What Does it take to buy a $700,000 home in Orange County with a VA Loan?

What does it take to buy a $700,000 home in Orange County with a VA Loan? The biggest hurdle for most first time home buyers is the down payment. But for Veterans eligible to use the VA loan program, the down payment hurdle is removed. VA allows Zero Down payment with no limits to the purchase price. However, there are still closing costs to contend with. And the Veteran does need to have enough income to qualify for the VA loan, along with decent credit. 

Let's take a look at what the approximate payment would be for a $700,000 home price assuming a VA interest rate of 3.5%. Interest rates can change daily, so this is just meant as a guide to the range of numbers to expect. We'll also look at the estimated funds to close and the estimated income that would be need to qualify for the VA loan.

Below is a video that will talk you through the numbers for a $700,000 purchase using a VA loan with $0 down payment.

The Payment Breakdown = PITI

Below is a screenshot of the payment breakdown for a $700,000 purchase. There are four primary components to a mortgage payment, also know as PITI.

  • P = Principal
  • I = Interest
  • T = Taxes (property taxes)
  • I = Insurance (Homeowners Insurance)

As shown below the P&I is $3,256. The property taxes are estimated to be $729. The Homeowners Insurance is estimated to be $145. The total PITI is $4,140. Also, if the property is a condo then you would need to add the Homeowners Association Dues to the over all payment. The typical HOA dues for an Orange County condo is in the $350 range. One more important fact since we're talking about condos. If you are looking to buy a condo in Orange County using the VA loan program then you will need to make sure the condo is in a "VA approved" condo complex. There are two great websites that will specifically help Veterans find VA approved condos in Orange County.

www.OrangeCountyVeteransHomes.com

www.OrangeCountyVACondos.com

How much income is needed to qualify for a $700,000 VA home purchase?

VA guidelines require a review of the Veterans income. The Debt to Income ratio guideline for a VA loan is 41%. This means that 41% of a Veterans total income, or "Gross Income" BEFORE taxes, can go towards the housing payment AND any other installment payments and minimum payments on credit cards. Child care is also included in the expense side of the equation. If we assume a Veteran has no other payment and is trying to qualify for a $4,140 PITI mortgage payment, then their Gross Income will need to be $10,097. However, 41% is just the guideline. It is not unusual to get loan approval even when the DTI is 55%. This means it's possible the Veteran would only need $7,500 per month or $90,000 per year to qualify. But remember, if there is a car payment or other monthly payments, then the income will need to be higher.


How much money is needed to buy a $700,000 Orange County home with a VA Loan?

This is sometimes a surprise for first time VA buyers. Even though there is no down payment, there are closing costs and prepaid expenses to contend with. The escrow and title companies still need to get paid, along with the appraiser and notary. PrePaid expenses include mortgage interest, prorated and "impounded" property taxes and insurance. Altogether, the amount of money needed to close on a $700,000 purchase can easily end up being between $10,000 and $15,000, depending on several factors. There are ways to dramatically lower the amount needed to close by adjusting the interest rate or negotiating to have the seller pay closing costs. Currently we are in a Sellers Market, meaning that Sellers have the upper hand in negotiations. Getting a seller to pay for closing costs in Sellers market will be difficult. So working with an Orange County VA lender who knows who to structure and present your options will be important. 

A frequently asked question comes up about the VA Funding Fee. Veterans who have a minimum 10% service connected disability rating will not have a VA Funding Fee. Otherwise, the Funding Fee is financed into the VA loan. The amount of the fee depends on several factors, including whether it is the first usage of VA financing or "subsequent usage". Also, it the VA Funding Fee is slightly different for Reserves/National Guard. A down payment of 5% or 10% will lower the VA Funding Fee. What is important to understand is that even a 100% disabled veteran will still have the normal closing costs associated with a transaction. 

Request your FREE VA Purchase Analysis

The first step in the home purchase process is to request a Purchase Analysis. In this case, a VA Purchase Analysis. The VA Purchase Analysis will give you a clear and concise breakdown of the numbers you need to know, side by side. 

FREE VA Loan Purchase Analysis

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

Buying an Orange County, CA Home with a VA Loan in 2022

Buying a home in Orange County is super competitive in 2022 no matter what type of financing a home buyer is using for the purchase. But for those Veterans using a VA loan in Orange County to purchase a home, they will find the competition to be extra challenging. What is it that makes it more difficult to use the VA loan to buy a home versus other types of home loans?

Why are Sellers are Afraid of the VA Loan Program?

I've been closing VA loans in Orange County, CA for over 30 years. When I first got in mortgage lending the VA loan program was not widely used, since only Veterans, Active Military, and surviving spouses (in some circumstances) have access to the program. But because of how the market was in 1990, it wasn't that difficult to get an offer accepted for a Veteran using the VA loan to buy their home. Still, it was generally accepted and expected that the seller would pay for most of the Veterans closing costs and that their may be repairs required by the VA appraiser (or termite inspection) that would need to be completed prior to the closing of the loan. Back in the 90's, before the internet took hold, it took longer to close a VA loan. Retrieving the Certificate of Eligibility was hard work. More than once I personally drove from Orange County to the downtown Los Angeles VA office to file paperwork at "the window" and get the paper COE for a client. Although compliance wasn't as difficult then as it is now, VA loans just took longer to close than other types of loans. Another important restriction that got in the way of the VA loan program was the loan limit for $0 down financing.  

That was then and this is now. That VA loan limit thing made it very hard for a Veteran to buy a home in Orange County prior to 2008. In 2005 the median home price in Orange County was $719,619. The VA loan limit was was $359,650. Needless to say, there were a few years there where the VA loan program barely existed in Orange County because of high home prices. Veterans were bypassing the VA loan program altogether and instead using risky "80-20" programs, along with anyone else who wanted to buy a home with $0 down payment. After the mortgage meltdown in 2006, changes were made and the VA loan limits were dramatically increased. By 2009 the VA loan limit for $0 down financing in Orange County was $737,500. The median home price in Orange County had dropped to $544,300. This made the VA loan program more popular than ever, at least in Orange County.

VA Loan Limits removed in 2020

2020 was a huge year for the VA loan program. There were now no restrictive loan limits for 100% financing using the VA loan program. In Orange County, where the Median home price reached $950,000 in 2020, being able to buy a home with no down payment, even if the price were $1,500,000 or more, meant the VA loan program was again the best financing option for nearly any Veteran buying a home. But as the market heated up, it became more difficult to get an offer accepted from a Veteran using the VA loan. There are several reasons for this, but the most typical goes back to old, commonly held, beliefs about the difficulty in closing a VA loan. Below are a few common "myths" about the VA loan program.

  • Seller has to pay the Veterans closing costs. This is not true. Back in the day (like in 1990) it was very common for sellers to pay the VA buyers closing costs, but it wasn't mandatory. The rules for "non-allowable" costs eased and became more clear in later years. While a lender does need to be cognizant of certain fees, it's important to understand the 1% rule. Basically, fees that VA considers "non-allowable" need to be less than 1% of the loan balance. The biggest fees included in the 1% calculation include the escrow fee, notary, and lender Origination fees. Fees that are not included are Title, appraisal, recording, and discount points. The escrow fee tends to be the biggest "non-allowable" fee. The formula most escrow companies use to determine their fee does not result in anything near 1% of the loan amount, unless the purchase price is under $150,000. But that doesn't happen in Orange County, so we will rarely if ever need to worry about hitting the 1% cap. 
  • Seller has to pay repairs. This is not true. VA is just like any other type of financing when it comes to paying for repairs. While VA does require a clear termite report, it does not require the seller pay for the repairs. In a competitive real estate market, a Veteran can choose to pay for repairs. It's all negotiable. 
  • VA Appraisers are conservative.  Not true. VA appraisers are also Conventional loan appraisers. The valuation process is the same for a VA appraisal as it is for any other type of appraisal.
  • Veterans have no "skin in the game" making their offer less likely to close. This is definitely not true. The VA loan program has for years had the lowest default rate of any other loan program. And why should a seller be concerned about the percentage of down payment when they will get their money whether it comes from a VA loan or someone paying cash. If the Veteran is working with a local Orange County VA Lender and has gotten a Fully Underwritten VA Approval, their offer is as solid, if not more solid, than any other offer.
  • VA Loans take longer to close. I'll say this is not true, but there are loan officers and lenders who don't close many VA loans, which can make the processing of a VA loan challenging. For an Orange County Loan officer who specializes in VA loans, the VA program can be the easiest loan program to close. And fast. VA is more flexible than other programs when it comes to credit, debt to income ratios, and of course down payment. There are less hurdles to closing a VA loan than any other type of Conventional financing. Any lender who tells you different is not a VA specialist.


The Challenge of Buying a Home with a VA Loan in a Super Hot Sellers Market

Buying an Orange County home in 2022 is a challenge no matter what type of loan you are using. Sellers are getting anywhere from 5 to 50 offers on their homes in the first week on the market. Many times the winning bids are those who are willing to pay more than the potential appraised value, which can quickly rule out any buyers with less than 10% down. This does make it extra challenging if a VA borrower is planning on $0 down financing. So how does a Veteran in Orange County compete?

How Veterans can make a Competitive Offer in Orange County?

There are strategies that will help make a VA offer more competitive than other offers. For most of 2021 and into 2022 we have been in an extreme "sellers market" due to a big imbalance between the supply of homes available for potential home buyers and the number of buyers who want to own a home. Here is what you need to do to compete with other buyers who may be less prepared.

  • Get Fully Approved BEFORE you make an offer. This is very important. Do not wait until you've already found a home to get PreApproved. And if a lender gives you a "PreApproval" without reviewing your documentation then just know that you are NOT PreApproved. And if a lender gives you a PreApproval without verifying income or assets and having an underwriter sign off on the approval, then you are not actually PreApproved. To make sure you are fully PreApproved, you will want to go with a lender who will send your loan into an underwriter. Not many lenders will do this. Fairway Independent Mortgage Corp does a full approval, which is known as the Fairway Advantage. If you have a fully underwritten Fairway Advantage approval then you will be in position to remove the loan contingency immediately.
  • Offer a shortened inspection contingency. Buyers will use the inspection as a way to back out of a transactions. If you are serious about wanting a home then offer a short inspection time period. Get the inspections done in the first few days of escrow.
  • If possible, offer at least a partial appraisal waiver. While someone who has a large down payment may be able to waive the appraisal contingency, even someone with a minimal down payment or no down payment can potentially set a "floor" for the appraised value. For example, let's say the offer price is $710,000 but the potential appraised value is $700,000. Maybe even lower. If the Veteran has $10,000 available then they could adjust their offer to allow for an appraisal as low as $700,000 even though their purchase price will be $710,000. If the appraisal comes in at $690,000 then the buyer still has an "out" since it was not a full appraisal waiver. This is also known as an appraisal gap strategy.
  • Allow the seller to "rent back" for free up to 60 days after closing. This can put your offer at the top of the pile. The seller is going to be a buyer on their next home and will be dealing with the same hot market that you are dealing with. They may not have a new home lined up yet. By offering a seller "rent back" for free or a minimal dollar amount it will allow the seller to make non-contingent offers and potentially close very fast on their next purchase. I've had several VA clients who have used this strategy to get their offer accepted. The maximum time period for a rent back is 60 days since that is the time period allowed before the buyer has to move into the home to meet the "owner occupancy" requirement for a VA loan. This is true of any Conventional loan where the home is a Primary residence.

Buy your Home Before Values go Higher in 2022

Property values are expected to increase in 2022 by between 5% and 9% depending on who you are listening to. This means that a home valued at $700,000 today will be valued at $735,000 - $763,000 in 12 months, Why wait? Find out what the numbers look like for your potential purchase using the VA loan program. Have us prepare a VA Purchase Analysis based on what you qualify for, what your payment comfort level is, and what fit's in your budget.

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

Orange County Real Estate Values and Supply and Demand

The real estate market is going through some changes that are affecting buyers and sellers, but experts say one thing remains constant: purchasing a home still makes sense.  Rapidly rising housing prices has pushed many prospective homeowners back onto the fence. Typical among first time buyers, rising prices puts them on the sidelines until their next rent increase. Eventually they realize that they just need to bite the bullet and buy a home, especially while interest rates are still low.

However, demand isn’t the real issue. Instead, it’s the lack of supply (homes available for sale). An article from the Wall Street Journal shows this is true for new home construction:

Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.”

If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for First Americanexplains:

“There’s a lot of conversation around rising prices and falling quantity in the housing market, and there’s this concept, or this idea, that it’s a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.”

Instead, we’re seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by CoreLogic:

  • January: 10%
  • February: 10.4%
  • March: 11.3%
  • April: 13%
  • May: 15.4%
  • June: 17.2%

(July numbers are not yet available)

There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.


1. Is Affordability really a problem right now?

While many people say that affordability is a problem, it's really not a problem for most home buyers. Interest rates have remained low through 2021 which has helped affordability. Even with the increase in property value since the beginning of 2020, mortgage payments are more affordable now that at almost any time since 1990. 

In the Long Run, Owning is Better for your Net Worth than Renting


2. Interest rates are still low. But what about next year?

Interest rates have remained extremely low since COVID took hold in early 2020. But now, as we enter the 4th Quarter of 2022, the Federal Reserves has plans to begin raising short term rates. And more importantly for long term mortgage rates, the Fed will begin "tapering" their purchases of Mortgage Backed Securities. Tapering is bad for mortgage rates. Inflation, which is another concern, is also bad for mortgage rates. As the economy recovers from the effects of COVID and the supply chain problems persist, inflation will be a concern. The Mortgage Bankers Association predicts mortgage rates will rise to 4% by the end of 2022. The MBA expects the average 30 year rate in 2021 to end up being 3.1%. On a $500,000 loan amount that difference in interest rate is equal to a $252 payment difference. That payment difference is roughly $50,000 in purchasing power. Why wait?

3. Home Price Appreciation forecast is 7.9%

Even with interest rates expected to rise, homes prices are still expected to appreciate by 7.9% in 2022 according to Fannie Mae. Even though the media has been reporting a slow down in home sales it's important to understand that a slowdown in sales is not the same thing as a drop in real estate prices. Zillow expects prices to increase 11.7% over the next 12 months. The California Association of Realtors expects the median home price in California to increase 5.2%. 

Cost of Waiting

The Cost of Waiting is a calculation that compares buying a home today versus waiting and buying at a later date. The reasons for waiting include wanting to save more down payment, paying off debt, improving credit and FICO scores, or just waiting out the market and waiting to see if there is a "crash". Let's assume you are looking to buy a home for $600,000.You have 5% down but want to save another 5% before buying a home. So you have $30,000 and feel the need to save another $30,000 so that your Private Mortgage Insurance is cheaper. The total PITI would be in the $3,300 range with a 5% down payment and assuming Fannie Mae's average rate of 3.1% for 2021. The loan amount would be $570,000.  In 12 months you would have paid the balance down to $558,296 and your property would be worth $632,000. You would have $73,000 in equity in the home. 

But if you waited 12 months so that you would have 20% down then this is what that would look like. The home you're buying is now $632,000. 10% down gives you a loan amount of $568,800. The PMI would be less since we are now assuming a 10% down payment, but interest rates are higher using the 4% forecast from Fannie Mae. The total PITI ends up being $3,495.

By waiting 12 months, the mortgage payment is $195 higher. There is 10% less equity. You paid another year of rent. And you're stuck for a 4% interest rate. It's also interesting to consider what would happen if property values did drop 10% but interest rates were at 4%. If the $600,000 property was bought for $540,000 with 5% down in 12 months when rates are 4%, the total payment would still be $3,220. The risk in waiting to buy definitely seems to be in favor of buying now versus waiting to buy later.

VA Loan PreApproval

The most important step in the home buying process is to get PreApproved. Veterans have access to the best mortgage program out there, the VA loan program. VA allows for Zero Down Payment to "any" purchase price, as long as the Veteran has enough income to qualify for the payment. Working with an experienced VA Loan Office is critical in making sure the buyer understands the numbers and gets a solid PreApproval.

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

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

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.