VA jumbo loans offer a way for Veterans and other military members to purchase a home in more expensive regions of the country.
These loans appeal to military members who want all the benefits of a VA loan, but need to borrow a larger amount than usual. VA jumbo loans are a great option for those who wish to purchase a home in a high-cost-of-living area, such as New York City or Los Angeles.
However, the way they work is slightly different from regular VA loans.
A VA jumbo loan is a type of loan that exceeds county-specific VA loan limits. It has the same benefits as a VA loan, but allows you to borrow above the required VA loan limit. The 2022 VA loan limit for most counties is $647,200, but in high-cost areas, that limit can be as high as $970,800.
If you wish to purchase a home with a VA loan beyond the typical loan limits, there are stricter requirements to contend with. For one thing, VA jumbo loans usually require a higher credit score. This is usually around 620 or higher but will depend on the individual lender.
Different lenders also have different requirements when it comes to VA jumbo loans. Some may require a down payment or even existing property equity, so you will need to carefully check each lender’s guidelines.
A down payment is not automatically required for a jumbo loan, but lenders may have a minimum one in mind for loans above a certain amount. For example, jumbo loans higher than $1.5 million will usually require a higher credit score and at least 10% down payment or equity. Some lenders even require you to have a cash reserve so you can comfortably cover a certain number of mortgage payments.
VA jumbo loan rates typically reflect similar rates you find with regular VA loans. The rate you get will depend on many things, such as the Federal Reserve Funds Rate and your lender's policies.
Just because your loan amount is higher than usual doesn’t always mean your loan rate will automatically be higher as well. However, in most cases, jumbo loans do have higher rates than traditional VA loans.
What separates jumbo VA loans from regular VA loans is that they allow you to borrow more than the county-specific VA loan limit. Loan limits determine how much you can borrow without a down payment if you don’t have your full VA loan entitlement.
Although the VA doesn’t limit the amount you can borrow, it uses a formula to determine a loan limit which is calculated based on your remaining VA entitlement. If you have full entitlement or have never used the VA loan program before, you won’t have a loan limit. You can qualify for the loan based on your income and credit. If you do not have your full VA entitlement, your loan limit will be based on where you live, and it’s possible you’ll need to come up with a down payment.
The loan limit works by calculating how much down payment or equity you have and how much remaining entitlement you have. Here's the formula:
(Remaining entitlement + down payment or equity) x 4
For example, let’s say you have used $50,000 of your VA loan entitlement but wish to purchase another property. If the loan limit in your area is the U.S. average of $647,200, the VA will guarantee a quarter of that amount. This means you have a maximum entitlement of $161,800.
Subtracting $50,000 (what you've used) from $161,800 (your maximum entitlement), leaves you with $111,800. Multiplying 111,800 by 4 provides a maximum loan limit of $447,200. If you wanted to purchase a home priced higher than $447,200, a down payment would be required to make up the difference.
For most areas in the U.S., the VA county loan limit is $647,200. For high cost-of-living areas, this figure can range up to $970,800. You can check the current loan limit for your county with our VA Loan Limit Calculator.
VA jumbo loans let you bypass loan limits and potentially borrow more, even if you have a partial VA entitlement. However, because the amount of a VA jumbo loan exceeds the usual loan limits, lenders may require a higher credit score or down payment. Still, it's worth doing your research on different lenders’ requirements to decide whether a VA jumbo loan is right for you.