If you were to take out conventional financing, you’d need a jumbo loan if you borrowed over $647,200. But that’s not the case with VA loans.
Technically, there isn’t a jumbo loan amount or limit for VA loans. The VA did away with loan limits a few years ago.
This doesn’t mean, however, that if you need to borrow a high loan amount, such as one over $647,200, we won’t need more documentation or have slightly stricter requirements. The more you borrow, the more proof we’ll need that you can afford it.
Qualifying for a VA Jumbo Loan
Maximum VA loan amounts don’t cap out at $647,200, but if borrow more than that, here’s what you might need.
You don’t need perfect credit by any means, but a higher credit score may be required to ensure that you can follow through on your higher debt. A higher loan amount means a higher mortgage payment, which if you have a bad credit history, may be hard to afford.
If you have a credit score of 680 or higher, you prove you are financially responsible and are not likely to default on your larger mortgage payment.
Low Debt-to-Income Ratio
Your DTI compares your monthly debt to your gross monthly income (income before taxes). The higher your DTI is, the higher your risk of default becomes.
There isn’t a magic number you should meet, but if you use conventional loan requirements as a guide, aim for a DTI of 36% 43% or lower. The less debt you have, the easier it is for you to afford your higher mortgage payment and the higher your chances of approval.
If you can prove your employment is stable and you’re likely to be there for the foreseeable future, it helps your chances at approval. A person that changes jobs frequently is a higher risk of default because they may not always have a job.
Again, you don’t need a down payment even for a jumbo loan, but it’s not a bad idea for two reasons.
First, if you make a down payment, you reduce the risk of default. Lenders like it when you have ‘skin in the game’ especially on a large loan amount. Not only will this help your chances of approval, but also your chance of securing a lower interest rate.
Second, if you invest in the home, you have instant equity. It can feel a lot better to know that you own a piece of your home, and the entire thing isn’t mortgaged.
Of course, this is just a suggestion – if you have the qualifying factors, you may still get by without a down payment.
The Difference Between Regular Jumbo Loans and VA Loans
Jumbo loans are loans with a high loan amount no matter which way you slice it. However, there are some vast differences that make VA loans much more attractive for veterans.
High Credit Score Requirements
Regular jumbo loans typically are available only to borrowers with a 700+ credit score. That’s a high credit score, especially for veterans just getting out of the military. VA loans don’t require a minimum credit score, although, for jumbo-sized loans, higher scores are recommended, but not necessarily 700 credit scores.
Large Down Payment Requirements
Traditional jumbo loans require down payments of 20% – 30% or even higher. It depends on the size of the loan and your other qualifying factors. It’s not unusual to see requirements of 30% or more down, though.
VA loans don’t require any money down even on jumbo loans. As long as you can prove you can afford the loan, you don’t have to make a down payment, but you always can if you decide to.
Low Debt Ratio Requirements
Traditional jumbo loans need low debt ratios. Since the loans aren’t bought by Fannie Mae or Freddie Mac, lenders keep jumbo loans on their books. If they take on too much risk, they could lose a lot of money.
To avoid this, they often require very low debt-to-income ratios to ensure you can afford the loan. VA loans don’t have a maximum DTI that you can have to secure a jumbo loan.