If you’ve proudly served your country, it’s time to let your country serve you through VA loans, which are guaranteed by the Department of Veterans Affairs.

These assist qualifying veterans and surviving spouses of military members in financing their dream of owning a home by encouraging lenders to provide a mortgage to veterans. If the borrower defaults, the federal government will repay the loan on the service member’s behalf, making lending less risky to this group.

There are two categories of VA loans: the standard loan, which is below the conforming loan limit set by the Federal Housing Finance Administration (FHFA), and the jumbo VA loan, which is above that limit. In 2023, the conforming loan limit is set at $726,200 for a single-family home, meaning that anything above this is a jumbo loan.

Before you begin dreaming of renovating a sumptuous home purchased with a jumbo VA loan, it’s important to think carefully about the benefits and drawbacks to opening a large mortgage. Today, we’ll examine the different pros and cons of a jumbo VA loan so you can better decide whether it’s right for you.

Benefits of VA Jumbo Loans

VA jumbo loans afford you the opportunity to buy a larger, more substantial home; this is great if you have a big family or simply want more space to stretch out and relax. It’s also a good option if you want to purchase a home with a large tract of land where you’ll live and farm in order to earn additional income.

With conventional non-conforming loans, there is typically a limit to how much a lender is willing to provide, which varies by region. In Arizona, for example, the limit is approximately $2 million to $5 million, depending on the lender, which means that if you wanted to buy a $7 million property, you would need to take out two loans. However, large VA loans don’t have that problem: if you qualify, there are no limits to how much you can borrow, thanks to The Blue Water Navy Vietnam Veterans Act of 2019. Of course, you will still need to qualify for any amount based on your credit score and income, but it provides peace of mind for high-income borrowers who don’t want the hassle of separated mortgage payments.

While these loans are larger, jumbo VA loans come with many of the benefits of a standard VA loan. You can enjoy more competitive rates than a conventional loan, as the guarantee by the federal government makes lenders more willing to provide lower interest rates. Depending on how much you borrow, you may also be able to avoid a down payment entirely, though you might be required to provide one for more substantial home purchases.

The best benefit is that you can access more house with a lower credit score: you’ll only need a 620 at minimum, though many lenders want to see a score of 640 or higher, which is nearly 100 points lower than what’s required for a non-conforming conventional loan. If you do have that 640 score, you likely will not need a down payment for anything below

Drawbacks of Non-Conforming VA Loans

There are some downsides to jumbo VA loans, however. Firstly, you need to have full entitlement: this means that you don’t have an open VA loan, either because you have never taken one out or because you have already discharged a previous one through a home sale or repayment.

You also must meet the eligibility requirements set for any loan guaranteed by the Department of Veterans Affairs, such as qualifying service and an honorable discharge. For surviving spouses seeking loans, their late partner’s death has to have been related to their service, or they must have been declared a Prisoner of War or Missing in Action (POW-MIA).

Unlike conventional loans, all VA loans require the home purchased to be the primary residence of the borrower, meaning that you cannot use jumbo VA home loans to buy investment properties. This doesn’t mean that you can’t use the property as a money maker, such as if you open a family farm, but you can’t make it a rental property or resort.

When comparing large VA loans to their more standard counterparts, the eligibility thresholds are higher, though not as strict as for a conventional loan. Instead of a 580 credit score required for a smaller mortgage, a jumbo VA mortgage needs a score of 620. As mentioned previously, this is vastly lower than what’s necessary for a conventional loan of the same amount, but it can still be difficult to reach if you have little credit history due to your military service.

Any financial decision requires careful thought, and jumbo VA home loans are no different. Be sure to fully understand the eligibility requirements, your entitlement status, and how much home you can afford before pursuing a mortgage; you may find it very helpful to talk to a financial advisor about your needs and come up with a budget to pay back your loan. However, if you find that it’s right for you and that the drawbacks aren’t setbacks, you can afford your dream home as a thanks from the federal government for your sacrifices.