In the thousands of mortgage loans I’ve helped borrowers with over the years, one thing is certain – every one of my clients is unique, and so are their financial circumstances. So, in a market environment like today’s that offers fewer (and much more restrictive) mortgage financing options, it can be quite a challenge, finding innovative solutions for the range of complex needs. But it can be done – and that’s why I’ve put a series of mortgage advice articles together to discuss unusual, often overlooked, and sometimes imaginative approaches to a mortgage lending scenario.
Last week I talked about retirement funds as a source for down payments. This week, the topic is VA loans as a potential source of jumbo mortgage funding (defined as loans too large to be sold to Fannie Mae and Freddie, Mac). You might not realize that Colorado has over 424,000 veterans – and 20,000 veterans in Boulder County alone. So for these borrowers, (and including those in active military duty) VA mortgage loans might be a viable option.
Since the virtual shutdown of the jumbo loan market in the financial crisis of 2008 – 2009, few options have resurfaced from lenders fearful of mortgage risk. Typically, the terms for jumbo mortgage loans are more restrictive and the rates are considerably higher than loans that conform to Fannie and Freddie standards. This can make finding a mortgage cumbersome for borrowers with less than stellar credit and limited financial resources – and in many cases – shutting them out of a market entirely.
For eligible borrowers, a VA jumbo mortgage can be really compelling. And here’s why:
- 30-year fixed rate structure – unusual for a jumbo these days.
- Interest rates competitive with Fannie Mae/Freddie Mac 30-year, fixed rate loans.
- For loans up to $700,000, borrowers with a credit score of 620 can get a rate that’s approximately the same as a credit score of 800. Compare this to Fannie/Freddie loans, where a low credit score raises an interest rate substantially.
- No requirement for financial reserves – a big plus. (These are liquid assets held in some type of an account.)
- Up to 100% financing. No down payment for mortgage loans up to a purchase price of $427,500 (the VA limit in Boulder County, CO – limit varies by county.)*
- Only 25% down payment required for every dollar over the $427,500 limit – the VA will lend the rest up to a loan amount of $700,000.
Let’s look at an example: “Bill,” an eligible veteran, is looking to purchase a primary residence in Boulder County for a price of $768,125. He has a credit score of 620 and much less than a normal 20% for his down payment. With the VA jumbo mortgage loan however, Bills needs a down payment of just 9%, equal to $68,125. This means, I can put him in a VA jumbo loan for up to $700,000 – which gives us a 91% loan-to-value ratio.
You can see why this is an important consideration for jumbo mortgage loans today, because when you compare this to other jumbo options that typically require at least 20% down, credit scores typically above 700, and substantial financial reserves, the ability to purchase a home in the jumbo mortgage segment becomes much more of a reality.
Delivering mortgage advice is one of the things I most enjoy about my work in mortgage financing. Perhaps you are – or you know of – a veteran, an unmarried surviving spouse of a veteran, or an active duty person who is seeking a mortgage. If so, I’d love to help explore your VA loan options. Call me today at 720-352-3775.
*Some Colorado counties are much higher – for example, Pitkin, Eagle and Lake are all over $850,000.
