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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.

va loan application

Differences Between Standard VA Loan and CalVet for California Veterans

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.

VA Funding Fee to be Lower After September 30, 2011

California Veterans using their VA Eligibility are about to get a nice surprise, as the Department of Veterans Affairs recently announced they would  lower the VA Funding Fee.  The drop will help save thousands for VA Loan borrowers in California. The typical charge for “First Time Use” currently is 2.15%. The new percentage for first Time Use will be 1.4% for loans closed on or after October 1, 2011. On a $400,000 loan, that equates to a savings of $2,800.

New VA Funding Chart | California VA Loans

Below is a chart comparing the current VA Funding Fee’s to the new Funding Fee percentages.

 

VA Funding Fee Example for Los Angeles Veteran

As an example, let’s say a retired military Veteran wants to purchase a home in Los Angeles for $650,000 with Zero Down payment. (The 2011 VA Loan Limits for Zero Down financing are $700,000.) If this is the Veterans first time using his VA eligibility to purchase a home, then his Funding Fee under the current rules would be $13,975. ($650,000 * 2.15% = $13,975). The VA Funding Fee can be financed into the loan, which is what happens on most loans. In this case, the new VA loan would be $663,975. But if the loan closes after September 30, 2011, then the new Funding Fee of 1.4% applies. The Funding Fee to be financed into the loan would be $9,100, for a total loan of $659,100. That results in a savings of $4,875.  A $9,100 charge is not bad for the ability to purchase a home with no down payment. Also remember, VA does not have a monthly Mortgage Insurance payment, like other types of “high loan to value” loan programs.

Funding Fee Waived for Disabled Veterans

Veterans who have a service related disability may have the Funding Fee waived, which can be a very big savings. The VA has to consider the Veteran to be at least 10% disabled, which is verified by the lender.

The first thing a California Veteran needs to do when considering using VA Eligibility is talk to a lender who specializes in the VA loan program. A California VA Loan Expert should be able to provide a detailed loan scenario which will break down the purchase price, loan amount, payment, and amount needed to close, if any. He should also be able to explain the difference between the CalVet loan program and the standard VA loan program. Once the Veteran knows what purchase price they can afford, it is important to get a VA loan PreApproval.