How to Buy an Expensive House with a VA Jumbo Loan

How to Buy an Expensive House with a VA Jumbo LoanWith the housing market picking up the past couple of years, more individuals and couples are attempting to purchase homes. Between the different loan types and programs now available, buying a home can be easier than one would ever imagine.

Veterans who want to buy more expensive homes have the option of getting a VA Jumbo loan. Veterans Affairs loans have always been a convenient option for military personnel. Here is some information on how that can be accomplished.

What are Jumbo Loans & How are They Different?

Jumbo loans are loans that are for an amount that is higher than the conventional loan amounts, which currently are at $453,100 in most of the U.S. and $636,150 in Alaska and Hawaii. Freddie Mac and Fannie Mae purchase loans from lenders and have set maximum amounts for a loan to be considered a conventional conforming loan. Loans higher than that amount are considered Jumbo loans.

Besides the loan amount being higher, there are other ways that Jumbo loans are different.

  • Higher interest rates
  • Require high credit scores
  • Higher income required
  • Employment history for a longer period is necessary
  • Require the borrower to have enough cash to make a few months of mortgage payments
  • Down payments are 10 percent to 15 percent higher than a conventional loan.

Jumbo Loans for Veterans

The good news for veterans is that Jumbo loans are not just for certain home buyers. Many were under the mistaken belief that because veteran loans offered special benefits they could not be offered as this type of loan. This is a misconception, because veterans can also get Jumbo loans if they meet the eligibility requirements.

Another piece of good news for veterans is that they have very competitive interest rates. Whereas regular loan rates are .25 percent and .5 percent higher than conventional loans, veteran’s Jumbo loans usually are not.

How to Buy an Expensive Home with a VA Jumbo Loan

Veterans can still buy an expensive home with a Jumbo loan. However, it will take a little calculation to get correct guarantee amounts and possible down payments. The Department of Veteran Affairs guarantees 25 percent of the $453,100, so if you purchased a home for $500,000, you would be required to have a down payment of 25 percent of the amount over $453,100, which would be $11,725 ($500,000 – $453,100 = $46,900 X .25 = $11,725).

While interest rates are usually not higher for veteran Jumbo loans, they could be higher. But the amount is still substantially lower than if you would have to put down a down payment on a conventional Jumbo loan. The Veteran Affairs program makes it very affordable for military personnel to purchase a high-end, expensive home.

The Department of Veteran Affairs provides veterans with an entitlement, which is a dollar they agree to pay back for the veteran towards the purchase of a home. The basic entitlement is $36,000, but it’s much higher when all is said and done. The only situation where a veteran would have to pay a higher down payment would be if they’ve already used up some of the entitlement on a previous mortgage.