VA Loan Limits for Orange County, CA to be Eliminated in 2020

VA loan limits for Orange County, CA will be eliminated as of January 1, 2020. This is a big change from what has historically been a limit on Veterans’ ability to purchase a home in Orange County with no down payment. With VA loan limits in California eliminated, usage of the VA loan program should increase significantly.

How have the VA Loan Limits Been Set in Orange County?

Every N0vember, Federal Housing Finance Agency (FHFA) announces the Conforming Loan Limits for each county in the United States. The basic Conforming Loan Limit in 2019 for all counties in the United States was $484,350. But for counties where home prices are above the national averages, like in Orange County, the “High Balance Conforming” limit was set at $726,525. There were also many counties in California with limits set above $484,350 all the way up to $726,525. It just depends on the average sales price of homes in that county.

VA followed suit and set the Zero Down 100% financing VA loan limits to be equal to the Conforming (or High Balance Conforming) loan limit set by FHFA. So in Orange County in 2019 a Veteran could buy a home for $726,525 for No Down Payment. If the Veteran was to buy a home priced above the loan limit then they would need a down payment equal to 25% of the difference between the purchase price and the loan limit. For example, if a Veteran was to purchase a home in Irvine for $826,525 (an even $100,000 above the loan limit) then the down payment required would be $25,000 and the resulting VA loan would be $801,525. Now, in 2020, the Veteran can buy that same home with $0 down. The VA loan will be $826,525. This change will open up the options for Veterans to buy a higher-priced home in areas like Newport Beach, where the VA program has not been widely used. The elimination of VA Loan limits will also help Veterans looking to buy VA approved condos.

What about the Inland Empire?

va mortgage questionsRiverside County and San Bernardino County, or the Inland Empire, will benefit big time from this change. The Inland Empire’s loan limit was set at the basic $484,350 in 2019. That has made it difficult for Veterans looking to buy their first home in the Inland Empire only to find that homes in many areas were priced above $500,000. Now, the barrier to entry will be much easier to break through.

How Does This Affect VA Refinancing?

This will also help those Veterans who already own a home and are looking to refinance to pull cash out above the current VA loan limits. In 2019 VA did tighten the cashout refinance guidelines, making it difficult to pull cash out above 90% a properties value. And it is the “total VA loan amount” including the VA Funding Fee that has to be used in the 90% calculation. But 90% loan to value for a cashout refinance is still better than any other type of Conventional or Government loan program for 1st mortgages.

Eliminating the loan limits means a Veteran who is looking to pull cash out on a property valued at $1,500,000 could get a new VA loan of $1,350,000. At least theoretically. It is important to mention that VA issues the underwriting guidelines but does not actually fund VA loans. Bank fund VA loans. As of this writing, we are still waiting to see how aggressive the banks will get with cashout refinancing are Super Jumbo loan programs.

2020 will be a big year for the VA loan program. Veterans who typically didn’t take a serious look at the VA loan should now learn more about and compare it to other financing programs. VA tends to have lower 30 year fixed rates than other programs, especially in the lower FICO score ranges. Also, the debt to income ratios are not limited to 43% like most Conventional Jumbo loan programs. And only a 2 year wait period is required after a bankruptcy or foreclosure, compared to 4 to 7 years for other types of loan programs. And best of all, even though no down payment is required, there is no monthly mortgage insurance like there is on Conventional loan programs when the loan to value is above 80%.

If you are a Veteran considering a home purchase or refinance, make sure you talk to a Loan Officer who is knowledgable with the VA loan program.

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 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

Orange County VA Loan Limit for 2019 is $726,525

2019 Orange County VA loan limitsThe VA loan limit in Orange County for 2019 increased once again to $726,525. In 2018 the limit had been $679,650. This $46,875 increase gives Veterans more reason to seriously consider the VA loan program even if they have a down payment. Home prices in Orange County are higher than in most parts of the country, making it difficult for home buyers, both Veteran and non-Veteran buyers, to finance the purchase of a home. VA offers the only 100% financing program with a limit to $726,525 and is only available to eligible Veterans.

Jumbo VA Loan Program – What is it and How Does it Work?

$726,525 is the 100% financing loan limit for Orange County, but is not the actual limit for the highest a VA loan can go. Many lenders will fund VA loan amounts as high as $1,500,000. A Jumbo VA loan is when the loan amount is higher than the 100% financed limit.A down payment is required when the purchase price is higher than the 100% financed loan limit, but it is minimal compared to other loan programs. The down payment is equal to 25% of the difference between the 100% financing loan limit and the purchase price. For example, if a Veteran is purchasing a home for $850,000 in Irvine, CA, the minimum down payment required would be $30,868. ($850,000 – $726,525 = $123,475. And 25% of $123,475 = $30,868). This means that a Veteran can purchase an $850,000 home in Orange County with only 3.63% down payment. The base VA loan amount would be $819,132.

Other Advantages of the VA Loan Program

There are several advantages the VA loan program has over most other types of home financing. They include:

  • No monthly Mortgage Insurance or PMI, even when the down payment is less than 20% (or $0)
  • Flexibility with Debt to Income Ratios – Many “Jumbo” loan programs limit the debt to income ratio to 43%. Some will go as high as 50%. Standard VA guidelines do not have a maximum debt to income ratio. It is not uncommon for a VA loan to be approved with the debt to income ratio being above 55% or even 60% in some cases. What is more important on a VA loan is the Residual Income calculation. *Debt to Income ratio is equal to a homebuyers total mortgage payment, installment payments (car, student loans, etc), minimum credit card payments, alimony, child support, etc divided by their total gross income before taxes. If a home buyer making $7,000 per month has a proposed mortgage payment of $2,500 and a car payment of $500, then their Debt to Income ratio is 42.8%. $2,500+$500 = $3,000.  $3,000 / $7,000 = 42.8%
  • Short wait period after a bankruptcy or foreclosure. While Conventional loan programs typically require a minimum of 4 years wait period after a Chapter 7 bankruptcy and 7 years after a foreclosure, VA only requires a 2 year wait prior after a bankruptcy or foreclosure. It is important to reestablish credit after a significant credit event, but it is not unusual to see credit completely restored only 2 years after a major credit event.
  • Competitive 30 year fixed interest rates – While VA does not have an “interest only” loan program, VA does have very solid 30 year fixed loan programs with interest rates that can quite often be lower than other comparable loan programs.
  • Flexibility with FICO scoring. With Conventional loan programs, to get competitive loan pricing, the borrowers FICO score needs to be 740 or higher. With VA, there is very little difference in loan pricing between a borrower with a 740 FICO and a borrower with a 680 FICO. Even with a FICO of 620 it is possible for a Veteran to receive a competitive 30 year fixed interest rate.

Cashout Refinance to $726,525

The new loan limits will also help Orange County Veterans who already own a home and are looking to pull cash out for debt consolidation, home improvements, or almost any other purpose. VA allows “cash out” up to 100% of the property value up to the 100% loan limit. The new loan amount, including the VA Funding Fee, can be 100% of the property value. Also, properties valued higher than the $726,525 loan limit are eligible for even higher loan amounts. The formula for calculating the maximum Jumbo VA loan amount on a cash out refinance is similar to the formula for determining the loan amount on a Jumbo VA purchase. A Veteran who owns a home in Mission Viejo valued at $850,000 could get a new VA loan of $819,132.

Who is Eligible for a VA Loan?

You may be eligible for a VA loan if you meet one of the following conditions:

  • You have served 90 consecutive days of active service during wartime, or…
  • You have served 181 days of active service during peacetime, or…
  • You have more than 6 years of service in the National Guard or Reserves, or…
  • You are the spouse of a service member who has died in the line of duty or as a result of a service-related disability.

It is important to understand that the VA loan program is not only for First Time Buyers. It can be used multiple times and in some cases, a Veteran can have more than one outstanding VA loan. Your eligibility does not “expire”. Your VA lender will help you to retrieve your Certificate of Eligibility. All that is needed is a copy of your DD214. And in some cases, the lender may not even need that.

Step 1 in the VA Loan Process

The first step in the VA loan process is contacting a local Orange County, CA  VA lender. Working with a Loan Officer who specializes in the VA loan program is important and will help to ensure that your VA loan has the best chance of closing with as little stress as possible. The lender should be able to answer your questions and prepare a custom VA Mortgage Analysis based on your goals and budget.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation. 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 your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA Loan in Orange County | What does it take to Qualify for a $679,650 Home

qualify for va loanWith a VA Loan in Orange County, what does it take to qualify for a home price of $679,650? The reason I am using $679,650 as the price is that that is the loan limit for 100% VA financing in Orange County. You can still buy a detached home in Orange County for $679,650, but this price range could also put you in a nice attached home or condo as well. What do the numbers look like for an Orange County Veteran looking to take advantage of the VA loan program? What will the payment be? How much money will be needed to close the purchase? These are all questions that you, as a Veteran home buyer, need to know BEFORE you go out and make an offer on a home. You need to know if you qualify for a VA loan.

Know your Numbers Before House Hunting

va mortgage paymentIt is very important to understand your own budget. Be realistic about how much of a mortgage payment you can afford. From my own experience working with new home buyers, most are surprised at how much the mortgage payment will be for the homes they are interested in. The mortgage payment is made up of several components. Everyone knows or should know, about the Principal and Interest. But you also need to include the Property Taxes and Home Owners Insurance. And if you are looking at condos or homes in a Planned Unit Development (PUD), you will also need to include the Home Owners Association Dues into the mortgage payment. The Principal, Interest, Taxes and Insurance are commonly referred to as “PITI”.

For a $450,000 purchase price with No Down Payment, if we assume a middle of the road interest rate of 4.5% (4.776% APR), the P&I portion of the payment will be $2,329. The Property taxes will be approximately $465 (depending on the properties tax rate). The Home Owners Insurance will be approximately $94 (depending on the property and your insurance companies quote to you).  Your total PITI will be $2,892 based on these assumptions. If we add $100,000 to the purchase price, the PITI jumps to $3,534, a $654 payment increase, At $650,000 the PITI jumps to $4,177. And at $679,650 the PITI will be approximately $4,367.

If you’re looking to buy a home for $679,650 then you need to make sure you can afford a $4,367 payment. Does that payment fit in your budget? Will you still be able to save for your retirement, kids college funds, and have something left over for going out now and then? Most people that feel they can afford the payment will also qualify for a VA loan. VA is fairly flexible the Debt to Income percentages.

Do You Qualify for a $4,367 Payment? Let’s Calculate your Debt to Income Ratio

va mortgage questionsThe Debt to Income ratio, or DTI, is a calculation used by lenders to qualify potential home buyers for their home loan. It is calculated by dividing your mortgage payment, or PITI, plus any other monthly debt payments, by your gross monthly income. The guideline Debt to Income ratio for a VA loan is 41%.  $4,367 divided by 41% equals $10,651. So to qualify for a $4,367 payment, using a fairly conservative 41%, the VA borrower would need a monthly income of $10,651, or $128,000 per year. However, 41% is just a guideline. It is not uncommon, especially for a Veteran with good credit, to allow the DTI to be as high as 55%. At 55%, the monthly gross income before taxes only needs to be $7,940, or $95,280 per month. In reality, most people will have a car payment and possibly students loan payments or other monthly debt payments that would also need to be included in the calculation. For an accurate assessment, you should get PreQualified for your VA loan before you begin making offers, but these numbers should give you a good idea of what to expect.

How Much of the Payment is Principal

It is important to understand how much of the Principal & Interest payment is Principal. Because when you pay Principal, you are just paying the lender back for the money that has been lent to you. In our $679,650 purchase example, $914 of the $2,892 P&I is Principal. This is like saving money. It is not an expense as much as it is helping to build your wealth since your debt is decreasing. If you are comparing your rent payment to a mortgage payment, you should really be comparing your rent to the mortgage payment less the principal. The $4,367 payment less $914 is $3,452. And even if that payment is higher than your rent, you should also consider any tax advantages you will have as a result of owning. Your tax preparer should be able to let you know what savings you will have by owning a home.

The VA Loan Does have Closing Costs

The best thing about the VA loan is that there is no down payment. But that doesn’t mean there are no closing costs. When you buy a home you will still have an appraisal. There will still be an escrow and title company involved just like any other home purchase. You’ll still have recording fees, notary fees, lender fees, etc. And you will also have “Prepaid Expenses”. Prepaid expenses are things like prepaid interest, property taxes, and homeowners insurance. Closing costs can be estimated to be approximately 1% of the purchase price, maybe a little less. Prepaid expenses will vary depending on the timing of the closing. The timing of the closing affects Prepaid interest and the property tax impound account. In most cases, it would be safe to assume the Prepaid Expenses will also be approximately 1% of the purchase price. So for a $679,650 purchase price, plan on needing approximately $13,593 to close.

Can Closing Costs be Financed? What is a VA No No?

Closing costs cannot be financed. However, there are ways to get them paid. You can negotiate to have the seller pay the closing costs, or you can ask the lender to provide loan scenario options that include a lender credit for closing costs. By adjusting the interest rate higher, the lender can offer a credit to cover some or all of the closing costs. This is something you should review BEFORE making an offer. Veterans with a service-connected disability rating will receive a waiver of the VA Funding Fee but still will have the normal closing costs and prepaid expenses.

Below is a link to an interactive Rent vs Own calculator. It will allow you to adjust the purchase price, down payment, and other factors so that you can get an idea of whether buying a home makes financing sense for you.rent vs own calculator

Click Here for the Rent vs Own Calculator

Talk to an Orange County VA Loan Officer

It is always good to do as much research as you can when it comes to buying a home. But to get an accurate assessment of your numbers, talking with an Orange County VA Loan Officer is an important step. You will want to get PreApproved for your VA loan before you begin house hunting. After the initial phone consultation, the VA loan officer will be able to prepare custom loan scenarios that will give you a thorough breakdown of the numbers. If the loan officer is not able to answer your VA loan questions or provide scenarios that clearly give you a breakdown of your numbers, then find someone who can.

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.OrangeCountyVALoans.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.

 

4 Questions Every Orange County VA Loan Home Buyer Should Ask Themselves

Questions Orange County VA Loan buyer should askOrange County Home Buyers who are eligible for the VA loan program have a great benefit available to them when it comes to financing a home. However, there are four questions that every Orange County Veteran home buyer should research and ask themselves before purchasing a home.

  1. What are my reasons for buying a home right now?

Purchasing a home should almost never be purely a financial decision. There are many other reasons that should weigh heavily on the decision to buy a home. Finding the right space for your family and finding a community that you feel safe in are big reasons that buyers should be considering when looking for a home. And of course, owning a home can also act as a major savings investment since a home can act as a major source of stored equity.

When looking to purchase a home, think to yourself “what am I looking for in a home for my family?” and “what am I trying to accomplish by purchasing a home?”. Being able to answer questions like these will help you be satisfied with your reason for whether or not to purchase a home.

  1. What is expected to happen with Orange County property values in the next 12 to 24 months?

Property Values in Orange County are expected to continue rising. Chapman University and Cal State Fullerton economic forecasters are predicting a rise in prices in 2018 anywhere from 5% to 6%. A more conservative study by MBSHighway estimates Orange County price appreciation at 3.78% and 17.34% over the next 5 years.

2018 Orange County home price appreciation

A small inventory of available homes for sale has been a common problem over the past several years. Orange County remains one of the most popular markets in the country so when a home is listed for sale, it usually isn’t around for long. ReportsonHousing.com has reported that the typical home in Orange County will go into escrow after 55 days. Many homeowners are looking to sell but the small inventory of homes for them to potentially purchase scares them into staying put. There are also a variety of financial issues that are causing homeowners to not look to sell their home. Since values have risen, the costs related to closing have also increased which could leave the seller with less money than they would want. If homeowners have been living in their home for a very long time they will likely not want to give up their currently low mortgage and property tax rates. And if they’ve lived in their home a really, really long time, they may run into a capital gains tax consequence if they sell their home.

For Veteran homebuyers choosing the VA loan program, rising property values will be a huge long-term benefit. Since there is no down payment required by the VA program up to the Orange County VA loan limit (currently $679,650 in 2018), any increase in property value results in an exponential level of return from your investment in the property.

  1. What are the expectations for mortgage rates in the next 12 to 24 months?refinance to va loan

Going into 2018, it was widely predicted and expected that mortgage rates were going to climb. There has been a steady growth of new jobs created which has resulted in a growth in wages. This had led to a growth in the inflation rate, which is bad news for mortgage rates. At the beginning of 2018, Fannie Mae/Freddie Mac predicted interest rates would rise to 4.5%.  The Mortgage Bankers Association predicted 4.6%. Realtor.com predicted an average of 4.6%, reaching 5% by year-end.  Mortgage rates are already in the 4.5% range and appear to be heading higher as the economy strengthens. And remember, the property value appreciation is expected even though interest rates are going up. And that leads us to the next question a homebuyer should ask themselves.

  1. What is the Cost of Waiting to buy a home?

Even though property values are higher than they were a few years ago and it might seem like you should wait to purchase a home, waiting could actually end up costing you thousands of dollars. Property values have increased and are expected to continue to increase. Mortgage rates are also rising and expected to continue rising to nearly 5%. While you may be waiting so that you can meet certain conditions to buy a home, the necessary conditions and market environment are also changing. The Cost of Waiting is a way of comparing the current cost of buying a home to the future cost of buying the same home. For example, let’s say a Veteran is looking at buying a home for $600,000 with no down payment using VA financing. Assuming an interest rate of 4.5% (APR 4.71%), the PI portion of the payment would be $3,040. Property taxes, assuming a 1.25% tax rate would be $625. We’ll estimate the homeowner’s insurance at $100 per month. The total PITI is $3,765. If the Orange County Veteran waits 1 year to buy the same home and property values and interest rates have met expectations, the new home price would be between $622,680 and $630,000. We’ll go with the conservative estimate of $622,680. The PI would be $3,342 (5% note rate and 5.22% APR). Property taxes would be $648. The total PITI would be $4,091. That is a $326 payment increase just because they waited a year. When you also consider that if the Veteran bought the home today, then in 12 months he would have paid enough principal into his loan to lower the balance from $600,000 to $590,320 and you begin to really see the power of a Cost of Waiting Analysis. By waiting one year the homebuyer has lost out on over $30,000 in equity and has a payment that is $326 higher.

Getting PreApproved for a VA loan BEFORE you start the home buying process is the first step.It is very important to make sure that the mortgage payment will fit into your family budget. Having money left over for savings, retirement, vacations and going out to dinner now and then is a very important factor in determining what home price to buy. The first thing an Orange County Veteran should do at the start of the home buying process is to talk to an Orange County VA Loan Officer. Your VA loan officer should be able to answer all of your VA loan questions and put together custom VA loan scenarios that will match up with the home price you qualify for, taking into consideration the payment you are comfortable with. You can see a great example of the numbers for purchasing a home in California with VA financing right here.

 

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.OrangeCountyVALoans.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.

Who is Exempt from the VA Funding Fee?

fundingfee

 

The VA Funding Fee is unique to the VA mortgage program. The funds from this fee go directly to the VA to help cover any losses from loans that default. The VA funding fee is an amount equal to a certain percentage of the loan amount which is based on a variety of factors. These factors include the type of military service performed, whether a down payment is going to be paid with the loan, and if this is the first time using the VA program or a subsequent use. The borrower has the option to either pay the funding fee in cash at closing or to include the funding fee into the financed loan amount. It is extremely rare that a Veteran chooses to pay the VA Funding Fee out of pocket versus financing it into the loan, but it is possible.

Funding Fee Exemption

The VA does allow exemptions to the Funding Fee, but only for a few eligible groups. The main group that is exempt from paying the VA funding fee are veterans that have a service-connected disability rating. The other group that is exempt are surviving spouses of Veterans who died in the service, or as a result of service-related disabilities.

 

These two charts below include some addition information regarding how the percentage paid for the VA funding fee is determined. This first chart provides information for VA purchase loans:

Screen Shot 2016-06-21 at 3.30.08 PM

This second chart provides the percentage details for VA cash-out refinance loans:

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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.OrangeCountyVALoans.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.

The Easiest Way to Get Your VA Certificate of Eligibility

COE1

Yes, there is an easy way to retrieve your VA Certificate of Eligibility. Obtaining a Certificate of Eligibility (COE) is an important step in the VA mortgage process. The COE states your eligibility and is validation for your military service for the VA mortgage program. When it comes to getting your COE for your VA loan, you can either request it yourself or allow the lender you will be using for financing to request it.

VA Approved Lender Can Retrieve Certificate of Eligibility in Seconds

If you wish to request it yourself, you can either use the VA Online eBenefits portal, visit a nearby regional loan center or mail in necessary documents. But having an Orange County VA lender obtain your COE for the loan is a faster and simpler process. All you need to do is provide your lender with proof of service (DD214), and they are able to use the Automated Certificate of Eligibility (ACE) portal provided by the VA. Using this automated portal, lenders are able to obtain your Certificate of Eligibility in a matter of seconds. There will be some cases where the automated portal will be unable to make a decision on eligibility but it will still be a faster process for your lender to get the COE.

Providing Proof of Service

Whether you go about getting your Certificate of Eligibility yourself or have your lender do it, you may FAQ on VA loansneed to provide proof of service. Form 26-1880 may need to be completed if your lender is not able to get the COE on the first try. Also, the DD214 will need to be turned in to the lender if the COE is not retrieved on the first try. For the VA loan program, copy 4 of the DD-214 is preferred because it is the most detailed regarding your service. Reserve and National Guard members need to send in their most recent annual retirement summary with proof of honorable service attached. If you have been discharged from active duty and don’t have a proof of service form, you can still submit a request for a COE because in some cases the VA can determine your eligibility based on their own records.

What if your Certificate of Eligibility shows “Zero Entitlement”

There are situations where the COE will show no entitlement remaining. And this is where working with an experienced VA loan officer can save you a lot of money. Having Zero Entitlement does not necessarily mean you can’t buy a home with $0 down payment. Even if your $0 down loan limit is severely limited, it still doesn’t mean VA is not a viable option when compared to other loan programs. Bonus Entitlement can cover a Veteran with no entitlement.

Okay, so now that you have your Certificate of Eligibility, now what? Now it’s time to have your VA lender work on your VA Loan PreApproval. Before you even begin looking at homes you need to find out what loan amount you qualify for and are comfortable with. A good VA lender should be able to put together a detailed breakdown of the numbers for you, making sure you are well prepared for going through with a home purchase.

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.OrangeCountyVALoans.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.

Why choose a VA loan for your Orange County Home Purchase?

valoan

Purchasing a home in Orange County is a challenge for most people, but the VA mortgage program provides a great benefit to Veterans here in Orange County and across the country. The Department of Veterans Affairs acts as an insurer for approved lenders that minimizes the risk of the loan. The VA guarantee also results in lower interest rates compared to other types of financing. It also allows for no required down payment. The VA program has made financing a home significantly easier to obtain for Veterans who may not have been able to get a loan otherwise.

No Down Payment Required

One of the most significant benefits of the VA loan is that there is no down payment required. The Veterans Administration has established 100% financing loan limits based on the county you live in. Not requiring a down payment allows Veterans to save thousands of dollars and still obtain a loan. The 2018 VA Loan Limit for 100% financing in Orange County is $679,650.

No PMI – No Mortgage Insurance

Another major money saving benefit of the VA program is that there is no Private Mortgage Insurance (PMI) required with the loan. When there is a down payment of less than 20% on a loan, most Conventional programs will require PMI. The purpose of this requirement is to protect lenders against the risk of default. The VA mortgage program doesn’t require this because the VA already protects lenders against the risk of default. Not requiring monthly PMI can save Veterans hundreds of dollars per month.

Low VA Interest Rates Compared to other Loan Programsrefinance to va loan

Interest rates are of course a very important factor when it comes to financing a home. Due to the VA guaranteeing VA loans, lenders are able to offer veterans lower rates compared to other conventional loan programs. A lower interest rate can save veterans thousands of dollars annually and over the life of the loan.

Combined with all of these money saving perks, the VA program also doesn’t have a penalty for pre-paying on the principal of your loan. When it comes to buying a home, in most cases the VA mortgage program is by far the best option for Veterans looking to secure financing. The best way to find out how the VA loan program compares to other programs is to call a local Orange County Loan Officer who specialized in VA financing. The Orange County VA Loan officer will be able to prepare a Side by Side Total Cost Analysis of your loan program options, including a complete breakdown of the numbers involved in a home purchase.

 

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.OrangeCountyVALoans.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.

4 Myths about the VA Loan Program in Orange County

ocmyths

The VA mortgage program is a fantastic benefit that has made the Orange County home buying process much easier for our Veterans. However there are a few myths and misunderstandings about the program that sometimes cause veterans to look at different programs when buying a home. Here are 4 of the most common myths about the VA program…

Myth #1: You need perfect credit for a VA loan

The VA acts as an insurer for VA loans to offset the risk of a potential default. VA does not have a minimum FICO score requirement. However, because VA loans are sold on the secondary market, lenders do have their own requirements.  Many VA lenders will look for a credit score of at least 620. That 620 score is an arbitrary limit that is self-imposed by some lenders, so there will be some lenders that will close a VA loan with FICO scores of 580 or even lower. If you are looking for a VA loan and the first lender you visit won’t accept your loan request, it is worth looking to see if you can find a different lender that will accept your request. Also, VA only requires a 2 year wait period after a bankruptcy or foreclosure. And no wait period after a short sale.

Myth #2: VA loans take longer to close than other types of loans

The VA loan program has become a faster and more streamlined process. According to Ellie Mae, VA FAQ on VA loansand Conventional loans both on average close in about 43 to 46 days (2017 statistic). On top of that VA loans are also more likely to close than a conventional loan. Because the VA loan program is a “niche”, Veterans should seek out lenders and loan officers who specialize in the VA loan program. An Orange County Loan Officer who specializes in VA loans should have no trouble closing a VA loan in 30 days or less. (or even 22 days)

Myth #3: VA loans are risky loans

The no down payment aspect of a VA loan may make it seem like it’s a much riskier loan. However, VA loans have the lowest foreclosure rate when compared to other Conventional programs. VA is unique in that not only is the Debt to Income ratio reviewed, but a Residual Income calculation is also reviewed. No other loan program reviews Residual Income in the way that VA does.

Myth #4: VA loans can only be used one time

Many Veterans in Orange County think that the VA loan program can only be used once or your eligibility expires after a certain period of time, which is simply not true. The VA program is a lifelong benefit that Veterans are able to use multiple times. Every Veteran has a “basic entitlement” with the VA loan program, which represents the amount of their loan guaranteed by the VA. Once their first loan has been paid off and their entitlement has been reestablished or restored, they are able to get another VA loan. On top of that, it is important to understand how Bonus Entitlement works and how it is possible for get a VA loan even if your Certificate of Eligibility shows “Zero” Entitlement.

For more questions about the VA loan program or to receive custom VA loan scenarios,  please call Tim Storm at 949-640-3102.

 

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.OrangeCountyVALoans.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.

VA Loan Limits Increase in Orange County, CA for 2018

VA loan limits for 100% financing in Orange County, CA will be higher in 2018, jumping from the 2017 limit of $636,150 up to a new limit of $679,650. This is a fairly significant increase that will help Orange County Veterans buy or refinance homes in Orange County, where homes prices increased in 2017 and seem to be continuing to go up.

$679,650 Purchase Price with Zero Down Payment

Orange County, CA is considered a “high cost” county in California, along with Los Angeles county. Buying a home in Orange County has been challenging as home inventory has not kept up with the number of buyers wanting to purchase a home. And while being able to buy a home for $679,650 with no down payment may sound too good to be true, it is possible for eligible Veterans and Active Duty military.
Orange County has one of the largest populations of Veterans in the country, but many Veterans don’t realize they are eligible for the VA loan program.
Question: What if a Veteran Wants to Buy a Home for more than $679,650?FAQ on VA loans

The VA Jumbo Loan Program Explained

Although $679,650 will help Veterans in Orange County, what happens when the purchase price is above the Zero Down limit? The obvious, but incorrect, answer is the down payment would need to cover the difference between the purchase price and Zero Down limit. But the Jumbo VA Loan program is better than that. A down payment of only 25% of the difference between the purchase price and the loan limit is required. For example, if the purchase price is $779,650, or $100,000 above the Zero Down limit, the down payment would only be $25,000. The VA loan would be $754,650. That is a great deal for Veterans who can afford a higher priced home.

Refinancing into a VA Loan

The increased loan limits do not only effect purchase transactions. They also effect those who want to refinance into a new VA loan to pull cash out. Over the last few years there are many Veterans who bought homes and now would like to pull cash out for home improvements (or to cover debt that has built up on credit cards). The increased limits make it easier for those who were previously right at the 100% loan limit, especially when property values have also increased.
The first step in figuring out how the new loan limits can benefit you is to contact a VA loan specialist located in Orange County, CA. The VA program is unique, and working with a local VA loan specialist who understands what it takes to get a VA loan closed quickly on a high priced home (Single Family or VA approved Condo) is beneficial for the Veteran. The VA loan officer should be able to provide multiple loan scenarios with specific details on the numbers involved in a refinance or purchase.
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.OrangeCountyVALoans.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.

Residual Income and how it can affect your VA loan in Orange County

residual income flagVA Residual Income is…

A safeguard established by VA to ensure you can afford the new loan payment, with any debt you currently have, and still have enough for food, entertainment and housing expenses (because eating dinner is important). The Veteran’s Administration has dubbed this leftover monthly amount VA Residual Income. In order to qualify a Veteran and their spouse for a VA loan, we must first calculate their gross monthly income. Then federal, state, and social security taxes,  determined by the amount of dependents filed on the most recent tax return, are subtracted out. From this we get what is called Net Income, which is the amount taken home each month after taxes. After the net income is determined, the rest of the debts are deducted to reveal the Veteran’s residual income amount. In order below:

  • New proposed house payment (principle, interest, taxes, insurance, and Home Owners Association payment for Orange County VA approved condos.)
  • Maintenance of the house – using a factor of .14 cents per square foot of the home
  • Debts (monthly credit card payments, all installment and revolving accounts)
  • Child Care
  • Alimony or Child Support

A mortgage payment can put a significant strain on family finances. So borrowers looking to start the VA loan process must have a minimum amount of residual income depending on where they live and how many people live in the home.

Residual income must be equal to or more than the amount in the chart:

VA Residual Income by Region on all loan amounts $80,000 and higher
Family Size Northeast Midwest South West
1 $450.00 $441.00 $441.00 $491.00
2 $755.00 $738.00 $738.00 $823.00
3 $909.00 $889.00 $889.00 $990.00
4 $1,025.00 $1,003.00 $1,003.00 $1,117.00
5 $1,062.00 $1,039.00 $1,039.00 $1,158.00
Over 5 Add $80 for each additional member (up to a family of 7)

*For VA loans in Orange County we use the numbers from the West column to determine the Veteran’s residual income for Southern California loans.

How will it influence the loan decision?

Not meeting the residual income requirement should not trigger an automatic denial of a loan, but can be a deal breaker in most cases. This is a non-negotiable requirement that is in place to protect the Veteran from getting into a credit situation they cannot handle. Because each loan candidate’s particulars differ, their entire financial position is reviewed by a VA Direct Endorsed underwriter (the underwriter works for the lender – no VA). Common elements that are methodically reviewed will include your credit score, history and use of credit, employment history, liquid assets and/or down payment (if made, VA Funding Fee may be reduced). All of these areas in addition to the residual income calculation, will either strengthen or weaken the underwriter’s view of the file, and will further impede their decision to extend an approval or denial of the loan.

Truth be told, the bigger the loan amount the lower the chance that residual income will be a factor. And since property values are so high in Orange County, residual income rarely is an issue. A Veteran purchasing a home in Orange County who has a wife and two children will only need $1,117 in Residual Income. In reality, that is not really enough to cover food, clothing, and other potential problems that could arise when owning a home. Still, the Residual Income will always be reviewed to make sure the requirements set by VA are met.

Bottom Line

The Department of Veteran Affairs aims to keep Southern California home buying an affordable experience for all Veterans and their families. By having high 100% financing loan limits, flexible credit and income requirements, and aggressive loan pricing with no monthly mortgage insurance, the VA loan program is the best loan program available for Orange County home buyers. The first step is to talk with a local Orange County VA loan officer who can prepare custom VA loan scenarios and handle VA loan PreApproval.

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.OrangeCountyVALoans.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.