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CalVet vs VA Loan : What is the Difference?

What is the difference between the CalVet home loan program and a standard VA loan? Is one program better for California Veterans? Is it easier to qualify for VA or CalVet? These are all common questions from Veterans living in California. Many Veterans are not familiar with the CalVet program, but those that are sometimes automatically assume the CalVet home loan program must be better. But it depends on the situation. For most California Veterans, the standard VA loan program will be the best option. But there are times when the CalVet program can get things done that VA cannot.

Veterans in California have two great home loan programs to choose from- the CalVet home loan program and the VA loan program. Both programs offer Veterans low interest rates, no down payment, and relaxed qualification standards. But there are some key differences between the two programs that you should be aware of before you decide which one is right for you. In this blog post, we will compare and contrast the CalVet and VA home loan programs so that you can make an informed decision about which program is best for you.

Differences between the CalVet and VA Loan Programs

The first difference is the CalVet home loan program is offered by the California Department of Veteran Affairs. The VA loan program is guaranteed through the Department of Veterans Affairs, but it is actually offered and funded by banks and mortgage banks.  The funding for CalVet comes from the selling of voter approved Bonds. The funding for VA loans comes from Ginnie Mae Mortgage Backed Securities. CalVet posts an interest rate for each of their programs, whereas there is not a set interest rate with VA. VA interest rates can vary from one lender to the next, although should still be within a certain range based on how Ginnie Mae Mortgage Backed Securities are doing.  

va interest rate

This leads to a big difference for California Veterans. CalVet charges a 1% Origination Fee on it's program. There are no underwriting or processing fees, but 1% can be a hefty fee in some markets. For example, a 1% Fee on a $500,000 loan is $5,000. VA offers more flexibility with loan pricing. A California VA lender can quite often offer loan options with 0 points (on a standard VA loan) or even negative points/a lender credit to offset other closing costs.  If a Veteran is needing to limit or even eliminate funds to close, VA will offer more flexibility since the lender is not locked into offering only one interest rate option and charging the 1% Origination Fee.

A big difference between these two programs is how title is held by the Veteran. CalVet holds legal title to the home. CalVet uses a "contract of sale" for the home purchase. Essentially, the California Veteran identifies the property, makes the offer, and gets it under contract. A Contract of Sale is also know as a Land Contract. The Veteran holds "Equitable Title" , which means they have the right to eventually have full ownership of the home. CalVet holds legal title. With a VA loan, the California Veteran immediately receives full legal title and ownership, just like nearly all other loan program types. A Veteran using a standard VA loan can get a HELOC or refinance to pull cash out. CalVet does not allow for a 2nd mortgage and does not do refinances. For this reason, many CalVet borrowers eventually refinance into a VA loan if rates drop or if property values increase and they want to access their equity.

Similarities Between CalVet and VA

Just like VA, CalVet does use the Veterans VA Entitlement on many of its loan program. A Certificate of Eligibility will be retrieved to confirm eligibility. CalVet has program's that allow for 100% financing, but also have programs for some Veterans who may not have VA eligibility. 

Which is Better: CalVet or VA?

There is no "right" answer for all Veterans. It's worth it to check into both programs. If a Veteran is purchasing a mobile home on leased land the CalVet is the way to go. If a Veteran is not eligible for a VA loan then they should check into CalVet. If a California Veteran is purchasing a farm, then check with CalVet. But if a California Veteran is looking to purchase a Single Family home or condo, or a 1 to 4 unit property they plan to live in, then check into both programs. 

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 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 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

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.

How to get a VA loan in California

How to Get a VA Loan in CaliforniaHow do you get a VA loan? Not every eligible Veteran takes the same path to homeownership, but those that follow a roadmap will have an easier time than those that go about buying a home in willy-nilly fashion. Knowing the steps and following them before you begin looking at homes will help to keep you from experiencing frustration when you find out you don’t qualify for the neighborhood you’ve been searching in.

Review your Household Budget

Knowing where your dollars are going is very important. You should have your budget under control before you buy a home. How much are you currently spending on housing/rent? How much for groceries? Dining? Entertainment? Utilities? Car, gas, insurance? And how much are you able to save each month? Some people use software to track their finances, but all you really need to do is right down the numbers on a sheet of paper. Or create your own spreadsheet. Make an honest assessment of your finances. Determine what mortgage payment you could handle. You may find that there are areas of your budget that you can cut back on and you may want to increase your savings.

Contact a California VA Loan Officerdo you qualify for a California VA loan

Now that you have a good grip on your budget, it is time to contact an experienced, local, California VA Loan Officer. The loan officer will help you determine how much of a VA loan you will qualify for. The Loan Officer should be able to give you custom VA loan scenarios with a complete breakdown of the numbers. You will want to see how much the full PITI (Principal, Interest, taxes, and insurance) is for the home price you are Prequalified for. The Loan Officer will also be able to educate you on the numbers.The more you know prior to making an offer on a home, the better chance you will have of getting your offer accepted and eventually, closing the transaction. Too often loan real estate transactions fall apart because the buyer didn’t understand something with the payment or didn’t realize how much money would be needed to close on the purchase of their home. While using VA financing does not require a down payment up to the county loan limit, there are still closing costs that the buyer is responsible for. There are escrow, title, appraisal, credit report, and recording fees. Money is also needed for prepaid expenses such as interest, taxes, and insurance. There are ways to have those fees covered, either by negotiating to have the seller pay some or all, or having the lender adjust the interest rate higher to then get a lender credit. Either way, knowing what your strategy is going to be PRIOR to making an offer on a home is critical. And an experienced California VA Loan Officer will be able to get you the numbers you and your real estate agent will eventually need to confidently make an offer and buy a home.

Retrieve your VA Certificate of Eligibility

VA Certificate of EligiblityTo make sure you are eligible for a VA loan you will need to retrieve your Certificate of Eligibility. The easiest way to do this is to have the VA lender pull it for you. VA Lenders can retrieve your COE in minutes since they have access to VA’s Automated Certificate of Eligibility (ACE) portal. The COE will verify your eligibility. It will also verify whether your VA Funding Fee is waived, or if you will have a subsequent user Funding Fee. The COE also will show if your Entitlement is not fully restored from a previous loan. These are all important things to know BEFORE you make an offer on a home.

Get PreApproved for your VA Loan

Now that you are already talking with a California VA Lender and the loan officer has created custom VA loan scenarios, it is time to start the VA Loan PreApproval. These days in California, a home seller will probably not even entertain an offer from a potential buyer who is not already PreApproved. PreApproval can be a different thing to different lenders, but at the very least you should be submitting your income and asset documentation to the lender along with a completed loan application. The lender will run your credit report and get an Automated Approval. Hopefully, the lender will also have an actual VA underwriter review the documentation to verify the numbers entered on the loan application. Once you have been PreApproved for your VA loan, the lender will issue a PreApproval Letter which can be submitted with any home offers you make.

Find a Real Estate agent who is comfortable with buyers using VA Financing

Not all real estate agents understand what it takes to get an offer accepted for a buyer using VA financing. Your California VA lender may be able to refer you to a real estate agent who has experience working with Veterans to buy a home. The real estate agent should know whether or not you will need the seller to pay your closing costs. And the agent should also make sure to include certain things in the purchase contract that are required by VA (like a clear termite report).

Find a Home

california va approved condosYou are now ready to find a home that meets your qualifications, budget, payment comfort level, and other personal requirements. If you are planning to buy a condo then you will want to keep your California VA Loan Officer in the loop. The condo project needs to be VA approved for a VA loan to close. It will be easier to limit your search to those condo projects that are already VA approved. Your lender and help you and your real estate agent narrow down the search. The home search can take 1 day or 12 months. It just depends on the current real estate market and your qualification and needs. Once you find a home you will make an offer through your real estate agent. The California real estate market has been hot for the last few years, so it may take a few offers before you have an accepted offer and are “in escrow”.

You are “In Escrow”

When you are “in escrow”, this means you have an accepted offer and have given a deposit to the escrow company to “open escrow”. It typically takes between 30 and 45 days to close escrow. During escrow, the appraisal and inspections are completed, a title search is completed, and the loan is fully approved. Once the loan closes you will be given the keys to your new home. Depending on the terms of your sale contract, the sellers of the home you buy may have a few days to move out before you can move in. But at this point, you are a new home owner.

The entire home buying process can take several years for some people but may only take a month or two for those with a clear idea of the steps towards home ownership and a clear idea of the type of home (and location) they want to buy. The biggest hurdle for most home buyers is the down payment. For California Veterans, that hurdle is mostly eliminated since VA does not require a down payment up to the county loan limit. So for those California Veterans who are thinking of buying a home, figure out what your budget is and talk to a California VA Loan Officer who will prepare custom VA loan scenarios for you today.

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 your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

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 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.