VA Jumbo Loan Guidelines and Eligibility Requirements
- The VA jumbo loan combines the benefits of a regular VA loan with the ability to obtain a bigger mortgage. Read on to learn more and find out how to qualify.
In financial terms, a jumbo loan is a mortgage issued for an amount exceeding the conforming loan limits set by the Federal Housing Finance Agency. The loan limits are updated each year due to changes in the cost of living. In some areas, the cost of living is so high that it's difficult for a buyer to find a home that falls under the limit for a conforming loan. A buyer in one of these areas may need to take out a VA jumbo loan to ensure they have enough funds to make a home purchase.
The Veterans Benefits Administration offers loans to veterans, current members of the Armed Forces and members of the Reserves and National Guard. This guide explains how the VA loan program handles jumbo loans and describes what you need to do to qualify for financing.
Does the VA Allow Jumbo Loans?
Yes, the VA allows eligible borrowers to obtain jumbo loans. Depending on where you live, this may be the only way to secure enough financing to buy a home. In the first quarter of 2022, the median sales price of a house sold in the United States was $428,700. Although many homes sold for less than the median price, homes in areas known for their high costs of living sold for much more. In California, for example, the median home price in San Diego was $1,375,000 in February 2022. This far exceeds the 2022 conforming loan limit of $647,200. Someone who wants to buy a home in one of these expensive markets may need to obtain a jumbo loan.
What Is a VA Jumbo Loan?
VA loans are government-backed loans given to eligible borrowers with a history of military service. Loans are available to veterans, active-duty members of the military and current or past members of the National Guard and military reserve forces.
A jumbo loan is simply a VA loan for an amount that exceeds the conforming loan limit. The Veterans Benefits Administration generally doesn't limit the amount of money you can borrow, but lenders may only approve you for a certain amount based on your income and credit history.
Full vs. Partial VA Loan Entitlement
Before you apply for a VA jumbo loan, it's important to determine whether you have full entitlement or partial entitlement. For borrowers with full entitlement, there's no loan limit. You may have full entitlement if any of the following apply:
- You've never participated in a VA loan program.
- You took out a VA loan, had a compromise claim/foreclosure and repaid the full amount of the loan.
- You took out a VA loan, paid it in full and sold the property you bought with the loan funds, restoring your full entitlement.
If you only have partial entitlement, the Veterans Benefits Administration will only guarantee up to 25% of the loan limit for your county. Any entitlement you've already used is subtracted from 25% of the county loan limit to determine the final amount of the loan guarantee. Even if you don't have full entitlement, your lender can still approve you for the amount of funding you requested, but you may have to make a down payment if your entitlement doesn't cover at least 25% of the total loan amount.
VA Jumbo Loan Limits
The limits for a VA jumbo loan depend on where you live and the type of property you're buying. Under the VA loan program, eligible borrowers can use their loan funds to buy single-family properties or multifamily properties with up to four units. In most counties, the loan limits range from $647,200 to $1,244,850, with higher limits reserved for multifamily properties. Some counties have higher limits due to their higher costs of living. For example, Los Angeles County in California has limits ranging from $970,800 to $1,867,275. A VA jumbo loan is any VA loan that exceeds these limits.
Can I Get a VA Loan for $1,000,000?
Yes, it's possible to get a VA loan for $1,000,000 or more. Your eligibility for a loan of this size depends on your income, credit history and whether you have full or partial entitlement. It also depends on which lender you use. Not all lenders deal with loans this large.
To purchase a home with VA jumbo loan funds, you must use the home as your primary residence. If you purchase a multifamily home, then you must use one unit as your primary residence, even if you plan to rent out the other units or allow family members to live in them. The home you choose must also pass an inspection to make sure it's safe.
The Veterans Benefits Administration doesn't require applicants to meet a minimum credit score; however, your lender may not be willing to approve you for a VA jumbo loan unless your score is at least 640. If you have a higher score, you may be able to qualify for better loan terms, such as a lower interest rate or no down payment, but it's up to the lender. Your lender will also verify your income and make sure your debt payments don't take up too much of your income each month. Even if you have a high debt-to-income ratio, you may be able to qualify for a VA jumbo loan.
Is a Down Payment Required for a VA Jumbo Loan?
It depends on your credit history and how much money you want to borrow. If your credit score is near the minimum required to qualify for a VA jumbo loan, your lender may require you to make a down payment to reduce some of their risk. You may also be required to make a down payment if you want to borrow significantly more than the conforming loan limit for your county. Even if your lender doesn't require a down payment, you can still make one if you want to reduce the principal amount of your loan and have less money to pay back over time.
VA Loan Interest Rates
Interest rates go up and down based on market conditions, so the interest rate on a VA jumbo loan depends on what the prevailing rate is when you apply for financing. You may also qualify for a better rate if you have a high credit score.
VA Jumbo Loan Funding Fees
Even if you're not required to make a down payment, you may have to pay a funding fee to obtain a VA jumbo loan. This fee typically ranges from 1.4% to 3.6%. In many cases, you can wrap the funding fee into your principal balance, which means you don't have to pay the whole fee at closing. The amount of the fee varies based on the size of your down payment and whether you have full or partial entitlement. Certain borrowers are exempt from VA loan funding fees, including disabled veterans and surviving spouses who are receiving Dependency and Indemnity Compensation (DIC).