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How a California Veteran Can Qualify for a VA Loan

by | Aug 25, 2021 | Blog, VA Loan Information, VA Loan PreApproval

The VA Home Loan Program is designed to help California veterans who served honorably, and their surviving spouses, buy homes as they start to lay down roots here in California. The VA loan program does not require a down payment or mortgage insurance and offers interest rates that are usually below market. Best of all, there are no loan or income limits. Find out how a California Veteran can qualify for a VA Loan and get started today!

Here are the steps to qualifying for a VA loan.

=>STEP 1: Decide if the VA Home Loan is right for you

There are many reasons why someone might want to decide if the VA Home Loan is right for them. Some people may be interested in a VA home loan because they have very little money saved, or because qualifying for a Conventional loan is more difficult. Another big reason is that there is no down payment required with the VA loan. And of course, since interest rates tend to be low on VA loans and no mortgage insurance is required, the mortgage payment will be lower with a VA loan when compared to another loan (like an FHA loan). Lastly, another great benefit of getting a VA home loan is that there are no income limits and no loan limits.

=>STEP 2: Determine your eligibility and entitlement with the VADD214 for California VA loan eligibility

The easiest way to determine eligibility for a va loan is to have a VA Lender submit your DD214 through the Va Lenders portal and retrieve your Certificate of Eligibility. But if you’re wondering what the basic requirements are then the information below will be helpful.

When did you serve? You meet the minimum active-duty service requirement if you served for at least this amount of time: Between September 16, 1940, and July 25, 1947 (WWII)

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between July 26, 1947, and June 26, 1950 (post-WWII period)

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between June 27, 1950, and January 31, 1955 (Korean War)

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between February 1, 1955, and August 4, 1964 (post-Korean War period)

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between August 5, 1964, and May 7, 1975 (Vietnam War), or

February 28, 1961, to May 7, 1975, if you served in the Republic of Vietnam

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between May 8, 1975, and September 7, 1980 (post-Vietnam War period), or

Between May 8, 1975, and October 16, 1981, if you served as an officer

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between September 8, 1980, and August 1, 1990, or

Between October 17, 1981, and August 1, 1990, if you served as an officer

  • 24 continuous months, or
  • The full period (at least 181 days) for which you were called to active duty

Between August 2, 1990, and the present (Gulf War)

  • 24 continuous months, or
  • The full period (at least 90 days) for which you were called or ordered to active duty, or
  • At least 90 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
  • Less than 90 days if you were discharged for a service-connected disability

You separated from service after September 7, 1980, or

After October 16, 1981, if you served as an officer

  • 24 continuous months, or
  • The full period (at least 181 days) for which you were called or ordered to active duty, or
  • At least 181 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
  • Less than 181 days if you were discharged for a service-connected disability

If you’re on active duty right now then you just need 90 continuous days.

=>STEP 3: Find a lender that works exclusively with the VA

You may know this already, but the VA is not a lender. But VA does guarantee the loan for the lender as long as it is underwritten to VA guidelines. It’s up to you to find a lender who specializes in VA loans.

Here are some things to look for when you’re looking for a lender:

-Is the lender a VA-approved lender? If not, they can’t approve your loan documents with the VA and will need to coordinate this through another company.

-Does the lender have a good reputation? You’ll want to see if other veteran borrowers say something positive about their experience working with them.

-Can you reach someone on the phone to ask questions? This is important. Working with a VA lender who is difficult to get on the phone will be frustrating as you get through the process. The best of all worlds is to find a California VA Loan specialist who not only answers the phone but can also answer your questions and effectively guide you through the home buying process.

If you can answer ‘yes’ to these three questions, then they might be worth your consideration. You’ll want to make sure they have the ability to originate VA loans in California before you give them any personal information.

=>STEP 4: Submit a formal application with the lender to get PreApproved for the VA Loan program. The following is a list of steps that you will need in order to submit an application:

Apply for VA loan

 

1) Complete and submit the VA Application Package online. The California VA lender will be able to provide a link to their secure online loan application. The application should be very intuitive and easy to complete.

2) Provide any additional required documentation (i.e., DD214, tax returns, W2’s, paystubs, LES statement, bank statements, etc). The lender should have a secure method that you can use to upload the documentation to them for review.

3) Stay in contact with your California VA Loan specialist. He will be able to answer your questions and will stay with you all the way to the end, acting as your “Home Buyer’s Guide.”

=>STEP 5: Begin house hunting – your VA loan is just a signature away!

You should now be PreApproved for your VA loan. It’s important to know that PreApproval means different things to different lenders. Some lenders will issue a “PreApproval Letter” without even reviewing the file or documentation. This is should be more of a Prequalification if even that. The best PreApproval is a “fully underwritten” PreApproval. This is where the lender processed your loan application as if you already have an accepted offer. You’re not going to get a fully underwritten PreApproval in 10 minutes or even 24 hours. It could take more than a week, maybe two, to get a fully underwritten PreApproval. But once you have it you are as strong as a cash buyer. All that is needed is a purchase contract, clear title, and appraisal.

Most house hunting is done online these days. But it will be helpful to work with a Realtor who is familiar with VA financing, especially if you intend to buy a condo. If you ARE planning to buy a condo then you’ll want to limit your search to VA-approved condos. And this again is where working with a VA loan specialist is critical. Otherwise, you could end up frustrated while looking at homes that are not VA-approved. Depending on where your home search is there are websites that can help narrow down the search to only condos in VA-approved condo projects. For example www.CaliforniaVeteranHomes.com and www.OrangeCountyVACondos.com.

=>STEP 6: Make an offer to purchase and close on your home.

It’s no secret that the housing market in California is tough. You have to be patient and persistent when buying a house. But with your VA loan PreApproval letter in hand, you will be in a very strong position when competing with other offers. Make sure to keep your California VA Loan Officer involved in the process so that he can provide updated numbers for the homes you are interested in. Remember, your California VA Loan Officer will be your Guide and is there to answer all of your VA loan questions.

=>STEP 7: Move into your new home

This is the best part. After a typical 30 days in “escrow”, you should be ready to close and then own your home. Schedule the moving van and make your new home your own. And again, keep your VA Loan Officer in the loop if you have any questions on how or where to make your payment. A good California VA Loan Officer will make sure you have a solid understanding of what to look out for after your loan closes, like Supplemental Property taxes which can be a surprise to new home buyers.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Arbor Financial Group NMLS 236669. My direct line is 949-829-1846. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you hav

The VA Home Loan Program is designed to help California veterans who served honorably, and their surviving spouses, buy homes as they start to lay down roots here in California. The VA loan program does not require a down payment or mortgage insurance and offers interest rates that are usually below market. Best of all, there are no loan or income limits. Find out how a California Veteran can qualify for a VA Loan and get started today!

Here are the steps to qualifying for a VA loan.

=>STEP 1: Decide if the VA Home Loan is right for you

There are many reasons why someone might want to decide if the VA Home Loan is right for them. Some people may be interested in a VA home loan because they have very little money saved, or because qualifying for a Conventional loan is more difficult. Another big reason is that there is no down payment required with the VA loan. And of course, since interest rates tend to be low on VA loans and no mortgage insurance is required, the mortgage payment will be lower with a VA loan when compared to another loan (like an FHA loan). Lastly, another great benefit of getting a VA home loan is that there are no income limits and no loan limits.

=>STEP 2: Determine your eligibility and entitlement with the VADD214 for California VA loan eligibility

The easiest way to determine eligibility for a va loan is to have a VA Lender submit your DD214 through the Va Lenders portal and retrieve your Certificate of Eligibility. But if you’re wondering what the basic requirements are then the information below will be helpful.

When did you serve? You meet the minimum active-duty service requirement if you served for at least this amount of time: Between September 16, 1940, and July 25, 1947 (WWII)

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between July 26, 1947, and June 26, 1950 (post-WWII period)

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between June 27, 1950, and January 31, 1955 (Korean War)

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between February 1, 1955, and August 4, 1964 (post-Korean War period)

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between August 5, 1964, and May 7, 1975 (Vietnam War), or

February 28, 1961, to May 7, 1975, if you served in the Republic of Vietnam

  • 90 total days, or
  • Less than 90 days if you were discharged for a service-connected disability

Between May 8, 1975, and September 7, 1980 (post-Vietnam War period), or

Between May 8, 1975, and October 16, 1981, if you served as an officer

  • 181 continuous days, or
  • Less than 181 days if you were discharged for a service-connected disability

Between September 8, 1980, and August 1, 1990, or

Between October 17, 1981, and August 1, 1990, if you served as an officer

  • 24 continuous months, or
  • The full period (at least 181 days) for which you were called to active duty

Between August 2, 1990, and the present (Gulf War)

  • 24 continuous months, or
  • The full period (at least 90 days) for which you were called or ordered to active duty, or
  • At least 90 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
  • Less than 90 days if you were discharged for a service-connected disability

You separated from service after September 7, 1980, or

After October 16, 1981, if you served as an officer

  • 24 continuous months, or
  • The full period (at least 181 days) for which you were called or ordered to active duty, or
  • At least 181 days if you were discharged for a hardship, a reduction in force, or for convenience of the government, or
  • Less than 181 days if you were discharged for a service-connected disability

If you’re on active duty right now then you just need 90 continuous days.

=>STEP 3: Find a lender that works exclusively with the VA

You may know this already, but the VA is not a lender. But VA does guarantee the loan for the lender as long as it is underwritten to VA guidelines. It’s up to you to find a lender who specializes in VA loans.

Here are some things to look for when you’re looking for a lender:

-Is the lender a VA-approved lender? If not, they can’t approve your loan documents with the VA and will need to coordinate this through another company.

-Does the lender have a good reputation? You’ll want to see if other veteran borrowers say something positive about their experience working with them.

-Can you reach someone on the phone to ask questions? This is important. Working with a VA lender who is difficult to get on the phone will be frustrating as you get through the process. The best of all worlds is to find a California VA Loan specialist who not only answers the phone but can also answer your questions and effectively guide you through the home buying process.

If you can answer ‘yes’ to these three questions, then they might be worth your consideration. You’ll want to make sure they have the ability to originate VA loans in California before you give them any personal information.

=>STEP 4: Submit a formal application with the lender to get PreApproved for the VA Loan program. The following is a list of steps that you will need in order to submit an application:

Apply for VA loan

 

1) Complete and submit the VA Application Package online. The California VA lender will be able to provide a link to their secure online loan application. The application should be very intuitive and easy to complete.

2) Provide any additional required documentation (i.e., DD214, tax returns, W2’s, paystubs, LES statement, bank statements, etc). The lender should have a secure method that you can use to upload the documentation to them for review.

3) Stay in contact with your California VA Loan specialist. He will be able to answer your questions and will stay with you all the way to the end, acting as your “Home Buyer’s Guide.”

=>STEP 5: Begin house hunting – your VA loan is just a signature away!

You should now be PreApproved for your VA loan. It’s important to know that PreApproval means different things to different lenders. Some lenders will issue a “PreApproval Letter” without even reviewing the file or documentation. This is should be more of a Prequalification if even that. The best PreApproval is a “fully underwritten” PreApproval. This is where the lender processed your loan application as if you already have an accepted offer. You’re not going to get a fully underwritten PreApproval in 10 minutes or even 24 hours. It could take more than a week, maybe two, to get a fully underwritten PreApproval. But once you have it you are as strong as a cash buyer. All that is needed is a purchase contract, clear title, and appraisal.

Most house hunting is done online these days. But it will be helpful to work with a Realtor who is familiar with VA financing, especially if you intend to buy a condo. If you ARE planning to buy a condo then you’ll want to limit your search to VA-approved condos. And this again is where working with a VA loan specialist is critical. Otherwise, you could end up frustrated while looking at homes that are not VA-approved. Depending on where your home search is there are websites that can help narrow down the search to only condos in VA-approved condo projects. For example www.CaliforniaVeteranHomes.com and www.OrangeCountyVACondos.com.

=>STEP 6: Make an offer to purchase and close on your home.

It’s no secret that the housing market in California is tough. You have to be patient and persistent when buying a house. But with your VA loan PreApproval letter in hand, you will be in a very strong position when competing with other offers. Make sure to keep your California VA Loan Officer involved in the process so that he can provide updated numbers for the homes you are interested in. Remember, your California VA Loan Officer will be your Guide and is there to answer all of your VA loan questions.

=>STEP 7: Move into your new home

This is the best part. After a typical 30 days in “escrow”, you should be ready to close and then own your home. Schedule the moving van and make your new home your own. And again, keep your VA Loan Officer in the loop if you have any questions on how or where to make your payment. A good California VA Loan Officer will make sure you have a solid understanding of what to look out for after your loan closes, like Supplemental Property taxes which can be a surprise to new home buyers.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Arbor Financial Group NMLS 236669. My direct line is 949-829-1846. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you hav

10 Benefits of the VA loan program for California Veterans

by | Aug 20, 2021 | Blog

There are 10 benefits of the VA loan program for California Veteran's that every Veteran should know. The VA home loan is a mortgage loan offered to eligible military veterans by the U.S. Department of Veteran Affairs. The VA home loan is great because it provides a number of benefits to military veterans. First, the down payment requirements are much less than those conventional loans require. VA loans allow a Veteran to purchase a home with $0 down payment. Second, the VA loan has no mortgage insurance requirement. This means that you won't have to pay out any money each month to cover the lender's risk in case you default on your payments.

Restore va eligibility

1. VA loans have no down payment requirement!

That means you can buy a home without putting any money down at all. This is great if you don't have a lot of money saved up for a down payment or if you're maxed out on the amount of money you can put towards a home.

2. VA loans do not require mortgage insurance.

This means that the Veteran does not have to pay out any money each month to cover the lender's risk in case of a default on payments.

3. The approval process for a VA loan is much more flexible than the approval process for other types of home loans.

VA is more flexible with credit scoring and qualifying "debt payment to income ratios".

4. VA interest rates tend to be lower than other types of home financing.

va interest rate

This means you'll pay less in interest over the life of your loan and it will be easier to afford monthly payments.

5. There's no limit on the amount you can borrow with a VA loan.

Other loan programs are limited based on set loan limits whereas VA did away with set loan limits in 2020. A California Veteran can now purchase a home at any price that their income will qualify them for.

6. You can use your VA home loan benefits multiple times.

It is not a "first-time buyer" program and not a "one-time usage" program.

7. A VA home loan has no prepayment penalty.

Anytime that you want to pay off the loan early, you can do so without any penalty.

8. The VA home loan is assumable.

If you decide to sell your home at a later date, the buyer can take on your existing VA loan.

9. VA offers the easiest refinance program out there

The VA Interest Rate Reduction Refinance Loan, or VA IRRRL. There is no appraisal, no income documentation, no money needed out of pocket. As long as the Veteran meets the seasoning requirement (210 days after the first payment due date) and has employment (or Disability rating) they qualify for an improved interest rate if rates are lower.

10. VA allows cash-out refinancing up to 90% of the current appraised value.

The cash out can go towards anything the Veteran needs. Education, debt consolidation, home improvements, etc.

Benefits of the VA Loan Program for California Veterans

The VA home loan is a mortgage loan offered to eligible military veterans by the U.S. Department of Veteran Affairs with benefits that make it an attractive option for many California Veterans who are looking for ways to afford their next purchase or refinance. The VA home loan provides several unique advantages including no down payment requirement, no monthly mortgage insurance and flexible approval guidelines which allow you to qualify even if your credit score isn't perfect (or you have some other financial issue). If you're ready to learn more about how this program can benefit you, let us know! We'll be happy to answer any questions and offer advice on getting started.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS 2289. My direct line is 949-829-1846. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Refinance Your CalVet Loan; 3 Options

by | Jul 27, 2021 | Blog

va home buyer

CalVet Loan to a VA Loan

The CalVet home loan program is a great way for a Veteran in California to buy a home. However, the VA loan program beats out the CalVet loan program in a lot of ways. A California Veteran looking to buy a home using their VA entitlement should look at both programs. This article is for those Veterans who financed their home purchase with a CalVet loan and now want to look at their refinance options.  


The first thing to know is that CalVet does not do refinancing. The CalVet loan program is only for purchases. So what is a CalVet borrower to do if they want to lower their interest rate when rates go down? Or pull cash out for home improvements or debt consolidation when property values go up?


This is where is will be helpful to understand your options. Know when it makes sense to refinance a CAlVet loan into a VA loan with either a VA Interest Rate Reduction Refinance Loan (VA IRRRL) or a VA Cashout refinance. And know when it may make more sense to refinance in a Conventional loan. All options should be reviewed to make sure you are making the best decision.

The Problem: CalVet borrower has an interest rate that is at least .5% higher than current VA interest rates and just wants to lower the rate and payment. No cashout needed.

Interest rates fluctuate. They can move from one day to the next. Why stay in a loan with an interest rate that is .5%, 1% or more above current market mortgage rates? Every situation is different, but not taking advantage of the possibility of saving hundreds of dollars per month and thousands of dollars over the life of a loan is just not smart. Even if you feel that you can easily afford your payment just think what could happen if you made the same payment you are making now but at a lower interest rate. You could end up taking years off your loan payoff. So what is the best option for a "Rate and Term" refinance out of a CalVet home loan?

The Solution: The VA IRRRL, also known as the VA Streamline Refinance

The VA IRRRL is probably the best mortgage refinance available, at least for those that are eligible. Most CalVet home loans are backed by VA, making them eligible for a VA IRRRL. VA IRRRL is an acronym for VA Interest Rate Reduction Refinance Loan. It is also known as a Streamlined Refinance since No Income Documentation is Required, No Appraisal is Required, and No Assets are required. As long as you are making your payments on time along with a few other qualifying requirements (.5% lower rate and breakeven in 36 months or less on the refinance). 


Not all VA lenders know how to do a VA IRRRL from a CalVet loan. CalVet uses an unusual method of financing known as a Land Contract. If your lender gets hung up trying to figure it out then contact a lender who specializes in CalVet to VA refinancing. 

VA cash out refinance

The Problem: CalVet borrower has owned their home for a few years and property values have gone up. They would like to consolidate some credit cards and also update their kitchen. They have a VA Disability rating of 10% or more.

When property values go up it can be nice to take advantage of the built up equity to put yourself in a better financial position. Or to make your home into your Dream Home, or at least something closer to your dream home. What are your options?

The Solution: The VA Cashout Refinance

The VA Cashout refinance is a "full qualifying" loan. Unlike with the VA IRRRL above, there will be an appraisal. The loan amount cannot be greater than 90% of the appraised value. Also, there will need to be a clear termite report prior to closing. And the borrower must have sufficient income to qualify for the new payment.


Let's assume a California Veteran purchased his property a few years ago for $400,000 with a $400,000 CalVet loan. Now the property is worth $500,000. The maximum VA loan would be $450,000 (90% of $500,000 value).  The current balance of the CalVet loan is now $375,000. There is $75,000 equity available for closing costs, prepaid expenses, and cash out for debt consolidation and home improvements. Again. it's important to get with a California VA Lender who can prepare a VA Total Cost Analysis which will give you a full breakdown of the numbers prior to making the decision on whether a refinance makes sense.


An important fact to point out is the Disability Rating of 10% or more. By having a Disability Rating of 10% of more the VA Funding Fee is waived. Otherwise the VA Funding Fee will be 3.6%. In the example above, if the Veteran did not have a Disability Rating then approximately $15,500 would be added to the base VA loan. That adds a big fee that needs to be considered prior to making the decision to do a cashout refinance.

The Problem: CalVet borrower has owned their home for several few years and property values have gone up significantly. They would like to consolidate some credit cards and also update their kitchen. They DO NOT have a VA Disability rating.

The main difference between this problem and the last problem is the Disability Rating. What are the options for a cash out refinance if the CalVet borrower is trying to avoid a 3.6% VA Funding Fee? 

The Solution: The Conventional Loan Cash-out Refinance

While VA allows cash-out to 90% of the appraised value, Conventional loan programs only allow cash out to 80% of the value. But if you don't have a Disability Rating then at least you won't have to pay the 3.6% VA Funding Fee. 


Let's assume a California Veteran purchased his property several years ago for $400,000 with a $400,000 CalVet loan. Now the property is worth $550,000. The maximum Conventional loan for a cash out refinance would be $440,000 (80% of $550,000 value).  The current balance of the CalVet loan is now $350,000. There is $90,000 equity available for closing costs, prepaid expenses, and cash out for debt consolidation and home improvements. 


Because more equity is required to pull cash out with a Conventional loan, another option may be to get a Home Equity Line of Credit. HELOC's can go to 90% of the property value and in some cases even 95%.



Know Your Options

Understanding your options is important. Make sure to do a little bit of research and work with a lender who can show you the numbers in an easy to read and understand manner. You'll want to compare your current loan to several different options and review the payment, costs, and savings now and over time. Your lender should be able to provide you with a VA Refinance Savings Analysis that compares your current loan to your refinance options. 

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS 2289. My direct line is 714-478-3049. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Destroying 3 Myths about the VA Loan Program in California

by | Jan 21, 2020 | Blog, VA Loan Information

We are about to destroy 3 myths about the VA loan program in California. The VA loan program is the best benefit available to Veterans, allowing them to purchase a home with no down payment. And as of 2020, there are no VA loan limits tied to the allowance for no down payment purchases. On top of that, VA has very aggressive interest rates and no monthly mortgage insurance. Even with these huge advantages there continue to be myths about the VA loan program that can make it tough to get an offer to buy a home accepted.

Myth #1 : VA Loans Take to Long to Close   -  FALSE

This depends on the experience of the lender, but if you're working with a California VA loan specialist then a VA loan can close very quickly. It all depends on the internal process of the lender and the initial prequalification of the borrower. Some lenders will even do a "fully underwritten PreApproval" prior to the offer being made. This is always the preferred method of VA loan PreApproval, but not all lenders will go through the extra step of actually have an underwriter review the initial loan package. If you go with a lender who has fully underwritten your loan package prior to making an offer, then you will be in a very strong position to not only get your offer accepted, but also to close very quickly. The only item you'll be waiting on is the VA appraisal. A good VA lender should be able to issue a "Clear to Close" in as little as 15 days from the day of your accepted offer.

Myth #2: VA Loans Cost the Seller More  - FALSE

Accepting a VA offer does not cost the seller anything that would be different from any other offer. This myth stems from the idea that with a VA loan there are "non-allowable" closing costs, or closing costs the buyer is not allowed to pay. What someone who believes this myth to be true doesn't understand is that even fees that are on this list CAN BE PAID by the Veteran as long as the total amount of these fees are less than 1% of the VA loan amount. In California, where home prices tend to be higher than other parts of the country, and where most VA purchase loans tend to be with $0 down payment, 1% is a big number and more than covers these "non-allowable" fees. Most typical closing costs are not included in the calculation. For example, title insurance fees, loan discount fees, and the the appraisal fee are not included in the 1% calculation. A Veteran using the VA loan program in California can even pay for the required termite inspection report and can pay for any required repairs, just like with any other type of financing.

Myth #3: VA Loans are harder to close - FALSE

This may be true for some lenders, but again, this is where a California Veteran needs to make sure they are working with a lender AND loan officer who specializes in the VA loan program. A lender who specializes in the VA loan program will have more dedicated support and knowledge about the VA loan program that a lender who is a "jack of all trades". A California Loan Officer may run into one to three VA loans in a year. A California VA Loan Specialist may close more than 50 or even 100 VA loans in one year. The California VA Loan Specialist will have more knowledge about the VA loan program and will have seen many more scenarios and have solutions for almost any scenario versus a loan officer closing one to three VA loans in a year. So yes, a VA loan may be harder to close for some lenders, but if you are working with lender and loan officer who specialize in the VA loan program, then the VA loan program will be easier to close than other types of loan programs. Think about it. No down payment to verify. No max "debt to income" ratio to worry about. Very flexible underwriting requirements and FICO score requirements. It just easy.

3 myths about VA loan

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS 2289. My direct line is 714-478-3049. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

California VA Cashout Refinance in 2020

by | Dec 30, 2019 | Blog

California VA cash out refinances in 2020 are a little different that they were at the beginning of 2019. As the result of a Circular issued by VA in 2019, and then a Memorandum issued by Ginnie Mae on August 1, 2019, there are restrictions in the underwriting guidelines that must be met for a California Veteran to pull equity from his or her home with a VA loan. The VA cash-out refinance loan program is still the most flexible mortgage program out there when it comes to pulling cash out through a refinance, it's just not quite a flexible as it used to be,

The Previous VA Cash-Out Refinance Guideline

At the beginning of 2019 it was possible to pull cash out to 100% of the property value, not including the VA Funding Fee. Not including the VA Funding Fee is the key term here. As an example, if a California Veteran owed $300,000 on his home that was valued at $400,000, he could get a $400,000 VA loan. The VA Funding Fee could be financed on top of $400,000. If the VA Funding Fee was 3.3% (subsequent use cash out VA Funding Fee) the $13,200 Funding Fee added to the $400,000 base VA loan resulted in a $413,200 VA loan. The Veteran would receive the full $100,00 cash out, less typical closing costs.

Circular 26-18-30 - VA Guaranteed Cash-Out Refinancing Home Loans

Circular 26-18-30, issued on Valentines Day, December 19, 2018, brought about significant changes to cash-out refinancing. Effective February 15, 2019, VA would no longer allow the final VA loan, INCLUDING the VA Funding Fee, to be higher than 100% of the property value. Going back to our example above, if that same California Veteran did a maximum cash-out refinance, the total VA loan, INCLUDING the Funding Fee, would be $400,000. This means the base VA loan would be $387,221. This also means the Veteran receives $87,221 cash-out, less closing costs, instead of $100,000 less closing costs. In this example, the Veteran receives $12,779 less cash out with the new guideline.

All of this really started with the issuance of VA Circular 26-18-13 on May 25, 2018. This circular "brought about important changes that go into effect immediately". It was brought about as a result of the Economic Growth, Regulatory Relief, and Consumer Protection Act of 2018. It included The Protecting Veterans From Predatory Lenders Act of 2018. Several lenders got in trouble for "churning" loans, which negatively affected how the VA loan program was perceived on the Secondary Market. 

Ginnie Mae All Participants  Memorandum 19-05

On August 1, 2019, Ginnie Mae issued All Participants Memorandum 19-05, which brought about a further significant change to VA cash-out refinancing. Ginnie Mae would no longer allow VA cash-out refinances where the loan amount was greater than 90% of the property value to be included in Ginnie Mae I Single Issuer Pools and Ginnie Mae II Custom Pools. 

First, a quick explanation of who Ginnie Mae is. Ginnie Mae is a government owned corporation that issues Mortgage Backed Securities (MBS) which directly support housing programs by the Federal Housing Administration, the Department of Veterans Affairs, and Department of Agriculture Rural Housing Service. Ginnie Mae had begun to see that their Primary MBS pools were losing favor on the market due to excessive refinance churning. To protect the pools, which in turn helps to keep VA loan interests lower than other types of loan programs, Ginnie Mae made these changes to make it tougher refinance multiple times within a short period of time. 100% cash out refinancing is still allowed, but must be placed in a Ginnie Mae II Custom Pool. Without getting any more technical than we already have, just know that the interest rate for a loan placed in the a Ginnie Mae II Custom Pool will be quite a bit higher than for VA loans placed in the larger primary pools, Ginnie Mae I Single Issuer Pools and Ginnie Mae II Custom Pools. 

Seasoning Requirement

In addition to the changes mentioned already. Ginnie Mae also spelled out seasoning requirements for any VA loan in their MBS Pools. 

The note date of the refinance loan must be on, or after, the later of:

  1. the date on which the borrower has made at least 6 monthly payments on the loan being refinanced; and
  2. that date is 210 days after the first payment due date of the loan being refinanced. 

If a California VA cash out refinance meets the #2 requirement of 210 days after the first payment due date then it will surely also meet the 6 payment requirement. As an example, if a California Veteran bought a property and closed escrow on March 15, 2019, then their first payment due date would be May 1. To meet the 210 day seasoning requirement, the Note date of the refinance (most likely the signing date) could not be until November 27, 2019. A quick way to calculate the 210 days is using a Days Between Dates Calculator.  By November 27, the California Veteran would have made 7 payments, so the 6 payment requirement would also have been met.

va cash out refinance

The Bottom Line on VA Cash Out Refinancing in California

Compared to any other type of cash-out refinancing, even at 90% loan to value VA comes out ahead. Especially considering the interest rate comparison and the fact that there is no Mortgage Insurance on a VA loan. However, the VA Funding Fee is harsh. VA Funding Fees for cash out refinancing are increasing in 2020 from 3.3% to 3.6%. Even at 3.3% it was high. For those Veterans in California who have a service connected disability rating with VA the Funding Fee is waived, which is awesome. But if there is no Funding Fee waiver, then it will be important to thoroughly review the numbers to make sure a cash-out VA refinance makes sense. And the best way to do a thorough review of the number for your refinance is to have a local California VA Loan Officer prepare a Side by Side VA Total Cost Analysis, which will show a comparison of several options, side by side compared to your current loan.

Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS 2289. My direct line is 714-478-3049. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.