It is possible to get a $1,000,000 VA loan in Orange County, CA, which is always a big surprise to people learning that for the first time. As a matter of fact, there a VA lenders willing to go as high as $1,500,000 on a VA loan. Of course, if this is true then why is everyone concerned with VA loan limits?
What is the VA Loan Limit?
The VA loan limit that is most commonly mentioned is the Zero Down payment, 100% financing loan limit. VA is one of the very few loan programs that allows for no down payment. The 100% financing loan limit for most of the country is $417,000. But in Orange County, CA, where home prices are higher than most parts of the country, the 100% VA financing limit for 2014 is $687,500. Some lenders still don't want to close a VA loan higher than $417,000, but there are lenders who are comfortable with the VA program that are very happy to close a $687,500 loan with no down payment.
So if the 100% loan limit is $687,500 in Orange County, then how do you go above that? This is where "Jumbo VA Loans" comes into play.
The Jumbo VA Loan Program
A Jumbo VA loan occurs when a Veteran buys a home for a price higher than the 100% financing loan limit. In this case a down payment is required equal to 25% of the difference between the purchase price and the loan limit. Let's assume the our Veteran, Dr. Navy-Seal, is purchasing a home in Irvine, CA for $1,200,000 and wants to get maximum VA financing. Dr. Navy-Seal could actually get a VA loan of $1,071,875, meaning a down payment of only $128,125, or 10.6% down. What other loan program is going to allow for 10% down on a $1,200,000 purchase price without breaking it into two loans or requiring some form of mortgage insurance? Plus, VA offers very aggressive 30 year fixed rates, is flexible with credit and FICO scoring (far more than Conventional Jumbo financing), and will allow for debt to income ratios above 50%. Not to mention the allowance for recent bankruptcies, short sales or foreclosures (2 years wait period required - shorter than other types of financing).
How did we calculate the required down payment and resulting loan amount? $1,200,000 less the loan limit of $687,500 equals $512,500. 25% of $512,500 equals $128,125 (the down payment). 75% of $512,500 is $385,375, which is added to the 100% loan limit of $687,500, resulting in a total VA loan of $1,071,875. This formula works all the way to an approximate purchase price of $1,770,000, where a Veteran would need approximately 15% down for a VA loan of close to $1,500,000.
The most important first step in any home buying process is Preapproval. Especially when it comes to a Jumbo VA loan, working with a loan officer who is very familiar with the VA loan program is critical. Your Orange County VA loan specialist should be able to quickly prepare custom loan scenarios detailing the purchase price, loan amount, payment, closing costs, and total amount needed to close.
Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Home Point Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com