VA Jumbo Loans:
VA Jumbo Loans have specific guidelines that any lender must follow when evaluating a VA loan application. Affordability is found by calculating debt to income ratios, and credit is checked by reviewing credit histories just like most other loans in use. However the Department of Veteran’s Affairs allows the lender to set the maximum loan amount to be borrowed.
Without the Department of Veteran’s Affairs setting a maximum limit on the amount of a VA loan the amount is simply referred to as if it was being compared to a conventional loan through the government agencies Freddie Mac and Fannie Mae. Because of this, any loan surpassing the normal sum of money is considered jumbo. However a fundamental difference is the requirement of a down payment. Conventional loans normally require down payments, where as conventional VA loans do not.
How Do VA Jumbo Loans Work?
The Department of Veteran’s Affairs issues a guarantee to any VA lenders that represents twenty five percent (25%) of any loan amount or four times the available entitlement. This is standard procedure for any and all VA loans considered to be within the conventional loan average amount.
How, then, does this apply to loans which exceed the average? Remember that the VA will guarantee up to twenty five percent (25%) of the $417,000 limit. In this example with a $500,000 home, the veteran is required to bring in twenty five percent (25%) of the amount over and above $417,000. The difference is $83,000 and twenty five percent (25%) of $83,000 is $20,750.
This does show a slight down payment from the borrower, although the amount is much smaller then what a normal conventional loan might require. With this advantage it should be no problem finding an amiable VA Jumbo Loan lender as this little known feature of the VA can be unrivaled by any other financial institution.