Which is Better for Orange County Veterans: CalVet or VA Loan

California Veterans have two great choices when it comes to Zero Down financing for a home purchase. They can either use the CalVet program or the VA loan program. But there is a difference between the programs, both in how the interest rate is calculated and the closing process. So which program is better? Because everyone’s situation is different it probably makes sense for Orange County Veterans to check into both programs. Below are are few of the primary differences.

Loan Amount Limits

It used to be that VA had limits on the purchase price allowed for $0 down financing. In some cases, those limits were less than what Calvet allowed. But in 2020 the Veterans Administration removed loan limits. Now, a Veteran can buy any priced home with $0 down payment as long as they have the verifiable income (and credit) to support the payment. 

How Title is Held: Calvet vs VA

The VA loan program is a fairly standard program when it comes to how closing and title are held. Like other programs (FHA, Fannie Mae, Freddie Mac, Jumbo, etc) when a VA loan is closed the Veteran holds legal title immediately upon closing. The VA loan is a recorded lien.

CalVet is different. With Calvet, after the Veteran identifies a property and gets an accepted offer, Calvet purchases the property. Calvet then “sells” the property to the Veteran using a contract of sale, which is also known as a Land Contract. Calvet still holds legal title to the home and the Veteran holds “equitable title”. Equitable title is the right to obtain full ownership.

The different forms of holding title may not seem like much initially, but it does add complication down the line, especially if the Veteran wants to refinance or get a Home Equity Line of Credit. More on this below.

Credit Scoring

Calvet does not have a minimum FICO score requirement. This means a Calvet loan may be a better option for an Orange County Veteran with a FICO score below 620. Technically, VA guidelines do not list a minimum FICO score requirement. But VA does not lend. VA guarantees the loan for the lender. And most VA lenders sell their VA closed loans to Ginnie Mae and so must follow what the current generally accepted FICO sore requirements are for loans being sold on the secondary market. Most VA lenders have minimum FICO sore requirements of between 580 and 620. It’s important to mention that private lenders will tend to have pricing adjustments for low FICO scores whereas Calvet does not. A Veteran with a 600 FICO score may get a lower interest rate with Calvet than VA. But every situation is different, making it important to do a thorough review of your options.

Interest Rate & Fees: CalVet vs VA

va mortgage paymentThere is not a set answer to this comparison since every situation is different. However, there is a lot more flexibility with a VA loan than with Calvet. Calvet offers a set interest rate determined by the current market for government-issued bonds. Every lender is different, but VA interest rates are mostly affected based on home Ginnie Mae Mortgage-Backed Securities are traded on the secondary market. Rates can change daily, but there is a lot of flexibility in the rate and fees that are offered to an Orange County Veteran. For example, as of today, August 17, 2021, the Calvet published 30 year fixed rate for the QMB 100% financing program is 2.75% (2.962% APR). Calvet charges a 1% Origination Fee. If an Orange County Veteran is purchasing a home in Irvine for $750,000 with $0 down payment then the Calvet Origination Fee will be $7,500. This fee is not financed into the loan. It needs to be paid out of pocket. When you add the escrow, title, recording, appraisal fees combined with “prepaid” expenses, the amount needed to close on a $750,000 purchase can get very expensive. A VA lender could offer the same rate of 2.75% (2.874% APR) but at 0 points. Better yet, if the Veteran is tight on funds to close the VA lender could offer additional options with a higher interest rate and “lender credit”. As an example, a Veteran would choose to go with an interest rate of 3.25% and get enough lender credit to cover nearly all closing costs and prepaid expenses. This flexibility allows a Veteran to buy a home without depleting all of their savings. Not all lenders have the same rates, so it makes sense to check around.

Refinancing Options

Calvet does not refinance their loans. Calvet is strictly for purchasing, construction, or home improvement loans. VA does have several refinance options.

  • VA IRRRL – Interest Rate Reduction Refinance Loan – This is for a VA backed loan to VA loan refinance. Also known as a VA Streamline Refinance, this is the easiest loan a Veteran will ever do. There is no income documentation required. No appraisal. No termite inspection. As long as the Veteran has a job (or VA Disability rating) and is current on their VA backed loan, they are eligible. This is a “no cash out” refinance. And since Calvet is, in most cases, a VA backed loan, it is possible for a Calvet borrower to refinance into a VA loan using the VA IRRRL program.
  • VA Cash Out Refinance – VA allows for cash out refinancing up to 90% of the property value. The VA loan, including the VA Funding Fee if applicable, can be 90% of the VA appraisal value. For example, if a property appraises for $700,000 then the new VA loan can be $630,000. If the loan being paid off is $500,000 then the Veteran can pull out $130,000, less the Funding Fee (if applicable) and closing costs/prepaid expenses. The cash out can be used for debt consolidation, home improvement, education, or any other purpose.

As an Orange County Veteran, what will be most important in your search for the best Veteran financing is the advice you get for a local, experienced, Veteran Loan Specialist. While no special license is required for a Loan Officer to originate a VA loan, most Loan Officer are lucky if they close one or two VA loans a year. Finding a local Orange County VA loan specialist who can answer your questions or prepare a professional presentation of your VA loan options in an easy-to-understand format is going to benefit you, the Orange County Veteran. Make sure to ask for a VA Loan Purchase Analysis or a VA Refinance Savings Analysis.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at Fairway Independent Mortgage Corporation. Direct line is 949-829-1846. www.OrangeCountyVALoans.com

Why is it Difficult to Find VA Approved Condos in Orange County?

va approved condo for sale

Why is it difficult to find VA approved condos in Orange County, CA? There are plenty of Veterans in Orange County who want to take advantage of the VA loan program, especially now that there are no more loan limits for ZERO Down VA financing. But trying to narrow down the search for those condos that are VA approved, meaning they are eligible for VA financing, is no easy feat.

First, it's important to understand the difference between a condo and a Single Family Detached home. In Orange County it is not always as easy as just looking at the property and knowing if it is a condo or an SFR. Most people assume that all condos are attached properties on at least one wall, tend to be smaller homes, and have a monthly Home Owners Association (HOA) payment. And they also assume an SFR (Single Family Residence) will be a detached property, larger home, and not have an HOA payment. But this is not always the case.

Condos that Look Like SFR's

While some condos look like a stereotypical condo, some do not. Many times, especially in the last 10 to 20 years, builders have developed and built detached home projects that are legally condos in an effort to achieve more "density" in the project, meaning, build more homes on the parcel of land. The homes are detached. They look and feel like a Single Family Detached home, or even a Planned Unit Development (PUD), but legally they are a condo.

Orange County VA Approved Condos

Single Family Homes that Look Like Condos

And then there are the home projects that look like condos but are legally SFR's.  These properties are attached and have HOA dues. Typically they are older projects. You'll run into these in all areas of Orange County.

Full Proof Way to Know if a Property is a Condo

There is a full proof way to know if a property is a condo. Check out the Assessors Parcel Number, or APN. In Orange County, if the APN begins with a "9", then the property is a condo. A lender or real estate agent will be able to look up the APN number, but as a consumer you can typically find it in the property listing information. For example, Redfin.com lists the APN number in the "Public Facts" section of the property page. Zillow shows it in the "Other" section lumped together with about 50 "other" details. A little harder to find. Realtor.com shows the APN in the "Other Property info" section. 

While many of the listing sites may identify a property as a "condo" or a "SFR", there are times when the information is incorrect. The agent entering the information didn't realize the significant difference in financing possibilities based on the legal property type, so knowing the rule of "9" is important. And if the APN does not begin with a 9 then your are good to go with your VA loan. But if there is a 9 and the property is a condo, then you will need to narrow down your search a little bit more, because to get a VA loan on a condo, the condo project needs to be VA approved.So how do you figure out which condos are VA approved and which are not?

Finding VA Approved Condos

If you are a Veteran looking to buy a condo using the VA loan program, then you are not going to want to waste your time looking at condos that are not VA approved. You can find a real estate agent who can help with your search. Or, you can go straight to a website built specifically for finding Orange County VA approved condos. There are two websites in Orange County, CA that will drastically narrow down the search for VA approved condos, saving lots of time, energy, and frustration. 

www.OrangeCountyVeteransHomes.com

www.OrangeCountyVeteransHomes.com has links for just about every city in Orange County. Just click on the link for the city you are interested in and "bam", you are presented with a list of VA approved condos for sale. They are listed in order of purchase price. Any Veteran who has spent any amount of time looking at condos only to find that a property they fell in love with is not VA approved will appreciate the this website. And while it is still important to have a local Orange County VA Loan Officer who is familiar with Orange County VA approved condos double check a properties eligibility before you make an offer, just knowing you are not wasting your time looking at condos that are not VA approved is a big time saver.

Fully Underwritten PreApproval

The first step in any home search should always be a consultation with a lender. For those using the VA loan program, working with a local, Direct VA Lender who is purely focused on the VA loan program and also knows the in's and out's of VA condo lending can help make the whole home buying process a smooth process. Your VA lender should be available to answer your questions and should be quick to present your loan options in an easy to understand way. And most importantly, it can be critical to understand the difference between being "Prequalified", "PreApproved", and Fully Underwritten and PreApproved. If your lender issued your PreApproval letter 1 hour after running your credit and getting a "DU", then you probably do not have an "underwritten" VA PreApproval. VA loans fall apart all the time when the Veteran thought they were PreApproved. Unless an actual Direct Endorsed VA Underwriter has reviewed your loan package, then you are still at risk of having a rocky loan process once your offer is accepted. The best recommendation that can be given to a Veteran early in the home search process is to get your VA loan fully underwritten and approved. This not only will give you peace of mind, but will also make any offer you make solid gold to the seller. A fully underwritten and PreApproved offer is as good as a cash offer and will make it easy to close very quickly. 

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.

No VA Loan Limits in 2020

No VA loan limits in 2020? You heard that right. The VA loan limits for 100% financing have been eliminated effective January 1, 2020. For high priced neighborhoods in Orange County this will have a dramatic affect for Veterans trying to buy a home. Veterans buying homes in Riverside and San Bernardino counties will also benefit greatly. 

How VA Loan Limits Worked in 2019

Previously, the Veterans Administration would announce the upcoming 100% financing loan limit for each county in late November of the preceding year. Most recently the 2019 100% financing loan limit for Orange County was $726,525. This meant an Orange County Veteran could buy a home for a price as high as $726,525 with no down payment. (just don't forget about closing costs which do have to be paid). If the price was above $726,525 then the Veteran was required to come in with a down payment equal to 25% of the difference between the 100% loan limit and the purchase price. For example, if the purchase price was $1,000,000 then the down payment would be $68,368 (25% of the difference between $1,000,000 and $726,525). The VA loan would be $931,631 (before financing the VA Funding Fee, if applicable). Now, in 2020, no down payment is required.

Buy a $1,000,000 Orange County Home with $0 Down Payment

An Orange County Veteran purchasing a $1,000,000 property in Orange County now would not need any down payment.For that matter, the Veteran could buy a $2,000,000 with no down payment as long as they had enough income to qualify for the payment. 

What You Need to Know Before Buy

There are things every Veteran should know before they buy a home. Really, they should know these things before they even think about making an offer on a home. Many times there is a big disconnect between the payment the Veteran is comfortable and the price of range homes they wish to purchase. Understanding the numbers involved in a purchase is critical in order to avoid frustration and potential financial disaster. Here are just a few of things to be aware of before looking at homes and getting your hopes up.

  • Know you own budget. What is your net income after taxes? How much do you spend on meals and entertainment? How much is spent on car payments, student loans, other installment loans? Are you carrying credit card debt? Hopefully you have positive cash flow, or at least know exactly what it will take to have positive cash flow.
  • Know what makes up a mortgage payment. It's not just Principal and Interest. The full mortgage payment also includes property taxes (can be anywhere from 1% to 2% of the purchase price divided by 12), home owners insurance (estimate using .25% of the loan amount divided by 12 - but you will shop for your homeowners insurance), and possibly Homeowners Association Dues if you purchase a condo or home in a PUD (Planned Unit Development).
  • Know what payment your are comfortable with and that will fit in your budget. If you are pushing your budget, are you expecting a raise in the near future that will lessen the burden?
  • Know that there are closing costs involved in a home purchase, even when using VA financing. Just like any home purchase, there will be escrow/settlement fees, title insurance, a VA appraisal fee, recording fees to the county, lender fees, inspection fees, notary, etc. Also, there will be "prepaid" expenses which include prepayment of property taxes, insurance. and mortgage interest. These are buyer costs. The seller will also have their own costs. Having a solid estimate of all the costs and fees involved is important in order to make sure you are not short to close when your closing date arrives. If you do not have money for closing costs or wish to keep you money in the bank, then you can negotiate upfront to have the seller pay some or all of your costs. This may put you at a disadvantage against other potential home buyers not needing the seller to pay closing costs but can put you in a good position with reserves in the bank after closing.

How to Get a Solid Estimate of the Numbers Involved in a Home Purchase

The best way to get an estimate of all the numbers involved in a VA home purchase is to work with an experienced VA Lending Expert. Ask for a VA Total Cost Analysis, which is prepared as part of the initial Pre-qualification process.The VA Total Cost Analysis will show you several "VA purchase scenarios" based on your preferred price range and payment comfort level. It will give you complete breakdown of payment for each home price as well as a breakdown of the costs involved in buying a home at each price.The TCA is delivered on a personalized web page and can be easily adjusted based on a specific property. 

VA Loan PreApproval

The definition of a PreApproval varies from one lender to the next. Some lenders may just have the Loan Officer review you income documentation, run credit, and get an Automated Approval. Some lenders may not even do that much. There are some big online lenders who issue a PreApproval letter based on the initial borrower completed loan application without any review of the documentation. But in either of these situations, the final decision maker, the VA Underwriter, may have a different opinion of the loan package than the initial review by the loan officer. For this reason, you should ask for a "Fully Underwritten PreApproval".With a Fully Underwritten PreApproval your loan package is reviewed and Approved (or not) by an actual VA Underwriter. This is like walking into a car dealership with a check from your bank. Your financing is in place, provided the property meets VA requirements. This not only takes a lot of the stress out of the home buying process but also make your offer stand out among other competing "Prequalified" offers. 

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. 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 the Blue Water Navy Veterans Act of 2019 Affects California VA Loans

The Blue Water Navy Veterans Act of 2019 brought about significant changes to the VA loan program that Orange County, CA Veterans should be aware of. The two biggest changes are the elimination of the 100% financing loan limit and the increase in VA Funding Fees. 

Was there ever a VA Loan Limit in California?

There has always been confusion in regards to the VA loan limits. Technically, there was not a maximum VA loan amount prior to 2020. But there was a limit for No Down Payment VA loans. And since No Down payment is one of the best benefits of the VA loan, the 100% loan limit is something that Orange County Veterans have always needed to be aware of. In 2019 the 100% financing VA loan limit was $726,525. 

An Orange County Veteran could buy a VA approved condo in Ladera Ranch for $726,525 and not need a down payment. But if that same Veteran was looking at a home in Newport Beach for $1,200,000, a down payment would be needed. The down payment was calculated using 25% of the difference between the purchase price and the loan limit of $726,525. In this case, 25% of the difference between $1,200,000 and $726,525 is $118,368. The VA loan would be $1,081,631. Now, in 2020, a Veteran buying an Orange County home above $726,525 will not need a down payment. So a Veteran buying a VA approved condo in Irvine for $1,000,000 will not need any down payment. And yes, there are VA approved condos in Irvine valued at over $1,000,000.

VA Funding Fee Changes for 2020

VA Funding Fees will be increasing in 2020. Below is a chart showing the previous Funding Fee's compared to the new Funding Fee's required on a VA home loan. 

VA Loan Type

Down Payment

Funding Fee

First Time Use

Funding Fee

Subsequent Use

Purchase

0%

2.3%

3.6%

Purchase

5% to 9.99%

1.65%

1.65%

Purchase

10% or more

1.4%

1.4%

Cashout Refinance

N/A

2.3%

3.6%

VA Streamline

(IRRRL)

N/A

.5%

.5%

What is the VA Funding Fee?

The VA Funding Fee is required on all VA loans by law. There are some Veterans who have an exemption based on having a service connected disability rating through VA. The Funding Fee is used to help VA guaranty the VA loan program. The guaranty is the reason why the VA loan program is able to allow for 100% financing and not have a monthly mortgage insurance payment, like all other loan programs that allow financing above 80% of the property value. As shown in the chart above, the Funding Fee does go lower if the Veteran has either 5% or 10% for down payment. As part of the Blue Water Navy Veterans Act of 2019, Active Duty Military personnel who have received a Purple Heart will also be exempt from the Funding Fee.

FAQ on VA loans

Who Pays the VA Funding Fee?

The VA Funding Fee is paid by the Veteran, but is not an "out of pocket" expense. Depending on the Veterans preference, in most cases the Funding Fee is financed into the base VA loan amount. Below are the three ways the Funding Fee can be paid.

  • Financed into the VA loan (this is the most common method)
  • Paid out of pocket by the Veteran
  • Paid by the seller of the home the Veteran is purchasing

If the Funding Fee is financed into the loan, the VA loan will be higher than the purchase price of the home. For example, if an Orange County Veteran buys a home is Laguna Niguel for $500,000 with a no down payment VA loan and this is their first time using the VA loan program, the Funding Fee will be 2.3%. To calculate the new loan amount, multiply 2.3% by $500,000 to get $11,500. Add $11,500 to $500,000 for a total VA loan of $511,500. The mortgage payment is based on the full loan amount of $511,500. 

If you are interested in finding out what the numbers look like in your situation, contact a local Orange County VA loan specialist who will prepare a VA Total Cost Analysis. This will give you a clear and easy to understand break down of the numbers, helping you to make the right decision when it comes to your new homes financing.

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. 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 Buy a Condo in Orange County with a VA Loan

Are you looking to buy a Condo in Orange County, CA with a VA loan? There are things you need to know before starting the condo search that will help speed up the search process and relieve the potential frustration of finding out the condo you fell in love with is not eligible for a VA loan. The most important thing to know right out of the gate is that if you are using VA financing to purchase a condo, the condo project needs to be VA approved. And while it is possible to get a condo project VA approved after you have identified the condo you want to buy, it will be far easier to just limit your property search to only those condos that are in a VA approved condo project. But how do you do that?

Two Ways to Search for VA approved Condos

There are two common methods used by Veterans and their real estate agents in searching for a VA approved condo. The most common method is to just look at ALL condos for sale and narrow down the search to the condos the Veteran is most interested in buying. Typically the search will be based on price range, bedrooms, bathrooms, size, location, etc. After filtering through 100’s of properties, anywhere from 3 to 30 properties may be identified as potential condos to buy. Then comes the frustrating part. Looking up each condo to see if it is eligible for VA financing. Since most condos in Orange County, CA are not VA approved, finding out that most of the homes are not even eligible for a VA loan is not only frustrating but a huge waste of time.

The far easier method is to only look at condos that are located within VA approved condo projects. And this is where it makes sense to work with real estate professionals who are familiar with the VA loan program and understand how to limit the search to only those properties eligible for a VA loan. The real estate agent can search the Multiple Listing Service (MLS) based on a narrowed down search of legal “Tract” numbers. The resulting properties are then forwarded to the Veteran, saving a ton of time (and frustration).

Another option for Veterans who want to do some searching on their own is to use a local VA Condo search website specific to Orange County.  www.OrangeCountyVeteransHomes.com has done most of the legwork for you. There is a link for each city within Orange County. Simply click on the link and Bam, it’s done.  For example, let’s say you are looking for VA approved condos in Irvine. By clicking on the Irvine link, a list of VA approved condos in Irvine will appear. As of today (Nov 19, 2020), there are 49 VA approved condos for sale with prices as low as $305,000 and as high as $1,030,000. A quick search for VA approved condos in Huntington Beach shows there are currently 20 properties for sale with prices ranging from $279,000 up to $800,000.

It is important to have an experienced Orange County VA loan specialist double-check the VA website to make sure the condo project is verified as approved because sometimes a condo project can run into financial issues or a lawsuit that can jeopardize their approval.

Buy VA Condo with $0 Down with No Limit in 2020

In 2020 VA will do away with loan limits for 100% financing. In the past, a Veteran would buy a home with ZERO down payment but only up to the county limit. In Orange County in 2019 the 100% financing loan limit was (is) $726,525. It was possible to buy a property and get a VA loan above that limit, but only with a down payment. Now, as a result of the “Blue Water Navy Veterans Act”, loan limits have been eliminated. This means that those high priced condos in Irvine and Huntington Beach, along with other upper-end areas of Orange County, a Veteran can buy with No Down payment.

First Step in the Home Buying Process –VA Loan PreApproval

The first step in every home buying process should always be PreApproval. The last thing you want is to spend time finding the right property and then not be ready to make an offer. Most sellers will not accept an offer from a potential buyer who hasn’t talked to a lender yet and have a PreApproval letter in hand. With VA, it is important to work with a lender who specializes in VA. It is a unique program and working with a local Orange County Loan Officer who specializes in the VA loan program will help to make the overall process seamless. The VA Loan Officer will be able to pull the VA Certificate of Eligibility (you always want to make sure eligibility is clear before an offer is accepted), along with providing a Side by Side VA Total Cost Analysis (VA TCA). The VA TCA will give the Orange County Veteran a thorough breakdown of the numbers, making it easy to compare different options and price ranges.

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. 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