VA Jumbo Loan Rates
The Blue Water Navy Vietnam Veterans Act of 2019 was passed last year (went into effect January 1, 2020), and amongst other changes, it removed the limits on VA loans for Veterans with full entitlement. However, if you’re buying a home with a price over $510,400, a VA Jumbo Loan will come into play, and you may want to check the current VA jumbo loan rates. This would be especially important if the purchase price is right in that price range of the conforming limit.
The mortgage market experienced a serious contraction or “credit crisis” thanks to COVID-19, and this put upwards pressure on VA loan rates, especially with VA jumbo rates. Here’s what you need know.
Do I need a VA jumbo loan?
If you’re borrowing over $510,400 (VA BASE loan amount before the VA Funding Fee), you’ll be looking at a VA jumbo Loan. Because VA loan limits were eliminated, the loan amount available for a home purchase solely depends on how much a lender is willing to lend to you. That typically depends on your creditworthiness, and especially on your income as you set your sights on borrowing at these higher amounts.
On the other hand, if you are a Veteran who has one or more active VA loans or if you have defaulted on a VA loan in the past, loan limits will still apply to you. According to the VA, current VA loan limits are the same as the Federal Housing Finance Agency (FHFA) limits. If the loan you want exceeds the limit for your area, you would still need a VA jumbo loan.
For example, if you live in Los Angeles County, the VA conforming loan amount limit is $510,400. If you wanted to purchase a home that costs $520,000 you would need a VA jumbo loan. In this case we would recommend an aggressive negotiation on price to try and reduce it under the limit or perhaps you could use a down payment. Considering the higher rates offered for VA Jumbo loans, the payment comparisons will obviously guide your decision away from a VA jumbo loan and that higher rate.
What happened to current VA jumbo loan rates after March?
VA jumbo loan rates vary by lender but can be as much as 1% to 2% lower than conventional jumbo loan interest rates. In our current lending environment, true conventional jumbo loans don’t even exist, thanks to COVID-19 and the meltdown of the capital markets in March and April. Fortunately, thanks to the VA loan guaranty program, Veterans can still borrow money beyond the old “high balance” limits and literally get 100% financing, well in excess of 1MM with their VA benefit. But the rates on VA jumbo loans are much higher now, relative to where they were in February.
Although, it may be harder than it was in the past to find a lender offering good VA jumbo loan rates. Again, due to the diminished liquidity in the secondary market, some lenders have decided not to offer VA jumbos at all.
The bottom line is that VA jumbo loans are not as attractive to Wall Street as they were before COVID-19. Wall street sees more risk in buying and these loans. This has a lot to do with the government passing the CARES act with provides mortgage forbearance for families – the main mortgage borrowers. Because the loan servicers must advance the borrower’s monthly payments to the GNMA security in all cases, it’s a huge problem when the borrower isn’t making a payment! This is “devaluing” the loans being sold on the secondary market, especially VA jumbos. A lower “value” equates to a higher rate. It’s that simple, and all VA loans ultimately get sold and securitized into GNMA securities.
Should I pay the higher VA jumbo rate?
Ay SoCal VA Homes, we partner with the top direct sellers of VA loans, who make up most of the market share in national VA loan production. These partners are our investors which provide us wholesale VA loan rates on conforming & VA jumbo loan products. We then offer these loan products to you at competitive retail rates. That gives use a competitive advantage when shopping our partners products for you…to find you the lowest rate. We know who has the best VA jumbo rates!
Call 949-268-7742 to speak with a Senior VA Loan Technician at SoCal VA Homes. We can walk you through all of your jumbo options, so you can make an informed decision on what’s best in your situation. Contact us today!