What Is A VA Jumbo Loan? A Guide To How VA Jumbo Loans Work

VA loans allow eligible active-duty service members, reservists, members of the National Guard, veterans and qualifying surviving spouses extra benefits during their home buying process. The U.S. Department of Veterans Affairs (VA) offers various types of VA home loan products, including:

• VA purchase mortgages
• VA Streamline refinances
• VA cash-out refinances
• VA jumbo loans

We’ll take a closer look at how VA jumbo loans work, the requirements, loan limits and advantages of this type of loan.

What Is A VA Jumbo Loan?

A jumbo loan, or jumbo mortgage, is a type of mortgage that helps home buyers purchase expensive homes that exceed the national loan limits set by the Federal Housing Finance Agency (FHFA). VA jumbo loans have flexible requirements and higher loan amounts compared to regular VA loans and conforming conventional loans. One of the main benefits for VA loan borrowers is that VA loans typically don’t have set limits on the loan size and offer flexible down payment amounts if you have full VA entitlement.

A VA jumbo loan is available as a fixed-rate or adjustable-rate mortgage and is a non-conforming loan. All VA loans, including jumbo loans, are backed by the VA and the process for a VA jumbo loan is similar to obtaining a traditional mortgage. The main difference between the two is the amount being borrowed and the extra eligibility requirements enforced by the VA.

How Does A VA Jumbo Loan Work?

Jumbo loans are a type of non-conforming loan, meaning they don’t fit Fannie Mae and Freddie Mac’s standards for purchase. Jumbo loans exceed the conforming loan limits set by the FHFA and are sometimes used for higher cost of living areas.

With current home prices rising, the VA’s flexible lending rules allow eligible service members and veterans the opportunity to purchase and finance high-priced homes that may not be feasible to purchase with a conforming loan.

VA Entitlement

VA entitlement determines the dollar amount that the VA will pay your lender if you default on your loan. If you’ve never had a VA loan before or paid off a previous one in full, you should have full entitlement.

Full entitlement means you won’t need to make a down payment and if you default on your loan, regardless of size, the VA will pay your lender 25% of the loan amount. This maximum guarantee is covered by the VA based on your loan amount and VA entitlement. Your entitlement amount will be listed on your certificate of eligibility (COE).

Down Payment

Borrowers with full VA entitlement technically do not need to make a down payment for a VA jumbo loan, regardless of the loan amount. A down payment may be required if you have partial entitlement. There are a few reasons why you might have reduced entitlement, such as if you’re still paying back a previous VA loan or if you’ve defaulted on a VA loan in the past.

VA Jumbo Loan Limit

It’s important to note the VA does not set a loan limit for jumbo loans; the maximum loan amount is limited only by what a lender will allow you to borrow.

As of 2020, VA loan borrowers with full entitlement no longer have limits on loans over $144,000. This means there is a 0% required down payment, and the VA will guarantee your lender up to 25% of the loan amount if you default.

If a qualifying service member only has partial entitlement, a down payment may be required. If your entitlement is reduced, the VA will only guarantee your loan up to the conforming loan limit minus the entitlement you’re already using.

VA Funding Fees

Whether you’re using a VA home loan to purchase or refinance a mortgage, the VA funding fee is always required unless you meet certain requirements for exemption. You can pay this fee by either paying it upfront at the closing table or by including it in your loan to be paid off over time.

The amount you will pay for your funding fee will vary based on your VA loan type and whether you’ve had a VA loan before. It may range from 0.5% – 3.6%. For a more in-depth look at what you could be responsible for paying, visit the VA's website for their breakdown of the funding fee.

VA Jumbo Loan Requirements

To be eligible for any VA loan, you must meet certain service requirements set by the VA. Beyond eligibility, each lender also sets their own rules for potential borrowers. As with any mortgage application, it’s important to shop around and explore your various options since every lender is different. For VA jumbo loans, lenders will typically require the following:

• Minimum credit score of 640. A score of 680 or better may be required for loan amounts greater than $1.5 million from our friends at Rocket Mortgage®.
• Lenders may impose their own upper bounds on loans. At Rocket Mortgage, the VA jumbo loan limit is $2.5 million.
• Qualifying debt-to-income ratio (DTI) set by lender; Rocket Mortgage doesn’t impose a maximum DTI for many VA loans – your personal maximum DTI will be based on factors like your down payment, credit score and payment history.
• Cash reserves if required by your lender
• Must get a home appraisal to assess home value and assure home fits VA or lender standards
• Must be a primary residence

VA Jumbo Loan Rates

Interest rates vary based on your lender. VA jumbo loan rates are typically comparable to traditional VA mortgage rates but are still generally lower than conventional mortgage rates. A variety of factors can influence your VA jumbo loan rate including your credit score, loan duration, previous loan history and current market conditions.

Compare today's mortgage rates to get an idea of what rates you can expect.

Benefits Of A VA Jumbo Loan

The VA jumbo loan offers higher loan amounts with flexible requirements. Here are some of the other notable benefits of a jumbo VA loan:

• Better access to homes in high-cost areas
• Less money down at closing
• Potentially flexible qualifying terms and credit score requirements
• No private mortgage insurance (PMI)

The Bottom Line

The VA offers jumbo loans with no loan limits, reasonable interest rates and flexible down payment options specifically for those looking to buy high priced homes or homes in high-cost areas. These loans can be a great option for veterans, qualifying active-duty service members and surviving spouses looking to take advantage of a no money down jumbo loan.

Ready to start your house hunt? Take the first step toward finding your dream home with Rocket Mortgage and apply online today. You should also feel free to give us a call at (833) 326-6020.