Compensating U.S. military personnel for their sacrifices is no easy task. The risks they face, the physical challenges they overcome and the emotional strain of leaving loved ones for months at a time are difficulties unknown to most people. It is for these reasons that active duty military and veterans receive (and deserve) financial aid from the Department of Veterans Affairs (VA) to mortgage a home. For many of those eligible, a VA jumbo loan will help purchase a house and build a future for themselves and their families.
What is a VA jumbo loan?
A VA jumbo loan is a home loan that is greater than the limit set by the Federal National Mortgage Association, which is $417,000. The VA guarantees this loan to a maximum of 25 percent, which alleviates some of the risk on the shoulders of lenders. For example, if a veteran is fully eligible for $104,250 in entitlement benefits, the VA guarantees the maximum $417,000 with a $0 down payment.
Although the VA will only guarantee up to 25 percent of $417,000, a qualified borrower can enjoy these benefits for property loans up to $1,000,000. In these cases, the down payment is approximately 25 percent of the difference between the loan amount and the $417,000 guaranteed by the VA. The difference for a $1,000,000 loan is $583,000, amounting to a down payment of only $145,750.
The Benefits of VA Jumbo Loans
Besides incredibly low down payments, VA jumbo loans allow refinancing up to 90 percent, an amount greater than most conventional loans. This is especially relevant today because the collapsed housing market makes refinancing a last resort for lenders. Also, there are no repayment penalties for a VA loan. In fact, borrowers can receive financial assistance due to monetary hardship.
The Disadvantages of VA Jumbo Loans
VA loans have unique entitlement benefits. Entitlements assure lenders that the borrower is a safe investment by guaranteeing 25 percent of the loan. However, because jumbo loans involve more money, the borrower’s debt is greater. This leads to a pricier interest rate.
Despite this minor shortcoming, jumbo loans offer buying power that can land an eligible party in the perfect home. This is the American dream, and who deserves it more than those who make the ultimate sacrifice to protect American freedoms?
Contact one of our loan consultants to learn more about this program.