000 with no down payment. For an amount over $417,000, your loan becomes a “VA jumbo loan” and you are required to make a down payment of 25% the amount over $417,000. So if the home you want to purchase is $100,000 more than $417,000 ($517,000) then you need to make a down payment of $25,000. No $25K may seem like a lot, but it’s just under 5% of $517,000. There aren’t many (if any) jumbo loan programs that let you buy a more expensive house with less than 5% down, and if they f they do exist they probably have much higher interest rates.
And the great thing about a jumbo VA mortgage is you get all the benefits of a VA loan that you would not get on a non VA conventional or jumbo loan with a low down payment – primarily a competitive interest rate, no mortgage insurance. The savings on this can be significant, in the $517,000 purchase example above if your interest rates was 0.75% lower (a typical difference between conventional and jumbo loan) you would be saving just over $300 per month, $3600 per year, or $36,000 over 10 years.
Now one thing to make sure you factor in is the VA funding fee. This can vary between 0% and 3.3% of the loan amount, but it is can be rolled in to the loan amount and the incremental payment is almost always less than paying mortgage insurance. Keep in mind, if you are a Veteran with 10% or greater disability rating, the VA funding fee is waived. If your net down payment on your VA jumbo loan is 5% – 9.99% then the funding fee is only 1.50%, and if your down payment is 10% or more it drops to 1.25%. As discussed, with a jumbo veterans affairs loan there will be some down payment, so odds are you get close to 5% down this dropping the funding fee. On a loan like the one in our example, it adds about $50 to the payment, so you still come out ahead vs. the $300 interest rate savings.
So do you take advantage of this Veteran benefit. Well the first step is to find a lender that offers the jumbo VA loan program, and ideally we would advise finding someone who specializes in VA home loans because they’ll know all the details of exactly what you need to do on order to qualify for and obtain a VA jumbo mortgage.
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