The Difference Between “Normal” and Jumbo VA Loan Rates


Different VA lenders will all offer the same suite of VA mortgage loans and while the loan guidelines don’t change from lender to lender, the interest rates do. Not by much, but you will find slight variances in VA loan rates from lender to lender. Approved VA home loan lenders all set their interest rates each day using the very same index; that’s why you won’t find one VA lender with a 30 year fixed rate at 2.00 percent when everyone else is at 3.00.

There are differences; however, when comparing conforming loan amounts and what are considered “jumbo” loans. Before we get too much further explaining how jumbo VA loan rates are set, let’s first explain what make a VA loan a jumbo VA loan.

“Normal” vs. Jumbo

While the VA doesn’t set maximum loan limits, lenders do, and the current VA loan limit for VA loans is set at $417,000. This loan amount isn’t by chance, it’s the very same loan limit established for conventional loans underwritten to Fannie Mae and Freddie Mac guidelines. With the exception of certain areas deemed, “high cost” any loan amount above $417,000 is indeed labeled “jumbo.”

Jumbo loan amounts will have higher interest rates than conforming loan amounts. For example, if you have a loan amount of $400,000, then a 30 year fixed rate might be 3.75 percent, but if your loan amount is considered a jumbo loan at $600,000, then your rate will be closer to 4.25 percent, about one-half percent more.

This so-called “spread” between conforming loan amounts and jumbo loan amounts will vary from time to time, but historically the difference is anywhere between one-half to one percent. Remember, so far we’re talking about conventional loan amounts, not jumbo VA loan rates. Jumbo VA loan rates are treated a bit differently and it’s all in your favor.

Jumbo VA Loan Rates

The maximum VA loan that a VA lender will approve with no money down is $417,000 or up to $625,500 in high cost areas.

What happens if you want a jumbo VA loan- is there such a thing? Yes, there is a jumbo VA loan, but the rates for a VA jumbo are similar for loan amounts at or below the $417,000 limit.

The difference is the amount of down payment required for a VA jumbo mortgage. Any amount above the $417,000 limit must be accompanied by a 25 percent down payment of the difference between the normal (county) loan limit from the borrower.  For example, let’s say you want to buy a $500,000 home and use your VA home loan benefit. First, calculate the difference between $500,000 and $417,000 = $83,000. Your required down payment is 25 percent of $83,000, or $20,750 and no mortgage insurance.

There are jumbo VA loan rates and there are VA jumbo loans, it’s just that they’re not marketed that way by VA lenders, but if you are VA eligible and you want to finance a larger loan amount, the VA loan program is hard to beat.