This answer comes in 2 parts but I want to start with a basic understanding of what VA does for the lender. When a loan has a VA Guarantee 25% of the loan is insured by VA against default for the lender. Example, the lender forecloses on a home that has a $100,000 loan balance. The lender sells the home for $75,000. VA sends the lender a check for 25% ($25,000) to cover the difference. So now on to VA Jumbo loans:
First, you can do a VA Jumbo Loan in high cost areas that follow the conforming Fannie Mae/Freddie Mac loan limits up to $1,094,250 in high cost areas. Because the loan amount is over $417,000 it would still be classified as a Jumbo loan even though it follows the conventional guidelines. This does not require down payment from the Veteran for a purchase.
The second answer is truly a VA Jumbo Loan. These apply when you're borrowing above the conventional loan limits and above your VA Eligibility limit ($104,250, or 25% of $417,000). When a borrower makes a purchase where the loan amount would be over $417,000 a down payment is required equal to 25% of the overage. This sounds like a lot but in reality its typically less then you think. Here's an
example:
Purchase Price: $600,000.
Base VA Loan @100% $417,000 leaving $183,000 short.
Buyer is required to put down 25% of the shortage, $45,750
The end loan would be $554,250 or 92.37% Loan to Value
The benefit for this type of loan would be lower interest rates, no private mortgage insurance and less money down. VA Jumbo loan limits vary by lender but up to $1,000,000 is available by many national lenders. A link to VA's website with 7 different examples is listed below for reference.
http://www.homeloans.va.gov/docs/guaranty_calculation_examples.pdf
Answer Submitted on Fri, Jan 16 2009
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