A VA jumbo loan is when the loan amount on your VA loan lands above the conforming loan limit in your specific county. The conforming loan limit for 2022 in most but not all counties is $647,200.
VA jumbo loans are typically treated differently from regular VA loans, but the process and minimum service requirements are all the same.
Where you may find differences is when it comes to credit, savings, income and outstanding debts. Guidelines vary by lender, but when loan amounts exceed the conforming loan limit, it's common for lenders to require a higher credit score and more cash reserves than a VA loan below the conforming loan limit.
Credit score requirements for VA loans also vary by lender, but a minimum of 620-660 is typical.
VA jumbo loan limits are the same as VA loan limits, which are the same as the conforming loan limits. The base limit for much of the U.S. is $647,200. However, in high-cost counties, the limit can exceed $970,800.
VA jumbo rates are generally higher than loans under the conforming loan limit. Even with the VA guarantee, jumbo loans carry additional risk to the lender, which is the cause for typically higher rates.
That said, VA loan rates are still typically lower than conventional and FHA rates. According to ICE Mortgage Technology, through the first half of 2021, the average VA loan rate was 2.80%, while conventional fell at 3.11%.
If you have full VA loan entitlement, you still won't need a down payment. However, if you have diminished entitlement from not paying off a prior VA loan or past foreclosure, you may need to bring a down payment to closing.
In these cases, the down payment required is typically 25% of the difference between the loan amount and your available entitlement. You can get a complete overview of VA entitlement here with example calculations.
The Federal Housing Finance Administration sets conforming loan limits. These limits exist by law to regulate what mortgages Fannie Mae and Freddie Mac can purchase in the secondary mortgage market.
That's a lot to take in if you're not an industry professional. The short version is Fannie Mae and Freddie Mac purchase mortgages in bulk from lenders in the secondary mortgage market. The benefit to consumers is purchasing the loans allows financial institutions to keep providing mortgages to consumers without running out of money.
While you may see some additional scrutiny when applying for a VA jumbo loan, you can also receive some amazing benefits compared to a traditional jumbo.
These benefits are made possible through the VA guarantee - the portion of the loan the VA backs against loss. Through that guarantee, lenders are typically more willing to extend favorable terms with less scrutiny than a traditional jumbo loan - including $0 down.