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New California VA Buyers Should be Aware of Supplemental Property Tax Bills

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In the first year of home ownership, most home buyers will receive a Supplemental Tax bill. For California Veterans who used VA financing and have their taxes paid from their impound account, receiving a Supplemental Tax bill causes confusion. “Shouldn’t the supplemental tax bill be paid from the impound account?”. In many case, the answer is “no”. This is why it is important to understand what the Supplemental Tax is and to be prepared for it.

How Assessed Values and Tax Bills are Calculated

A home owner’s property taxes are based off of the home’s assessed value when it was purchased. In most cases, the assessed value is the actual purchase price of the home, less exemptions. 100% Disabled Veterans can get their assessed value lower by between $126,380 and $189,571 by applying for the Disabled Veterans Exemption. Each year the assessed value can increase by a maximum of 2%. This limitation is in place because of Proposition 13 (this is specific to California only), which passed in 1978. (I just remember that in 1977 I was in middle school and was required to shower after PE, even if we did nothing. In 1978, when Prop 13 passed, the school could no longer require us to shower since there were no longer school provided towels). The standard property tax is 1%, although nearly every county has additional taxes or assessments that bring the tax rate up to between 1.05% to 1.25%. Some areas, typically newer developments, may even have Mello Roos, but I’ll leave Mello Roos for another discussion. Each year, normally in October,  the county sends out tax bills. The assessed value is multiplied by the tax rate. The bill is split into a “first half” due November 1 (late after December 10), and “second half” due Feb 1 (late after April 10).

When a home is sold, in most cases (we’ll try to forget about the whole 2008 debacle when property values dropped) the value for the new owner is higher than for the previous owner. This means that the new buyer will have a new tax amount to pay. But since the county will have already sent that years tax bills out there will be a “catching up” bill sent out several months after the purchase. Instead of calling the bill “Supplemental” they should just call it the Catching Up bill. This difference in property values is what spawned supplemental property tax laws.

A Little History on Supplemental Tax Assessments

Supplemental tax assessment laws were originally enacted here in California in 1983 and were intended to increase funding for schools. This law accelerated the effective date of new appraisals made according to Prop 13. Supplemental tax laws require that a new property assessment be completed after a change in property ownership. If the new value is greater than the previous value, then a Supplemental tax bill will be issued. If the new value is less than the old value, then a refund will be issued to the owner.

When is the Supplemental Tax Bill Sent out?

The bill for Supplemental taxes will come separate from the regular property tax bill and usually comes 6 to 9 months after the purchase. Supplemental taxes are primarily paid as a one time lump sum to make up for the difference between the required tax payments. If the change in ownership happens before May 31st, then there will be two supplemental tax bills. It is solely the responsibility of the buyer to make sure that the supplemental taxes are paid. The Supplemental tax bill will typically state something along the lines of “This bill will has not been submitted to your lender for payment”.

How to Estimate your Supplemental Tax Bill

Fortunately, most county tax websites have a Supplemental Tax Bill Estimator. You can use the online calculator to estimate your impending Supplemental Tax Bill. Below are links to a few of southern California county Supplemental Tax calculators.

Orange County Supplemental Tax Bill Estimator

San Diego County Supplemental Tax Bill Estimator 

Riverside County Supplemental Tax Bill Estimator

Los Angeles County Supplemental Tax Bill Estimator

If you have questions on the VA loan program in California, or would like to see custom VA loan scenarios, make sure to contact me. I’m always available to help.

Authored by Tim Storm, a California VA Loan Officer specializing in the VA Loan program. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoans.com. I will prepare custom loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA Loan Limits in California Increase to $679,650 for 2018

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California VA Loan Limits for some high priced counties in California will be $679,650, which is welcome news for those counties where property values continue to rise. The highest Zero Down VA loan limit in California in 2017 was $636,150. An increase of over $40,000 for Zero Down financing is a big jump.

What the VA Loan Limit Increase Means for California Veterans

For a California Veteran purchasing a home for $679,650 in a county like Orange or Los Angeles, this means they will not need a down payment. Because VA does have the Jumbo VA Loan program, it is possible to get a VA loan above the 100% financing limit. If a Veteran purchased a home for $679,650 in 2017, they would have needed a down payment of $10,875 and a VA loan of $668,775. That was really a good deal. But now, even better, they will not need a down payment at all for a $679,650 purchase price. The Veteran can keep the $10,875 in their bank account, or use for paying closing costs.

100% Financing Limit Varies from County to County

The basic 100% VA loan limit will be $453,100 in 2018. The previous limit in 2017 was $424,100. For counties that are not considered “high cost”, such as San Bernardino and Riverside counties, $453,100 will be their limit. Other counties, like San Diego, will have increased limits compared to 2017 ($612,950 in 2017), which will now be $649,750.California VA loans

VA Loans Above 100% Financing Limit = Jumbo VA Loan

The Jumbo VA loan is any VA loan that is above the 100% financing limit for the county they are in. For example, if a Veteran purchases a home in Riverside County for $473,100, where the 100% Loan Limit is $453,100, they would need a down payment of $5,000. Notice how I did not say they needed a down payment of $20,000. VA only requires a down payment equal to 25% of the difference between the 100% loan limit and the higher purchase price. This would be a Jumbo VA loan. That same loan amount in Orange County, CA would not be a Jumbo loan. A Jumbo VA loan in Orange County (or Los Angeles county) would occur if the purchase price were above $679,650. For example, if the purchase price was $699,650, then a down payment of $5,000 would be required. If the purchase price was $1,079,650, or $400,000 above the loan limit in Orange County, the down payment would be $100,000 (.25 * $400,000 difference = $100,000 down payment). The VA loan would be $979,650.

High Loan Limits will Help VA Loan Refinancing

The higher loan limits will also help Veterans who currently own homes and were looking to refinance to pull cash out. If their loan amount was limited by the 2017 loan limits, then the 2018 VA loan limit will help. VA allows cashout refinancing up to 100% of the property value when the loan amount is within the 100% financing limits.va cash out refinance

How to Find Out What a VA Loan Looks to for You

So how do you find out what the numbers will look like for you. The first step is to contact a California VA loan specialist. A California VA Loan Officer is someone who specializes in VA financing. It is important to work with a specialist when learning about the VA loan program because it is different from other types of loan programs. The California VA Loan Officer should be able to prepare accurate custom loan scenarios that will give you a complete breakdown of the numbers, including the full payment (Principal, Interest, Taxes, and Insurance), closing costs, and prepaid expenses. A good Loan Officer should also be able to answer questions on the VA program and provide a custom video of your loan scenarios.
Authored by Tim Storm, a California Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA Entitlement Codes on the Certificate of Eligibility

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The first step a California Veteran will need to complete in securing a VA loan is to obtain your Certificate of Eligibility. The Certificate of Eligibility, also known as the the COE, is a document that the Veterans Adminstration issues, which verifies your eligibility for VA financing. On the COE there is a number listed that is known as the Entitlement Code. The Entitlement Code shows during what period you earned your eligibility, or other alternative ways in which you became eligible for the VA mortgage program. The chart below shows the entitlement codes and what methods of eligibility they represent.

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Subsequent Use of VA Eligibility

A common Entitlement Code is “05”. This means that the Veteran has used VA financing previously and signifies to the lender that a subsequent use VA Funding Fee will be required, unless the COE also verifies the Funding Fee is waived (in the case of a service connected disability).

These periods and methods of eligibility have certain minimum service periods that are required to establish your eligibility for the VA loan program. Each time period has different service requirements. This next chart lists out the dates that define each time period of service as well as their minimum service requirement for those periods.

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Easiest Method for Obtaining your Certificate of Eligibility

While it is possible for a Veteran to retrieve their Certificate of Eligibility directly from the VA, the easiest way to retrieve the COE is through a VA approved mortgage lender. VA approved lenders have direct access to pull COE’s and in many cases can retrieve your COE within seconds of inputting the information into the VA portal. It seems that 50% of the time the DD214 will need to be uploaded, and depending various circumstances, it can take a few days to retrieve the COE. It so easy for a lender to retrieve your COE that contacting a local VA lender should be your first step in the loan process.

Authored by Tim Storm, a California Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Why California Veterans Should use the VA Loan Program to Buy a Home

 

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Buying a home can be a difficult proposition for most non-Veteran Californian’s. The biggest hurdle to buying a home in California is the down payment. But this is where California Veterans have a big advantage over non-Veterans, because the VA loan program eliminates the need for a down payment. The VA mortgage is an amazing program that has helped Veterans across the country purchase homes. The VA doesn’t fund the loans but acts as an insurer or guarantor to reduce the risk for VA approved lenders. Since the VA guarantees a portion of the loan (25% of the loan), VA approved lenders in California are able to fund loans with no down payment and competitive interest rates.

No Down Payment Required up to County Loan Limit

The best thing that can be said about the VA mortgage program is that there is no down payment required. Based on the county VA loan limits that the VA announces each year, a California Veteran can purchase a home with $0 down payment. This enables Veterans to save thousands of dollars out of pocket while qualifying to purchase a home.

No PMI on VA Loans

Another big benefit for California Veterans that can save them thousands of dollars over the life of the loan is that there is no Private Mortgage Insurance (PMI) required. With other types of home financing that are used by non-Veterans, when there is a down payment less than 20%, PMI is required. This is designed to protect lenders against the risk of the borrower defaulting. Since the VA guarantee 25% of the VA loan, there is no need for lenders to require PMI. With no PMI, California Veterans can save hundred’s of dollars a month and thousands over the life of the loan.

Competitive Interest Rates on VA Loans

va interest rateVA loans also tend to have lower interest rates when compared to Conventional programs for non-Veterans. VA loans tend to have interest rates that are anywhere from .125% to .5% lower than Conventional programs, depending on factors like FICO score and loan to value. Lower interest rates means veterans will save thousands of dollars over the life of the loan. Lower interest rates is also a big reason why the VA program may be better for a Veteran than a Conventional loan, even when the Veteran has a down payment of 20% or more. It makes sense to always include VA financing in your loan comparison analysis no matter how much down payment will be used.

Underwriting and Credit Flexibility on VA Loans

On top of these benefits, the VA program doesn’t have a prepayment penalty and also has more flexible underwriting and credit guidelines than other types of home loan programs.  The VA program has provided the ability for thousands of California Veterans to be able to get a loan for a home that wouldn’t have been able to otherwise. When it comes to securing financing for a home, in most cases the VA loan is the best option for California Veterans.

The first step in determining whether you qualify for a VA loan is a quick phone call to your trusted California VA Loan Specialist. After a 5 minute consultation the VA loan specialist should have enough information to prepare custom loan scenarios and then can carefully educate you on the numbers to make sure you stay within your budget.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Getting a VA Loan in California After a Bankruptcy or Foreclosure

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Buying a home using VA financing in California after a foreclosure or bankruptcy is possible sooner than many Veterans realize. But it does take some planning in order to make sure the VA loan is approved. Understanding the wait periods that VA requires after a bankruptcy or foreclosure are critical, as is understanding what it takes to reestablish credit and make sure credit your report errors are fixed PRIOR to making an offer on a home.

With most types of home financing, having a bankruptcy or foreclosure is a significant road block that can prevent you from being able to get a mortgage. The good news for California Veterans is that the VA mortgage program is the most flexible and has the shortest timeline for waiting after a bankruptcy or foreclosure compared to other loan programs.

VA Loan After a Bankruptcy

Can I get a VA loan after a bankruptcyWith a Chapter 7 bankruptcy, which seizes and liquidates assets to repay debts, a potential borrower has to wait 2 years before being able to qualify for a VA loan. The clock on the 2 year waiting period starts once the bankruptcy is discharged, not when bankruptcy is filed. With Chapter 13 bankruptcy, which is a debt restructuring plan that is mandated by the court, a borrower may be eligible for a loan just 12 months after their bankruptcy filing date. In this case, good credit and no late payments are critical to being able to qualify. A potential borrower will also need to get permission to take on additional monthly payments from the bankruptcy trustee. The VA program can even be used to payoff a Chapter 13.

Filing for bankruptcy can create a significant hit to a borrowers credit (FICO) score which can potentially delay qualifying for a loan and purchasing a home. Lenders are usually looking for at least a 620 FICO score for a VA mortgage, but there are some lenders who will go as low as 580.  A bankruptcy could knock a potential borrower well below that mark. After the discharge of the bankruptcy and during the two year waiting period it is very important to work on repairing your credit score. Working with a credit repair professional can be well worth the money for anyone who has no prior experience with credit repair.

For those California Veterans with a foreclosure you will be happy to know that the wait period is also only 2 years. ( A Conventional loan requires a 7 year wait period which is one reason why the VA program is so awesome).The combination of both a bankruptcy and a foreclosure does not necessarily lengthen the time table  before getting a VA loan. In most cases this scenario is viewed on a case by case basis so it is important to consult a VA lender to ensure you are following the proper steps toward future qualification.It also important to understand that when you include a mortgage in a bankruptcy which results in a foreclosure of the home, that means you had a foreclosure. Again, to make sure you understand the timeline before being able to qualify for VA financing, talk to a California VA Loan Expert.

Authored by Tim Storm, an California Loan Officer specializing in the VA Loan Program. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVaLoanExpert.com.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

 

Which is better? VA Home Loan versus CalVet Home Loan

 The CalVet home loan and the VA home loan programs are the primary home financing options for California Veterans. CalVet and VA both offer Zero Down Financing, but which program is the best for California Veterans? Well, it depends. There are several factors that play into which program is best for your situation. The type of property and the purchase price, as well as your long-term plans for the property, can affect which program is your best option. There are also several differences between each program that have to be considered.

Eligibility for CalVet Home Loan versus a VA Home Loans:

CalVet and VA both have similar eligibility requirements for time served, whether it was during peace time or war time. VA is available to veterans nationwide while CalVet is only available to veterans currently living in California.

CalVet Home Loan:

When you use CalVet for your loan, the property is purchased by CalVet, who then uses a contract of sale to sell the property to the veteran. Equitable title is held by the Veteran who will be occupying the home while CalVet maintains legal title. Through this process Veterans still will have several ownership rights including property tax and mortgage interest deductions. Since CalVet will still hold the legal title, they are able to acquire a group rate for homeowner’s insurance. Since CalVet holds the legal title to your property, it can be very challenging to refinance or obtain a second mortgage in the future. Since CalVet doesn’t refinance their loans, if a Veteran wants to take advantage of lower rates or pull cash out based on increased equity, they will have to refinance out of the CalVet loan. CalVet does serve a niche when it comes to manufactured and/or mobil homes, especially when they are located on leased land. CalVet is the best is the option if the manufactured home is on leased land.

VA Home Loan:

The veteran receives full ownership rights and legal title when using a VA loan, just like most other types of home loan programs. The VA loan program is also much more flexible when it comes to occupying the property. With a VA loan the veteran must initially occupy the property, but after a few years they are able to live elsewhere and rent out the property. With the CalVet program, the Veteran is required to occupy the purchased property as the primary residence until the loan is fully repaid. Another benefit is that VA loans are much easier to refinance. VA also offers the Interest Rate Reduction Refinance Loan (IRRRL), which allows veterans to refinance their loan to lower their interest rate and payment without a new appraisal and without needing to supply income documentation. While a VA loan does allow for financing of manufactured homes there are not many lenders who will fund a VA loan on a manufactured home, especially if it is on leased land.

County VA Loan Limits and Loan Entitlements:

The size of your needed loan will play into which program better suits your needs based on which county you live in.  In Orange and Los Angeles counties the current VA loan limit is $679,650 whereas in Riverside County the current loan limit is $453,100. (based on 2018 loan limits for 100% financing) It is also possible to get a Jumbo VA loan that is above the county $0 down loan limit by coming in with a down payment. It is not unusual to have a Jumbo VA loan in the $800,000 to $1,000,000 range.

Understanding your options is critical. Make sure to research both VA and CalVet to make sure you are choosing the right loan program for your needs. And for a detailed loan scenario and video presentation of the loan scenario, contact Tim Storm directly

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.CaliforniaVALoanExpert.com.com. I will prepare custom VA loan scenarios which 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.

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