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.
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.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.
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.
Security America Mortgage Inc. 7514 Shadyvilla Ln. Houston, TX 77055
Branch MLS#: 355253 Eduardo Sera - Sr. VA Loan Specialist NMLS#: 304564
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