If you’re looking at buying the home of your dreams – and the price reflects it – then a VA jumbo loan may very well be the best option for your mortgage.
In most veteran loan scenarios, the VA guarantees up to 25% of the total amount of the loan up to the VA loan limit in your county – which, in much of the US, is $417,000.
But what happens when the value of the loan exceeds your county loan limit?
This is where VA jumbo loans come into the picture.
For the purposes of this example, let’s say that you live in a county where the VA loan limit is indeed $417,000. You find the perfect house for you and your family, and it’s selling for $517,000.
You decide that you would like to use your hard-earned veteran benefits to take out a VA mortgage!
So, the VA guarantees $104,250 of your loan (with $104,250 being 25% of $417,000). Yet what happens with the remaining $100,000 of the loan?
Simple. The U.S. Department of Veterans Affairs mandates that on jumbo loans above the county loan limit, the borrower put down 25% of the difference between the cost of the loan and the applicable county VA loan limit.
Continuing on with our jumbo loan example from above, 25% of $100,000 ($25,000) would be required as a down payment, and the VA would guarantee 25% of $417,000 ($104,250).
Not bad at all! In this example you’re buying your $517,000 dream home for only $25,000 down in addition to the required closing costs.
The real value of VA jumbo loans is apparent when you compare and contrast it to the standard down payment requirement of a conventional mortgage, which is typically 20% to avoid paying private mortgage insurance.
This means that for the example $517,000 house, a conventional loan down payment would be $103,400 while a VA loan down payment would only be $25,000. That’s less than one quarter of the down payment required for the conventional loan in this scenario!
Please keep in mind while house shopping that VA county loan limits vary widely throughout the country and will be higher in areas with especially high property values. Once again, the standard VA county loan limit is $417,000, but it’s smart to check with your local VA mortgage agent prior to looking at houses.
For example, as of 2011 the VA county loan limit for Marin County is $1,000,000! San Francisco County has a loan limit of $1,000,000 as well.
To check what the VA county loan limits are for each county in the United States, you can visit the U.S. Department of Veterans Affairs at their loan limit website. For counties that are not listed on the website, the official VA loan limit is automatically set at $417,000.
Why is there such as large difference in county loan limits throughout the nation? In short, because the various housing markets across the country vary greatly.
In San Francisco a small single-family house may sell for $1,000,000, while in other places you might be able to find a similar house for $100,000!
Wherever you are, if you are in need of a substantial home loan, a VA jumbo loan is certainly worth checking out.
Chris Brown is the premier expert on HARP loans and Government FHA and VA loans. Please visit The Mortgage Chili Blog