Let’s talk about three different types of VA loans available to veterans and active service members: jumbo loans, assumable loans, and construction loans.
What’s a Jumbo Loan?
There’s no official term called a “VA Jumbo Loan,” but what people are thinking of is when you exceed the VA loan limit. There’s actually no limit to the amount of money you can spend on a house, but the VA will only guarantee the loan up to the $484,000 loan limit in 2019, and then the borrower or the buyer has to put down 25% of anything exceeding that.
Can you buy a house from a veteran that currently has at the interest rate that they locked in at?
The short answer is yes. This is known as an assumable loan.
This is one of the biggest benefits of the VA loan, especially in the low-interest rate times that we’re in right now. When you buy a house under VA, let’s say you get a 4% interest rate. Historically that’s a great interest rate. In the future, let’s say seven, or eight years from now, the rates are up at 6 or 7%, which they certainly have been in the past. You can sell your home to another veteran.
They basically pay you for the equity in the house and then they can assume your 4% interest rate and only maybe 22 or 23 years left on the loan. And if you sell it to another veteran, the eligibility transfers to their eligibility, so you’re not fully eligible to go buy another house with a VA loan.
That’s really good news. Most veterans thought that until that house sold, that entitlement stayed with that property. So, it does get returned back to the original veteran.
Does the VA provide a construction loan if you want to work with a builder to do a custom build?
Yes, they do. The only limitation you have is that some lenders do those loans and some do not. The limitation really is the fact that a lot of lenders don’t want to loan up to 100% on a construction project because house values change during the construction. So many lenders offer the VA construction loan, but they may limit the loan to value to 90% or 95%, and a handful do offer up to 100%.
Importantly, know that the builder you work with needs to be VA approved. Your loan lender will also require it because it’s a VA requirement. A good lender can actually assist the builder in getting approved with the VA, so make sure you consider this when looking around for lenders.
Like more info? Here’s a full discussion on the matter care of Kat Kosmala: