What is a Jumbo VA Loan? A Complete Guide

A jumbo VA loan allows eligible borrowers to get a mortgage above the conforming loan limit while still enjoying many of the benefits of a standard VA loan. Jumbo loans are popular in high cost areas where home prices are above the conforming limits. With a jumbo VA loan buyers can purchase more expensive homes without a large down payment.

In this complete guide we will cover everything you need to know about jumbo VA loans including

• What is a jumbo loan?
• VA loan limits
• Benefits of a jumbo VA loan
• Requirements and eligibility
• Interest rates
• Down payment options
• How to get a jumbo VA loan

What is a Jumbo Loan?

First, let’s define what makes a loan a “jumbo.”

Jumbo loans are mortgages that exceed the conforming loan limits set by the Federal Housing Finance Agency (FHFA) each year. The conforming loan limit determines the maximum amount a mortgage can be to be purchased by Fannie Mae or Freddie Mac.

For 2023, the baseline conforming limit for a one-unit property is $726,200. However, the limit can be higher in certain high-cost areas up to $1,089,300.

Any loan amount above the conforming limit for that county is considered a jumbo loan. Jumbo loans come with slightly different guidelines and requirements compared to conforming loans.

VA Loan Limits

The VA itself does not set a maximum loan amount for VA loans. So in theory, you can get a VA jumbo loan for any amount.

However, the VA does set county-specific limits that determine how much of the loan will be guaranteed. For 2023, the baseline VA loan limit is $766,050 and up to $1,074,000 in high-cost areas.

If your loan amount exceeds the limit for your county, only the portion up to the limit will be guaranteed by the VA. The rest will be uninsured.

Lenders can still make loans that exceed the VA limit. But they may require a down payment for loan amounts above the limit, especially if you have used your VA benefit before.

Benefits of a VA Jumbo Loan

Jumbo VA loans offer homebuyers several advantages:

• Purchase more expensive homes – Jumbo loans allow buyers to qualify for mortgages exceeding the conforming limits in order to buy more expensive homes.

• Avoid jumbo mortgage insurance – Conventional jumbo loans usually require mortgage insurance for loans with less than 20% down. Jumbo VA loans do not require mortgage insurance.

• Lower down payments – Many jumbo loans require 10-20% down. But jumbo VA loans allow much lower down payments in many cases.

• Better rates – VA loan rates are very competitive. Jumbo VA loans often have lower rates than conventional jumbo mortgages.

• Relaxed guidelines – VA underwriting guidelines are more flexible than conventional loans. Jumbo VA loans have lower credit score requirements.

• VA protections – Borrowers get access to VA assistance and benefits like financial counseling.

Overall, a jumbo VA loan gives buyers with VA eligibility more purchasing power, flexibility and affordability than other jumbo loans.

Jumbo VA Loan Requirements

While jumbo VA loans offer nice perks, keep in mind that lenders will look closely at your finances before approving a large loan. Here are some key jumbo VA loan requirements:

Credit score – For a jumbo VA loan, you will likely need a minimum credit score around 620-640. The higher your score, the better.

Income – Lenders want to see you have enough income to comfortably make the higher monthly payments on a jumbo loan. Expect to provide ample income documentation.

Down payment – How much down payment you need depends on your specific situation. Veterans with full VA entitlement can get a jumbo with zero down. Those with partial entitlement may need to put 10-20% down.

Debt-to-income ratio – Lenders look at your total monthly debts divided by gross monthly income. Expect a maximum DTI around 41-50% for a jumbo VA loan.

Cash reserves – Some lenders require extra cash reserves for jumbo loans. Ask your lender about reserve requirements.

Occupancy – Jumbo VA loans are only for primary residences. You cannot use them to purchase investment properties or vacation homes.

In addition to good finances, you must meet basic VA eligibility requirements to get a jumbo VA loan. This includes service length, service discharge status, and VA home loan use.

Jumbo VA Loan Interest Rates

Interest rates on jumbo VA loans are very similar to rates on conforming VA loans. Rates are primarily based on your credit score and current market rates – not necessarily your loan amount.

That said, jumbo mortgage rates are indirectly impacted by investor demand. When demand for non-conforming loans decreases, jumbos may see slightly higher rates. But in general, expect competitive jumbo VA rates close to conforming VA rates.

Always shop around with multiple lenders to find the best jumbo VA rates. Small differences in rates can really impact your monthly payment.

Jumbo VA Loan Down Payments

One huge advantage of jumbo VA loans is the ability to qualify with little or no money down. Here are the key facts on jumbo VA down payments:

• Veterans with full entitlement – You can get a jumbo VA loan for up to $1.5 million with no down payment in many cases. Above $1.5 million may require 10% down.

• Veterans with partial entitlement – You may need to make a down payment of 10-20% depending on your specific entitlement situation and lender requirements. Always ask the lender first.

• Higher credit scores – Excellent credit in the 740+ range will give you the best shot at a no down payment jumbo VA loan.

• Cash gift OK – The down payment can come as a gift if needed. VA loans allow 100% gift down payments from family.

The difference in down payment alone can make a jumbo VA loan much more affordable than a conventional jumbo requiring 20% down.

How to Get a Jumbo VA Loan

Getting pre-approved for a jumbo VA loan involves a very similar process to a regular VA loan. Here are the key steps:

1. Check your VA eligibility – Make sure you meet the service length, character of discharge, and previous VA loan requirements.

2. Review loan limits for your county – See how much of your loan will be guaranteed based on the limits.

3. Check your credit score and report – Scores of at least 640 and ideally 720+ give you the best chance for approval and the lowest rates.

4. Calculate your income and debts – Lenders will review your debt-to-income ratio closely. Gather your paystubs, tax returns, and debt info.

5. Research lenders – Compare multiple lender quotes for the best jumbo VA rates and down payment options. Consider local lenders as well.

6. Complete your VA loan application – Work with your lender to submit all required income, asset and VA documents. Get a pre-approval letter.

7. Find a home and make an offer – Make sure the sales price fits within your pre-approval amount and meets VA appraisal requirements.

8. Get an appraisal – The home must be professionally appraised to ensure it’s worth at least the loan amount.

9. Finalize loan approval – Your lender will verify all your financial information and VA documents one last time after appraisal.

10. Close on your new home! – Set a closing date once final approval comes through. Bring your closing costs and down payment to the closing table.

Expect a jumbo VA loan process to take approximately 30-60 days from application to close. Rates can change daily, so lock in your rate once your loan application is complete.

The Bottom Line

Jumbo VA loans allow eligible borrowers to purchase higher-priced homes while still enjoying the many advantages of a VA loan. Key benefits include lower rates, smaller down payments, and more flexible credit guidelines compared to conventional jumbo loans.

While jumbo VA loan requirements are tougher than a regular VA loan, they are much easier to obtain than other types of jumbo mortgages. Veterans with full entitlement can even qualify for certain jumbo loan amounts with zero down.

If you need to buy a higher-priced home in a high-cost area, explore your options for a VA jumbo loan. Get pre-approved as soon as possible once you start home shopping to secure a competitive interest rate.