California is unique in that not only can a Veteran use the standard VA loan program for purchasing a home with no down payment, but can also take advantage of the CalVet loan program. But there are differences between the programs which can make one program better than the other for different people. When considering the purchase of a home using your VA eligibility, it is important to learn the differences and determine which program is better for your individual situation.
Differences to Consider Between CalVet and VA
There are several things to consider. Below is a list of a few of them.
- CalVet used the Contract of Sale as its primary financing instrument. VA, like most loan programs (FHA, Conventional, etc) use standard Deed of Trust and Mortgage. With a Contract of Sale Calvet actually purchases the property and then sells to the Veteran along the financing. When the loan is paid off, the Deed is transferred using a Grant Deed.
- Owner Occupancy – While both VA and CalVet require the Veteran to occupy the property after the close of escrow, CalVet has strict guidelines about the Veteran living in the property as a Primary Residence until the loan is paid off. VA requires occupancy initially, but if the Veteran decides to move a few years later and rent their home, that is allowable. More flexibility with the VA program.
- California VA Loan limits. The VA loan limits for 100% financing change annually. They also vary depending on the county you are purchasing in. For example, Riverside and San Bernardino max out at $453,100 (in 2018). But Orange and Los Angeles counties max out at $679,650 (in 2018). A Veteran looking to purchase a home in Los Angeles with zero down payment will have more flexibility with the VA loan program. But if they are looking in Riverside, they will have more flexibility with the CalVet program, at least if they are planning to purchase a home for more than $453,100.
- Mobile Home Purchase. The CalVet program will finance mobile homes located in parks. Mobile home financing is traditionally difficult and tends to have high interest rates. VA is more restrictive with mobile home financing. So any Veterans looking to purchase a mobile home should consider the CalVet program.
- Interest Rates. Interest rates for VA financing are based on mortgage backed securities on the open market. VA interest rates follow the market. As such, rates have been very low over the past few years. CalVet interest rates are based on the latest CalVet bond offering. There are times when CalVet interest rates are below market. But there are also times when Calvet rates are higher than the market.
It’s important to know the differences in the two programs so that when you are ready to buy a home you will choose the best loan program for you’re situation. A California VA Loan Specialist can help you by not only retrieving your Certificate of Eligibility, but also providing customized VA loan scenarios showing a complete breakdown of the purchase price, loan amount, payment, and amount needed to close. Getting PreApproved for a VA loan is required before making an offer on a home as most sellers will not even accept an offer from a non-PreApproved home buyer.
Authored by Tim Storm, a California VA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. 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.