How 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 Officer
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
To 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
You 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.
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.
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.
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.
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.