VA Jumbo Loans in California
VA Jumbo loans in California are any loans above the Federal Housing Finance Agency (FHFA) conforming loan limit.
For those active-duty or Military Veterans whose service qualifications earn them a Certificate of Eligibility from the VA with full entitlement, using the VA Home Loan Benefit for a home loan offers all the advantages of the “regular VA Home Loan” with three additional benefits over a traditional Jumbo Loan:
- No down payment required
- Traditionally lower rates
- Easier qualification requirements
The VA Jumbo Loan is available on a primary residence for:
- Purchase, or
- Refinance (VA to VA, and another Jumbo into VA), to
- Lower rates and payments
- Get cash out for any purpose
Let’s illustrate the benefits of using the VA Jumbo with a couple examples:
Purchase:
Compare a traditional Conventional Jumbo loan to a VA Jumbo loan for a Veteran receiving VA service-connected disability benefits (exempt from the VA Funding Fee) on a $720,000 purchase using a 30 year term (compare line-by-line).
VA Jumbo (No Down):
- Down Payment: $0
- Loan Amount: $720,000
- Rate/APR*: 3.75%/3.425%
- Principle/Interest: $3,183
VA Jumbo (20% Down—to match Traditional Jumbo requirements):
- Down Payment: $144,000
- Loan Amount: $720,000
- Rate/APR*: 3.75%/ 3.433%
- Principle/Interest: $2,546
Traditional Jumbo:
- Down (20%): $144,000
- Loan Amount: $576,000
- Rate/APR*: 3.750%/ 3.788% APR
- Principle/Interest: $2,668
*Rates as of 7/20/20; for comparison purposes only; subject to change; not guaranteed.
A couple of big benefits you realize with your eligibility to use the VA Jumbo over the traditional jumbo:
- The VA Jumbo’s no required down payment allows you to keep much more money in your pocket. In this example, the additional money you keep at closing is $144,000; money you can use for home decorating, landscaping, or just keep it in the bank for a rainy day.
- Because the VA Jumbo interest rate is lower, not only do you save on your total payment (putting 20% down on each—the VA payment is $122 lower) if you were to hold each loan to its full 30 year maturity, the VA Jumbo loan saves you over $54,000 in interest over the traditional jumbo. By the way—with full entitlement—you can put down as much as you wish, it’s just not required.
Refinance:
You can realize the same benefits on a refinance.
Let’s say you’re currently in a traditional Jumbo on a home you purchased for $800,000 5 years prior to today. When you bought, you put 20% down and used a 30 year loan with an interest rate of 6.5% on $640,000 giving you a payment of $4,045.
Today, you owe $599,000 and want to lower your payments to save some money for your retirement and your children’s’ college fund.
A new VA Jumbo 30 year loan at the same rate as above—4.25%--gives you a new payment of $2,947, saving you $1,098 per month. That’s a chunk of change.
But, you’ve already paid for 5 years and don’t want to start over, right?
Well…start over. Because the remaining interest for 25 years on the first loan is $614,000. But, the total interest for 30 years on the new loan is only $462,000. The new 30 year loan saves you $152,000 in total interest!!
Now, what do you do with the savings? If your $1,098 is invested monthly for 15 years earning only 5% interest (enough time for your 3 year old to be 18 and leaving for college) gives you a college fund of $294,706. That’ll pay for a darn good college, right?
Frequently Asked Questions on the VA Home Loan Benefit
Q: What constitutes a VA Jumbo Loan?
A: A VA Jumbo Loan is any loan above the FHFA conforming loan limit. Many counties in California are at the conforming
VA County Limits (subject to change annually).
Q: Is there a maximum loan I’m able to get? In other words, how much can I borrow?
A: The maximum loan available is determined by each lender, not the VA. As of this writing, the maximum loan we provide is $1.5 million, although we could go higher with management approval.
Q: What’s a “Funding Fee”?
A: For background, the VA doesn’t lend money; they provide an insurance policy for the entity lending you the money to buy your home. The insurance covers the lender for 25% of the loan in the event that the Veteran should default on the loan.
To pay for the insurance, the VA charges a “Funding Fee” as a percentage of the loan amount. The fee varies by several factors: Whether the person has previously used their VA Home Loan Benefit, the type of loan, the amount of down payment on the property, type of military service, etc. The fee is either added to the loan or can be paid at closing.
Q: Do I always have to pay the “Funding Fee”?
A: No. If you have a minimum of 10% “service-connected” disability, you are exempt from paying the funding fee.
Q: How is the down-payment amount determined for the Jumbo Loan?
A: The lender—not VA—determines the required equity they want for the VA loan above the VA County Limit. Because the VA covers 25% of the lender’s loss of the basic VA Home Loan, for any loan that goes above the VA County Loan Limit, the lender still wants their 25% guarantee. With the VA Jumbo Loan, the lender gets their “equity” from a combination of the 25% guaranty and down-payment or equity (determined by the appraisal, in the case of a refinance), Funding Fee included.
For example, a person with 10%+ service-connected disability and no funding fee purchasing a home: The required down payment/equity is 25% of the difference between the VA County Loan Limit and Purchase Price or Loan Amount. In a county with a $417,000 limit, a $600,000 purchase would require a down payment of $45,750 ($600,000 minus $417,000 times 25%).
Q: What other fees do I pay? I’ve heard that I don’t have fees when using this loan.
A: There are fees that the VA calls “non-allowable” charges. In the past, the person using the VA loan was not allowed to pay these fees (these vary depending on area of the country, but in California they’re basically: lender fees; escrow; notary; pest inspection). The VA has updated their policy and now allows the Veteran/active-duty person to pay those fees on his/her behalf up to 1% of the loan amount. The fees may also be covered by the seller or a credit from the lender—if available—depending on the interest rate chosen by the borrower.
This is an important change for the military borrower. Previously, a seller might be inclined to choose another offer on a home over the offer using a VA Loan, if they thought they had to pay a cost for the borrower. Now, the military borrower no longer needs to be penalized for using their VA Loan Benefit because they can now negotiate like any other buyer, covering the “non-allowable” fees however they choose.
Q: How do I get started?
A: The first step for any VA Loan is determining eligibility with the VA “Certificate of Eligibility” (COE). While a Veteran or service member can get this themselves, a VA Lender who specializes in VA Home Loans can get it—usually in the same day—directly and electronically from the VA. You’ll need to sign a 26-1880 and provide some form of the following, depending on your service: Form DD214; NGB 22 or 23 (National Guard); Points Statement (Reserves); or in the case of those still serving, a Statement of Service from your Commanding Officer.
If you’ve never heard about any of this, you’re in good company. You see, even if a lender is approved to do VA Home Loans, most don’t know you can get a Jumbo Loan using your VA Home Loan Benefit. If they do know it exists, they may not know how the Jumbo loan works, so it pays to work with a Loan Officer that not only can do a VA Home Loan, you want a Loan Officer that is proficient at VA Home Loans. You want a VA Home Loan Specialist.
If you, or someone you know have military service and want more information on how this loan works, or need questions answered, contact us by either email or phone.
Remember: You’ve earned this benefit. Find people who will advocate or you and your right to use it. It will save you money.
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