Currently, there exists a “perfect storm” of opportunity for qualified veteran and active duty military borrowers. Between record low VA rates and rock-bottom home prices, those who have earned VA Loan Guarantee eligibility can still qualify for incredible financing opportunities. While many VA borrowers are aware of the 100% financing benefits the loan guarantee program offers them on conforming loan amounts(</= $417,000 continental US, </= $625,500 in Alaska & Hawaii), many veterans are as yet unaware that there are financing options above and beyond conforming limits that still make VA loans a far superior alternative to conventional “Jumbo” loan options. Here we will offer a brief comparison of the two as well as some more specific advantages and features of the VA Jumbo Loan Program. While 100% financing is limited on VA Jumbo Loans, qualified veterans can still secure financing with smaller down payments and more flexible lending guidelines without having to carry mortgage insurance. Most conventional jumbo loans require that the borrower bring at least 20% of the full purchase price to close. By contrast, VA Jumbo loans generally require no more than 25% of the amount of the sales price over $417,000, or $625,000 in Alaska and Hawaii. Let’s say a home sells for $700,000. Now subtract the maximum “zero down” VA loan amount of $417,000 and you get $283,000. Simply take 25 percent of $283,000 and we determine that the down payment would be $70,750. To sum up, for just over 10% down, qualified veteran borrowers can purchase VA homes in high-cost counties with no mortgage insurance and with subsidized rate pricing. By comparison, a conventional jumbo loan borrower would have to bring $140,000 to close and likely receive a much higher rate that a qualified veteran. Currently however, in order to facilitate homeownership for qualified veteran borrowers in areas within the continental United States where the median home price exceeds the traditional $417,000 maximum (despite the recent home valuation trends of recent years), the Department of Veterans Affairs has extended loan guarantee benefits that allow for up to 100% financing. Many of these “High Cost” areas are located in California or in high density, east coast states, like Maryland and Virginia. To give an example of the sorts of benefits made available through loans, consider the following counties loan limits, based on 2010 updated figures.
- Los Angeles VA loan limit: $593,750
- San Diego VA loan limit: $437,500
- Alameda VA loan limit:$962,500
- San Francisco VA loan limit:962,500
- Orange County VA loan limit:$593,750
- Riverside County VA loan limit:$417,500
- Fresno County VA loan limit:$417,500
- San Bernardino County VA loan limit:$417,500
- Sacramento County VA loan limit:$418,750
- Santa Clara County VA loan limit:$633,750
While these areas have been designated as “High Cost” counties for the years 2009-2010, there is little indication as to the depth, extent or duration of how long these areas will be able to enjoy these benefits. In fact, even despite what the VA has indicated they will currently guarantee, the extent to which lenders will honor or offer financing across these conditions exist on a case by case basis. The best bet for any borrower looking to take advantage of these temporary benefits is to contact a VA approved loan officer who can navigate through the various opportunities available to you.