VA Jumbo Mortgages: Determining The Down Payment

by Brian Brady

Commercial Real Estate Finance Expert
Structured Debt and Equity
Licensed Real Estate Broker in AL, CA, and FL

Author website

Sean Purcell and I are really figuring VA-guaranteed  jumbo loans.  We’re getting a steady stream of business from high-cost California counties.  One of the common misconceptions is that VA loans are capped at the county loan limit, like FHA and conventional mortgages.  I’m going to walk you through the formula to determine the required down payment and maximum loan amounts for VA jumbo home loans.

STEP ONE:

___Lesser of purchase price or appraised value +

___Add the 100% financing VA funding fee =

___Gross loan amount

STEP TWO:

___ VA county loan limit * (.25) =

___ Veteran’s maximum entitlement * 4 =

___ Maximum VA guaranty (including funding fee)

STEP THREE:

___ Gross loan amount (from step one) * (.25) =

___ Required Guaranty –

___ Veteran’s maximum entitlement (from step 2) =

___ Required down payment

STEP FOUR:

___ Purchase price –

___ Required down payment (from step three) =

___ Base loan amount (before adding funding fee) +

___ Applicable LTV-adjusted VA funding fee =

___ Total loan amount after down payment

Let’s try a $650,000 purchase price in Maricopa County, where the county loan limit is $417,000, for a first-time VA loan user.

STEP ONE:

$650,000 (purchase price) +

$13,975 (2.15% funding fee) =

$663,975 (gross loan amount)

STEP TWO:

$417,000 county loan limit * (.25)=

$104,250 (maximum entitlement) * 4 =

$417,000 (maximum VA guaranty)

STEP THREE:

$663,975 (gross loan amount) * (.25) =

$165,993 (required guaranty) –

$104,250 (maximum entitlement) =

$61,744 (required down payment)

STEP FOUR:

$650,000 (purchase price) –

$61,744 (required down payment) =

$588,256 (base loan amount) +

$8823 (applicable LTV-adjusted funding fee) =

$597,079 (total loan amount after down payment)

Don’t be confused by the entitlement and loan amount; just follow the formula and any VA-approved underwriter will accept your figures.  As you can see, the required down payment, for this example,  is only 9.4%.  I’d probably round it up to an even 10% down payment so that the funding fee would drop to 1.25% instead of 1.5%.  Putting down an extra $3900 saves the veteran $1625 in the funding fee.

Very few jumbo loan programs allow for a down payment of 10% with no mortgage insurance.  This makes the VA-guaranteed jumbo mortgage tough to beat.  The first question you ask for  any loan application should be…

Did you serve ?

It could make a huge difference.  Good luck and good funding.