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:

Screen Shot 2016-06-21 at 3.30.28 PM

 

 

 

 

 

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.