If you are a Veteran looking to buy a home in Southern California and are wondering about high-cost or “high balance” counties or communities and VA jumbo loan limits, call us today! We are excited to guide Veterans through the process of buying a home!
The Benefits of Using a VA Jumbo Loan
There are many benefits in using VA loans over conventional home loans. The signature benefit of using your VA loan, if you are within the loan limit, is that a down payment is not required. Private mortgage insurance is also not required, saving you money. Your benefits also never expire, even if you earned those benefits decades earlier or if you’ve already used them in the past. Your VA home loan benefit can be used again and again. Even more, a history of bankruptcy or foreclosure may not affect your eligibility for VA home loans.
The benefits of VA jumbo loans are very appealing. VA jumbo loans have lower rates compared to conventional loans and the down payments are also significantly lower because of the VA’s backing of these loans, making them a lower risk for lenders. We’ll discuss this further below.
High-Balance Loan Limits in Southern California
You will need a VA jumbo loan if you are looking to buy a home in a high balance community. For example, San Diego is a “high-cost county” because the homes have higher-than-average price tags on them. As of January 2019, loan VA conforming loan limits are $484,350. But San Diego has a high balance loan limit of $690,000. Without the higher VA loan limit, Veterans who decide to live in San Diego County would have a smaller selection of homes to choose from when financing with no down payment.
Los Angeles County and Orange County are also high-balance communities, and each has loan limits of $726,525 as of January 2019.
How does a VA Jumbo Loan Work?
Institutional lenders fund VA loans, which then receive a 25% VA guaranty against loss in case of a borrower default. Should the purchase require a down payment, according to the VA’s guidelines, that down payment provided by the buyer supplements the VA’s guaranty of the loan, for a loan amount beyond the county loan limit. (Just not a good sentence – “product” confuses the reader without an explanation.) If a Veteran tries to secure a loan that is higher than the conforming VA loan limit, then that Veteran’s loan request will fall into the VA Jumbo loan category.
What is a VA Jumbo Loan vs. a High Balance Loan?
Some of our Veterans get confused as to the difference or definitions. A VA jumbo loan is a loan program category or product category, when the loan amount exceeds the conforming limit, also a product category. In contrast, VA lenders don’t technically refer to loans as “high balance” loans. We refer to specific counties in any state as “high balance counties” that accept 100% financing loan amounts in that county above the conforming loan limit. In that circumstance, a VA borrower automatically falls into a jumbo VA loan category.
Counties in which the VA loan limit is set at the conforming limit are the norm. Counties that are defined as “high balance counties” by the Federal Housing Finance Agency (FHFA) or the exception to the norm.
So, four scenarios exist, three of which require a VA jumbo loan to be used:
- Scenario #1: The more obvious scenario: A Veteran wants to buy a home in a high-cost / “high balance” county at a price that exceeds the conforming loan limit. In 2019, if this Veteran wants a home in Orange County, CA, he or she can borrow 100% of the purchase price up to $765,525 and falls into the VA jumbo loan category.
- Scenario #2: Let’s use Orange County again, but this time the Veteran has a larger appetite for a purchase price - $800,000. We’ll remind you about the formula: A down payment using a VA jumbo loan is only 25% of the difference between the purchase price of the home and the county loan limit.
(purchase price minus county loan limit) x 25% = down payment
[($800,000 – $726,525) = $73,475] x 25% = $18,369 down payment
Again, this Veteran falls into the VA jumbo loan category. This time he or she utilizes the maximum high-cost / “high balance” county limit, yet the borrower is still required to make a down payment.
- Scenario #3: This scenario is less obvious. A Veteran wants to buy a home with a sales price that exceeds the conforming loan limit, but the property is NOT in a high cost / “high balance” county. This Veteran buyer will be required to make a down payment to cover 25% of the difference between the conforming loan limit and the purchase price. This borrower is exceeding the conforming loan limit and also falls into the VA jumbo loan category.
- Scenario #4: This is the easy one, right? A Veteran wants to buy a home with a purchase price at or below the conforming loan limit. Regardless of the county loan limit, the Veteran can borrow up to 100% of the purchase price, and the loan will fall into the conforming VA loan category.
NOTE: On June 25th, 2019, President Trump signed the Blue Water Navy Vietnam Veteran’s Act of 2019. Early drafts of the bill intended to cover increased health care benefits for diseases related to Agent Orange exposure by raising VA loan funding fees. The approved bill reduces the fee increases, yet it also provides for a removal of these conforming loan limits (in most counties and most circumstances), allowing 100% VA financing over the conforming loan limit as of January 1, 2020. The additional revenue to be generated from both adjustments to loan fees and loan limits is intended to fund disability compensation for as many as 90,000 Veterans.
In conclusion, the two biggest differences between a conforming VA loan and a VA jumbo loan are interest rates and loan limits. VA Jumbo loans are for situations when the purchase price of a home is higher than conforming loan limits, as mentioned above, allowing a Veteran to finance one-hundred percent of a larger or more costly home.
Interested in a VA Jumbo Loan in California? Contact us at SoCal VA Homes Today!
Don’t be intimidated by VA jumbo loan limits. Get a VA jumbo loan through SoCal VA Homes! SoCal VA Homes offers three unique and powerful programs to help you get just the right home for your family, the home that you deserve.
We understand that it’s not always easy to use a VA home loan and that it can feel intimidating to consider a VA loan that’s within the mortgage high-balance loan limits. Because our staff of military Veteran real estate and lending pros understand your concerns, we work hard to help you overcome any hurdles in the home buying process.
We are here to answer all of your questions about high balance loans, VA jumbo loan limits, and anything else related to buying a house. You can afford more than you think! Use our VA loan limit calculator and see the numbers for yourself. Our blog also contains more information about the home buying process.
Contact SoCal VA Homes if you’re ready to pursue buying your home. Give us a call today at (949) 268-7742.