There are several differences between the VA home loan program and the Calvet home loan program. California veterans should take time to learn about both programs to determine what is best for them. There are times when the Calvet program is better and other times when the VA home loan program is better. Below are some of the differences, and why at this time the VA home loan program is better for most California veterans purchasing a home.
CalVet vs VA: Who is the Lender?
VA home loans are guaranteed by the Veterans Administration, but the actual loan is made by banks and mortgage banks. The VA’s guarantee on the loan encourages lenders to offer favorable terms to veterans, resulting in low interest rates. With the CalVet program, the state of California is the lender. California uses bond funds to lend to any virtually any Veteran who wishes to purchase a home in California.
Va vs. CalVet | Down Payment Requirements
The loan limits for 100% financing on a VA loan in Californiavary by county. For example, in Orange County and Los Angeles County, the 100% financing limit is $679,650 (2018 loan limit). California VA loan limits are very high. It is possible to go above $679,650 by coming in with a small down payment. The down payment is equal to 25% of the difference between the 100% financing limit and the purchase price.
The CalVet loan limit in California is $521,250, including the the financed Funding Fee. In some California Counties that limit is higher than VA, and in some counties it is lower. CalVet offers three basic programs: a 100% financing program, a 97% program, and a 80/20 program. There are subtle differences between these programs which need to be understood. While the 100% program allows the VA Funding Fee to be financed into the loan, just like the standard VA home loan program, the 97% program requires it be paid in escrow. This adds a considerable expense, on top of the down payment requirement.
Interest Rates for VA and CalVet home loans
Interest rates will fluctuate for the VA home loan program. This is an area where the VA program can easily beat out the CalVet program, and why the VA program has been more popular over the past few years. In 2010, VA home loan interest rates and been in the 4.5% to 5.5% range. The CalVet interest rates currently range between 5.75% and 6.2% according to information posted on their website. Because CalVet interest rates are based on Bond Funding, their interest rates do not quickly fluctuate.
Restrictions on the CalVet program
The CalVet program functions differently than the VA home loan program. With most mortgage programs, including the FHA, VA, and Conventional home loan programs, the California home buyer holds title to the home. The lenders holds the lien. Calvet uses a Contract of Sale for the financing instrument. This means CalVet actually holds title. There are advantages and disadvantages to this. It makes it difficult to refinance or get a second mortgage, whether its to take advantage of low interest rates or improve the home. An advantage is that CalVet is able to get group insurance rates for home owners insurance. In some areas where home owners insurance is difficult to get this can be beneficial. VA financing on condos in California can be tricky with either program. The condo project should be on the VA approved condo list.
When beginning the process of buying a home, it is important to find a California VA loan expert who understands the VA loan program and can quickly PreQualify and PreApprove you for a home loan. Finding someone who can answer your questions and provide customized loan scenarios is important.
Authored by Tim Storm, an Orange County, CA 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.
Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.
tstorm (at) ochomebuyerloans.com