VA Jumbo Loan Guidelines
The VA’s guidelines are set up to guarantee 25% of your VA home loan up to loan amount of $417,000 with no down payment. Any amount above $417,000 would be considered as a “VA Jumbo loan” and the VA requires you, the veteran, to put down 25% of the amount over $417,000. An example of this would be if f the sales price is $617,000, and assuming you have not used your VA entitlement or it has been restored, thenthe VA will require a minimum down payment of $50,000 (25% of the $200,000 overage). Even though you are putting down less than 8% on a $617,000 house, it is still a VA loan and you will still not have any mortgage insurance.
Big Savings with VA Jumbo Loans
Is it possible to have big savings using a VA Jumbo Loan? The Answer is yes, first, you need to know that interest rates jump higher when Conventional or non-VA loans go over $417,000. Once a conventional loan goes over $417,000 it is considered a Jumbo loan or Non-Conventional, but that is not the case for VA loans. For instance, if you have a Conventional loan under $417,000 at a rate of 5.00%, the Non-Conventional or Jumbo rate could easily be 5.75% when you go over the established $417,000 threshold. On a $600,000 Conventional loan at 5.75%, that higher “Jumbo” rate will cost you $281 more per month, or over $3,372 more per year or $101,160 for the life of your loan. With a VA jumbo loan, your rate will most likely be the same over or under $417,000, leading to substantial savings compared to a Non-Conventional Jumbo loan.
VA Jumbo Loans vs. Conventional Jumbo Loans
A veteran with a great credit score, buying an $800,000 home and putting down 20% might not even think about using his or her VA loan benefit, after all, they are already putting down 20%, so they won’t have mortgage insurance. But what they have overlooked is the interest rate advantage to going VA. If they were to use a VA Jumbo loan instead of a Non-Conventional jumbo loan, they could easily save $300 per month, assuming the same 20% down payment. Going VA would also give that same veteran the option of putting down just $95,750, keeping $64,250 in his pocket, and his VA payment would still be very close to putting 20% down on a Conventional jumbo loan due to the VA interest rate savings.
Does the VA Funding Fee Impact Savings?
Would the VA funding fee wipe out any savings? The answer is N0! The VA funding fee ranges from 0% to 3.30% of the loan amount and is almost always rolled into the VA loan. A veterans with a VA disability rating of 10% or greater is completely exempt from the funding fee, so many veterans pay no funding fee at all. For the rest who do not have a disability rating, the funding fee can go as high as 3.30%; however, 5% down payment drops the fee to 1.50% and 10% down drops it to 1.25%. Typically due to the guidelines a veteran using a VA jumbo loan will usually have a minimum down payment of 5% anyhow, so the highest fee they will usually see on a VA jumbo is 1.50%. Using this example with an$800K sales price and 20% down, the VA funding fee would be 1.25%, adding about $43 per month to the payment when rolled into their VA loan. Most people would opt into paying the $43 per month in order to lower their payment by $300 or a net gain of $257.
