VA loans are a great real estate purchase option for eligible veteran borrowers. Unlike conventional or FHA loans, VA loans allow borrowers to obtain purchase loans with a $0 down payment.
Borrowers can even obtain jumbo loans over the county loan limit with no down payment required.
Interest rates on VA loans are very competitive as well.
View mortgage rates for
April 26, 2024
What Is A VA Loan?
A VA loan is a loan partially backed by the US government but still available through private lenders, such as JVM Lending. VA loans are available to qualifying veterans and service members and can be used to purchase or refinance a primary residence. VA purchase loans are a veteran benefit to make the homebuying process easier and more accessible to service men and women.
VA loans have several benefits include $0 down payment and no mortgage insurance. Mortgage insurance is typically required for conventional loan borrowers with a down payment of less than 20%. VA loans can be used to purchase single-family homes, duplexes, condos, and even multi-unit properties. For eligible borrowers, VA loans are an attractive option to make homeownership a reality.
VA Eligibility
To qualify for VA financing, borrowers must satisfy at least one of the following criteria:
- Completed at least 90 consecutive days of active-duty service during wartime
- Completed at least 181 days of active-duty service during peacetime
- Completed at least 6 years of National Guard or Reserves service
- Surviving spouse of a veteran who died in the line of service due to a service-related disability
Benefits of VA Loans
- 0% down payment requirement for eligible veterans (must have full entitlement)
- Competitively low interest rates
- No mortgage insurance
- Less stringent qualifying guidelines
Jumbo VA Loans
In the mortgage industry, a jumbo loan refers to any loan over the county loan limit. The county loan limit varies from county to county, but as of 2022, the minimum county loan limit is $647,200 for a single-family residence. In higher-cost areas, the loan limit is as high as $970,800 on one-unit properties.
Typically, borrowers need to obtain a jumbo loan for loan amounts over these conforming loan limits (loans that conform to Fannie Mae and Freddie Mac guidelines). Jumbo lending guidelines are incredibly stringent with high credit requirements, low debt-to-income ratios, a required 20% down payment, and additional reserve asset requirements and cash reserves above and beyond closing costs.
VA loans, however, do not require a down payment even on jumbo VA loans over the loan limit. This enables veterans to access loan amounts otherwise unobtainable at higher price points.
Exact qualification requirements will vary from lender to lender on jumbo VA loans. At JVM, we can offer jumbo VA loans with the following criteria:
Credit Requirements for VA Loans
| Loan Amount | Minimum Credit Score |
|---|---|
| < $750k | 580 |
| $750k-$999,999 | 620 |
| $1.0M-$1,499,999 | 680 |
| $1.5M-$2.0M | 700 |
| $2.0M-$3.5M | 720 |
| >3.5M | 760 |
Down Payment Requirements for VA Loans
There is no down payment required on VA Jumbo loans up to $3.0M (meaning your home equity will be low initially but will grow with each monthly payment).
However a 10% down payment is required on VA loans over $3.0M
One exception to this rule is for unmarried co-borrowers, as the VA only guarantees loans for veterans & their spouses. If there are unmarried co-borrowers, the VA will only guarantee the veteran’s half of 25% of the loan amount (or 12.5%). This means that the non-veteran will need to provide the other half, and the loan will need a minimum 12.5% down payment.
Reserve Asset Requirements for VA Loans
There are no reserve asset requirements, except on 2-4 unit properties where rental income is used to qualify for the purchase.
Entitlement
In order to verify VA loan eligibility, borrowers must provide a Certificate of Eligibility. This certificate confirms if borrowers can obtain a VA loan and notes the remaining entitlement for borrowers that have obtained a VA loan in the past.
Borrowers with ‘full entitlement,’ who haven’t had a VA loan or paid off their VA loan in full in the past, are not required to make a down payment on jumbo loans up to $3.0M. If borrowers have partial entitlement left from a prior VA purchase, they may need to provide down payment funds depending on loan size and amount of entitlement remaining.
Below are the main details lenders need from the certificate of eligibility:
- Basic entitlement amount
- Entitlement code
- Funding fee exemption or subsequent use
- Prior VA loans
- Branch of service
- Disability amount collected
If the certificate has not yet been created, you or your lender can create an order on the VA’s website using your personal information and relevant information found on a DD-214.
If you have previously used your entitlement and then sold your property, refinanced into a different program, or paid off your loan, you can apply for a restoration of entitlement. This is also done through the VA’s website; some evidence of your prior loan being closed is all that may be needed.
Benefits of a Jumbo VA Loan
As touched on above, there are many benefits to a jumbo VA loan including the below:
- No Down Payment – Traditional jumbo loans typically require up to 20% down
- No PMI – Private mortgage insurance is usually required when borrowers put less than 20% down on non-VA mortgages
- Low-Interest Rates– VA rates are usually lower than jumbo or conforming rates across the board
- Less stringent qualifications– VA loans allow higher debt-to-income ratios and require less documentation than standard jumbo loans. This allows borrowers to qualify for higher price points with less hassle.
Considerations
While VA loans are a great option, it’s important to keep these potential drawbacks in mind:
- VA Funding Fee – Instead of private mortgage insurance, VA loans have a VA funding fee between 2.3%-3.6% of the loan amount. This fee is collected by the VA to enable them to guarantee VA loans and offset any VA losses. The VA funding fee can be rolled into the loan amount. Some veterans are exempt from the VA funding fee, for example, veterans with service-related disabilities.
- Spousal Debts – In community property states, such as California, lenders must take spousal debt into consideration on VA loan qualification. This means that any spousal debt reporting on credit must be factored into the borrower’s debt-to-income ratio even if the spouse isn’t on the loan itself. In some cases, when spouses are carrying a high debt load, this can limit maximum qualification.
- Escrow accounts– Unlike traditional jumbo or conforming loans, an impound account is required on all VA loans. This is an account that collects payments for taxes and insurance as part of the borrower’s monthly mortgage payment
- Appraisal – VA appraisal guidelines are stricter than conventional appraisals. For this reason, sellers sometimes consider VA offers as less competitive than a standard jumbo or conforming loan offer. JVM can tout your VA approval with our extensive VA expertise and rock-solid VA pre-approvals.
VA Refinances
VA jumbo loans can also be used on refinance transactions which can be a great option for borrowers that purchased with a non-VA loan but want to take advantage of lower VA rates or even cash-out options. These can oftentimes be referred to as a VA Interest Rate Reduction Refinance Loan (IRRRL).
Keep in mind that to qualify for a VA refinance, 210 days must have passed since the first mortgage payment due date on the original loan.
VA cash-out refinances are typically capped at a 90% loan-to-value ratio, unless specific additional transaction requirements are met.
Next Steps
Interested in learning more about VA jumbo loans, eligibility, or how to get started? The first step is talking to one of JVM Lending’s Mortgage Experts. We are experts at working with veterans and will gladly walk you through the VA home loan process to ensure you get the best loan possible.
