Written by Isaac F. Davis

Jumbo VA loans are those over the conforming loan limit.  Currently, the Fannie Mae conforming loan limit for most U.S. counties is $417,000.  Though the VA loan limit can change from year to year, the definition of Jumbo VA loan doesn’t change.

Most qualified VA borrowers know they can get veterans’ mortgages up to the conforming limit with no money down. What many don’t know is that zero-down VA home loans up to $1,000,000, and even more in some areas, are available in the form of Jumbo VA loans.

Certain counties with high-cost housing markets have conforming loan limits above $417,000.  Some places, like Nantucket, have VA loan limits as high as $1,092,250.  And a VA-eligible borrower looking to purchase a home here would have a total entitlement that is higher too. 

Providing higher entitlements in high-cost counties is the VA’s way of recognizing that veterans and active duty members living in these areas might need bigger loans to find adequate housing. The VA calculates entitlements in high-cost counties by taking the difference between $417,000 and whatever the conforming loan limit is in that high-cost county and dividing it by four.  This is the amount VA will guaranty over $417,000 for a Jumbo loan. 

Two kinds of Jumbo VA-guaranteed loans exist: Jumbo loans in counties where the VA conforming loan limit is higher than $417,000, and Jumbo loans in counties where the VA conforming loan limit is $417,000. 

Typically, if the amount of a VA-eligible borrower’s loan is more than the conforming limit for that county, then a down payment will be required.  Down payments for Jumbo VA loans are calculated on the portion of the loan not guaranteed by the VA. 

A VA borrower living in a county where the loan limit is $417,000, who wants to borrow more than that, will generally need to come up with a down payment equal to 25% of the amount over $417,000.  For instance, if the VA borrower buys a home for $700,000 in a county where the loan limit is $417,000, the difference is $283,000. Therefore, 25% of the difference is $70,750.  This would be the expected down payment.  With this down payment, the actual loan amount for this scenario would be $629,250. That calculates out to be 89.89% loan to value.  Most VA loans have 100% loan to value.

In reality, an LTV of 89.89% is still really competitive in the mortgage industry. When compared to down payments required for conventional loans, the VA Jumbo Program is hard to beat. 

Over time, fixed rates for Jumbo VA loans have been slightly higher than conforming VA mortgage rates. Since fall of 2008, this has been especially true.  In 2009, a 30-year fixed rate on a VA conforming loan might be a whole point lower than the rate on a VA Jumbo loan. Before the mortgage crisis, the difference between conforming rates and Jumbo rates was not as drastic – usually only up to one-half point divided the two. Perhaps once the mortgage industry settles again, this will be true.

As with all VA loans, a Jumbo VA loan is only offered to qualified VA-eligible borrowers. Income and credit requirements apply.  To learn more about conforming loans contact a VA mortgage professional.