VA loans are guaranteed by the Department of Veterans Affairs, which significantly lowers the threshold to be approved for a mortgage by a lender; they are a way to give back to veterans and their surviving spouses and ensure that they can afford a beautiful home in the land they fought to protect.
While a standard VA loan allows you to borrow up to the conforming loan limit set by the Federal Housing Finance Administration (FHFA), which changes each year, sometimes this isn’t enough to access your dream home. In this instance, you’ll be hunting for jumbo VA loans, which have no limit to the amount of money you can borrow. However, they are harder to qualify for, which is why it’s essential that you know the process ahead of time and prepare to meet these guidelines. In this article, we’ll walk through all the steps you must take in order to get the financing you need for a more expensive property.
Apply for a Certificate of Eligibility
Before you start the mortgage application process for any VA loan, you need to prove that you’re eligible, thanks to military service or marriage to a deceased military member. This includes your discharge status and the consecutive length of time you have spent in service. As VA requirements have changed over time, if you are a veteran, you need to check for the specific time period you served and ascertain from your military record whether you qualify.
You can apply for the Certificate of Eligibility online; after it’s approved, look over it carefully to see whether you’re approved and determine how much you can buy. If you’ve been denied due to your discharge status, you may be able to protest this through a discharge upgrade, at which time you’ll have to apply for another COE.
Once you’ve been approved, check the entitlement status to see whether you can access a Jumbo VA loan. You need to have a full entitlement to borrow over the conforming loan limit, which just means that you don’t have another VA loan open at the time of borrowing.
Analyze Your Financial Circumstances
Jumbo loans, including government-backed ones, are a weighty investment: even with VA non-conforming loans may have monthly mortgage payments of $5,000 or more on a $1 million home. This means that you need to have strong financial savvy in order to make it work.
Track your budget carefully for several months in order to ascertain how much you can afford over what you’re already paying in housing expenses; there are numerous loan calculators that will help you identify how much you’d be paying each month based on the loan that you take out, including ones that are specially formulated for VA loans.
Begin to build this extra money into your expenses, as this will help you save up money if your financial circumstances change and you need to rely on savings for several months. If you’re currently paying $3,000 for a mortgage and you know you will be paying $5,500 in total expenses if you get a loan in the amount you desire, start placing $2,500 per month in savings. You can use this money to pay your mortgage for a few months or, if you require a down payment, thanks to the size of the loan, put it towards that expense.
Living as if you already own your home will give you plenty of breathing room when you actually do get the keys to your dream property, ensuring you’re not scrabbling to accommodate the new cost.
Boost Your Credit Score
For a jumbo VA mortgage, you need at least a 620 credit score to qualify; this is much lower than what you would need for a conventional mortgage, but it can still be difficult to reach for those who don’t have a long credit history thanks to their service. Many lenders will require a down payment on properties below $1.5 million if you have less than a 640 credit score, so working hard to raise your credit rating will pay off, as you won’t need to put money down upfront if you get a home below that limit.
Shop for Lenders
Every lender is a little different, and it’s no different for VA jumbo loans. While most of the parameters will be the same, their interest rates will vary, as the Department of Veterans Affairs does not set this.
Even a fraction of a percent can drastically change how much you pay over time, so it’s crucial that you take your time and look at all your different options before applying for approval from one lender. While VA loans do not legally require a down payment, lenders can still request one before they are willing to work with you, so you need to consider this as well. Much as you want to move into a wonderful new property right away, comparing rates will pay off in the long run, as your mortgage payments will be lower and your bank account happier.
Any major purchase requires thought and preparation, but you can be assured that your hard work – both in the military and while shopping for a home – will afford you long-term happiness in the form of a beautiful house. By following the VA loan requirements, tracking your expenses, raising your credit score, and performing research on possible lenders, you’ll be stepping into a wonderful luxury property before you even know it.
