Why the VA home loan is the best financing option for Orange County Veterans

Orange County veterans have a number of financing options when it comes to buying a home. But, the VA home loan is often the best option for those who want to maximize their purchasing power and take advantage of the many benefits that come with this type of loan. In this post, we'll explore why the VA home loan is a great choice for veterans in Orange County and offer some tips on how to get started. So, whether you're ready to buy your first home or are considering refinancing your existing mortgage, keep reading to learn more about the VA home loan!

Home Financing Options for available to Veterans in Orange County

There are several home financing options available to Veterans. Many of these options are available to non-Veterans as well .There are only a few programs that are exclusive to Veterans. Below are programs that should be considered.

  • Conventional Loan - This is typically a Fannie Mae or Freddie Mac loan program. Conventional loan programs allow for down payments as low as 3% up to the base Conforming loan limit ($726,200 in 2023) and 5% down up to the High Balance Conforming loan limit ($1,089,300 in 2023). The maximum debt to income ratios are 50%, and depending on the credit of the borrower the max DTI could be less. FICO scoring is very important on Conventional financing. The interest rate on Conventional financing can be greatly affected by FICO scores below 720. Loan Level Price Adjustments, or LLPA's, adjust the pricing (interest rate) based on a borrowers FICO score, property types, down payment, property usage. A Veteran putting 20% down may consider Conventional financing, especially if the Veteran does not have a VA Funding Fee waiver (for having a service connected disability rating).
  • Jumbo Loan - This type of home loan is similar to a Conventional loan but is meant for home buyers in need of financing that is above the Orange County Conforming loan limit of $1,089,300. The down payment requirements are typically at least 10% and reserves (savings in the bank) after the closing are required on most Jumbo home loan programs. A Veteran may consider a Jumbo loan if they are purchasing a home with a large down payment (20% or more). 
  • Non-QM  - This type of loan is for borrowers who do not fit into typical full income documentation loan programs (Conventional, Jumbo, FHA, VA, etc). Self employed borrowers are an example of someone who may benefit from a Non-QM type program. Non-QM programs allows for deriving income from deposits on bank statements rather than using paystubs and tax returns. The trade off in the interest rate on a Non-QM loan can be quite a bit higher than other types of full income documentation financing. A Veteran may consider a Non-QM loan if they are self employed or have other qualification limitations. (bankruptcy less than 24 months old, buying an investment property, non-warrantable condo)
  • FHA - This is a government loan program that only requires 3.5% down payment up to the Orange county loan limit of $1,089,300. It has fairly flexible income and credit requirements. Many lenders will allow FICO scores as low as 580 (some even lower). The maximum "debt to income" ratio is 57% when run through one of the two main Automated Underwriting engines. The FHA home loan does have an Upfront Mortgage Insurance Premium of 1.75% which is financed into the loan and also has monthly mortgage insurance, which in most cases will remain for the life of the loan. A Veteran may consider using FHA financing if their entitlement for VA financing is being used and is not restored. 
  • VA Loan - This program is only available for eligible Veterans. An Orange County VA lender can retrieve the VA Certificate of Eligibility to verify entitlement for the program. VA allows for $0 down. There are no loan limits for VA loans, which means a Veteran can buy a home at any price with $0 down payment. Also, there is no monthly mortgage insurance, even when the down payment is less than 20% (all the way down to $0 down payment). There is a VA Funding Fee which is financed into the loan. It does not affect the cash to close and it is waived for Veterans with a 10% or greater service connected disability rating. VA does not have a maximum Debt to Income ratio, instead looking closely at the "residual income" calculation. VA is also more lenient than other program when it comes to credit. Bankruptcies and foreclosures need only be seasoned for 24 months. VA is offered by any VA approved lender and interest rates are determined based on the secondary market for Ginnie Mae Mortgage Backed Securities. Rates are not set by VA. 
  • CalVet Home Loan - this is also only for Veterans. In many ways the standard VA loan program will be better for most Orange County Veterans, but there are situations where CalVet is the better option. CalVet will lend on mobile homes on leased land, which VA will not. CalVet has programs for qualified Veterans that allow for $0 down. There are also programs available for some Veterans who may not be eligible for a VA loan but can still get CalVet. Typically, a small down payment is required. The interest rate is set by CalVet and always comes with a 1% Origination Fee, which means the Veteran has less flexibility with structuring a loan with low fees. (versus VA)

A Veterans First Step in the Homebuying Process

The first step in the homebuying process for a Veteran is to speak with a VA lender. While many Veterans will sometimes start by searching for a home, it could be frustrating if they later find that they don't qualify for the homes they are finding. Talk to the lender first. The lender will prequalify and prepare a VA Purchase Analysis which will have a breakdown of the numbers. This leads to PreApproval, which is important to have completed before making offers on homes.

For Veterans in Orange County who are looking for condos (versus a single family detached home), www.OrangeCountyVeteransHomes.com is a website that lists VA approved condos currently for sale

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at Arbor Financial Group. 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

It’s Getting Easier to get a VA Loan offer accepted in Orange County, CA

It's getting easier to get a VA Loan offer accepted in Orange County, CA. The last few years have been tough for home buyers using VA financing. Even though VA is a very easy loan to close, at least for lender who specialize in VA financing, sellers have always shied away from VA buyers. The reason vary and are mostly due to misinformation, old information, and "myths" about the VA loan program. But what made it even harder for VA buyers since the beginning of COVID was the extreme shortage of homes for sale.

Inventory levels have increased, but still have a ways to go.

Supply Shortage = Extreme Sellers Market

When COVID started in early 2020 the real estate market had slowed down. Home buyers and sellers put their plans on hold. Sellers didn't want people walking through their home and buyers were facing their own disruptions. Within months things changed. Employers allowed their employees to work from anywhere. Demand from homebuyers increased quickly, but with very little supply on the market home prices began to rise quickly. To complicate things even more, mortgage rates dropped to record levels, making home financing cheap. This just added more buyers to compete for a limited supply of home. I've heard the real estate market during this period called an Extreme Sellers Market and a Insane Sellers Market. In Orange County and the rest of southern California (and the whole US) there were anywhere from 20 to 40 or more offers on every home. It didn't matter if the home needed work or was in a poor location. Everything sold quickly and for more than the listed price. 

In a normal balanced market the listing price is what the seller is hoping to get for tor the sale of their home. They may get a few offers under or above the listing price and after some negotiations they may even help pay some of the buyers closing costs. But during the Extreme Seller Market of 2020 and 2021 the list price was more of a starting point. A floor price. Bidding wars ensued. The buyers that had the best shot at winning a bidding war were those with a big down payment or even just straight cash buyers. These buyers could waive the appraisal, paying above the appraised value. Plus they could waive the inspections, which is crazy but is what it took in some situations.

And this is why VA buyers had a very difficult time getting an offer accepted. A VA buyer planning to take advantage of 100% financing was usually not in a position to pay more that the home would appraise. If there were 20, 30, or 40 offers, the listing agent needed to quickly eliminate the weakest offers. A 100% financing offer was considered a weak offer in this scenario. Even Veterans who had a fully underwritten PreApproval and were willing to waive the loan contingency faced the challenge of competing against offers from other buyers bidding above what the property would appraise for. 

OC Inventory levels are rising but still have ways to go.

Why is it Now Easier for VA Buyers in 2022

2022 has gotten off to an interesting start. Mortgage rates began rising immediately after the New Year. My May mortgage rates are more than 2% higher than they were in 2021. This has helped to put a damper on demand (the numbers of buyers actively looking to buy a home). Sellers are more willing to consider offers from buyers with low down payments, including VA buyers with $0 down payment. Homes are sitting on the market longer, resulting in increased inventory. There are now fewer offers to compete with. It is still a sellers market in Orange County and southern California, but it's not as bad as it was a few months ago. 

What a VA Buyer should do to be as competitive as possible

There are things that any buyer should do before they begin their home search. And especially before they make an offer. It's even more important for VA buyers to get "all of their ducks in a row". 

  1. Get a Fully Underwritten PreApproval. Each lender seems to have their own definition of what a "fully underwritten PreApproval" is. Most lenders will just have a loan officer do a quick review and run the loan through Desktop Underwriter, which is Fannie Mae's automated underwriting engine. The problem with this is if the loan officer calculates income differently from what a VA underwriter calculates, then the loan could be declined in the middle of escrow. Some lenders, like Fairway Independent Mortgage Corporation, will do a full processing of the loan. Loan Disclosures are sent out as if the VA buyer already has an accepted offer. Income and assets are documented and VERIFIED using Verification of Assets and Verification's of Income. Then the loan is submitted to an underwriter for a full review and approval. Typically a Conditional VA Loan Approval is then issued. The non-property related conditions are then cleared. This is known as the Fairway Advantage Approval Program. The Fairway Advantage take the stress out of the homebuying process.
  2. Cash Guarantee. Fairway Independent Mortgage includes a Cash Guarantee to the seller when the buyer has gone through the Fairway Advantage program. Fairway guarantees the loan will close, and on time, or Fairway will either buy the property to close the transaction or will issue the seller a $10,000 check if the seller wants to keep the property and try to sell again. The guarantee is triggered if financing falls apart due to a financing reason. For example, if the buyers loses their job in the middle of escrow and is no longer qualified to buy the home, Fairway will buy the home. If the buyer purchases a car and takes on a big payment and no longer qualifies (this would not be smart on the buyers part, but you never know) Fairway will buy the property. If the appraisal comes in low then Fairway will either buy the property for the lower of the appraised value of the purchase price. If the seller wants to put the home back on the market, Fairway will give the seller $10,000. This is Fairway Mortgage's way of getting the point across that it stands behind it's Fairway Advantage home buyers.
  3. Get a VA Purchase Analysis before making an offer. It is important to know the numbers before making an offer. The VA lender should be able to present the numbers in a clear and concise manner so that the buyer has a very accurate idea of what the full payment will be including taxes, insurance, and HOA dues. And the VA Purchase Analysis should also have a fairly accurate estimate of how much money will be needed to close escrow. Even though VA does not require a down payment, there are still closing costs and Prepaid expenses that need to be covered. Knowing how much will be needed will eliminate surprises at the closing table.

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

VA Loan Program is not just for first time home buyers

Orange County Veterans, home buyerMany Orange County, CA veterans think that the VA loan program is only for first time home buyers. Or is for low income home buyers. In Orange County especially, that is not even close to the truth. In the OC, where the 100% financing limit for a VA loan is $668,750 in 2013 *, there are many second and third time users of the VA program.  *2014 limit is $687,500

VA offers Veterans a great way to finance a home. Along with no down payment, there are several other advantages to VA financing.

  • VA allows for higher debt to income ratios than most other types of financing
  • VA more flexible guidelines when it comes to credit. Issues like bankruptcy, short sales, and foreclosure are more quickly forgiven with VA financing than other types of financing.
  • There is no monthly mortgage insurance on the VA loan program, even though the down payment requirements are low to $0. Other programs, like the FHA program, require the borrower to pay a fairly high mortgage insurance payment each month. This saves veterans money every month versus other loan programs.
  • VA does allow for financing above the counties $0 loan limit. This is known as a Jumbo VA loan. The Orange County 100% limit is $668,750 in 2013.  *2014 limit is $687,500

How to get Prequalified for a VA Loan in Orange County, CA

Getting prequalified for a VA loan is fairly easy. The most important step is to find an Orange County loan officer who specializes in VA loans. Probably more than any other type of loan program, working with a loan officer who is very familiar with VA guidelines can save time and stress. The loan officer should be able to provide custom loan scenarios. And meeting the loan officer is also possible when you choose someone who is local to you.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Emery Financial. Direct line at 949-640-3102. www.OrangeCountyVALoans.com

VA Home Loans versus CalVet | Which is Better for California Home Buyers

There are several differences between the VA home loan program and the Calvet home loan program. California veterans should take time to learn about both programs to determine what is best for them. There are times when the Calvet program is better and other times when the VA home loan program is better. Below are some of the differences, and why at this time the VA home loan program is better for most California veterans purchasing a home.

CalVet vs VA: Who is the Lender?

VA home loans are guaranteed by the Veterans Administration, but the actual loan is made by banks and mortgage banks. The VA’s guarantee on the loan encourages lenders to offer favorable terms to veterans, resulting in low interest rates. With the CalVet program, the state of California is the lender. California uses bond funds to lend to any virtually any Veteran who wishes to purchase a home in California.

Va vs. CalVet | Down Payment Requirements

The loan limits for 100% financing on a VA loan in Californiavary by county. For example, in Orange County and Los Angeles County, the 100% financing limit is $679,650 (2018 loan limit). California VA loan limits are very high. It is possible to go above $679,650 by coming in with a small down payment. The down payment is equal to 25% of the difference between the 100% financing limit and the purchase price.

The CalVet loan limit in California is $521,250, including the the financed Funding Fee. In some California Counties that limit is higher than VA, and in some counties it is lower. CalVet offers three basic programs: a 100% financing program, a 97% program, and a 80/20 program. There are subtle differences between these programs which need to be understood. While the 100% program allows the VA Funding Fee to be financed into the loan, just like the standard VA home loan program, the 97% program requires it be paid in escrow. This adds a considerable expense, on top of the down payment requirement.

Interest Rates for VA and CalVet home loans

Interest rates will fluctuate for the VA home loan program. This is an area where the VA program can easily beat out the CalVet program, and why the VA program has been more popular over the past few years. In 2010, VA home loan interest rates and been in the 4.5% to 5.5% range. The CalVet interest rates currently range between 5.75% and 6.2% according to information posted on their website. Because CalVet interest rates are based on Bond Funding, their interest rates do not quickly fluctuate.

Restrictions on the CalVet program

The CalVet program functions differently than the VA home loan program. With most mortgage programs, including the FHA, VA, and Conventional home loan programs, the California home buyer holds title to the home. The lenders holds the lien. Calvet uses a Contract of Sale for the financing instrument. This means CalVet actually holds title. There are advantages and disadvantages to this. It makes it difficult to refinance or get a second mortgage, whether its to take advantage of low interest rates or improve the home. An advantage is that CalVet is able to get group insurance rates for home owners insurance. In some areas where home owners insurance is difficult to get this can be beneficial. VA financing on condos in California can be tricky with either program. The condo project should be on the VA approved condo list.

When beginning the process of buying a home, it is important to find a California VA loan expert who understands the VA loan program and can quickly PreQualify and PreApprove you for a home loan. Finding someone who can answer your questions and provide customized loan scenarios is important.

Authored by Tim Storm, an Orange County, CA Loan Officer specializing in VA Loans. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation NMLS #2289. My direct line is 714-478-3049. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

tstorm (at) ochomebuyerloans.com


VA Home Loans Remain Unchanged for Orange County Borrowers

While other loan programs continue to go though multiple guideline changes, the VA loan program has been mostly unchanged for Orange County VA home loan borrowers. FHA and Fannie Mae have recently tightened their guidelines. VA has not.

FHA and Fannie Mae Tighten Condo Financing Guidelines

FHA and Fannie Mae recently tightened their guidelines for financing on condominiums. FHA, which has an extensive approved condo list in Orange County, recently started requiring that projects on the list be “recertified”, a costly and time consuming process. Also, projects that were not previously on the list will need to go through a full review and approval process, which will take even more time and more cost. Plus, there is no guaranty that a project will be financeable. Even Fannie Mae is requiring a much more thorough look at condo projects. Each lender has their own approved condo list for Conventional loans, making lending on condo’s very tricky. VA is the only program that continues to have a valid project approval list. This is a big advantage for Orange County VA home home buyers interested in a condo. If they specifically look at VA approved condo projects, they will have an advantage over FHA and Fannie Mae home buyers. The key is to know how to find Orange County condo projects on the VA approved list.

Fannie Mae Lowers the Debt to Income Ratios

In December 2009 Fannie Mae decreased the debt to income ratios used to qualify borrowers. Although the “guideline” ratios rae still 28/36, it was possible to get a home buyer approved with a debt ratio of 60% in some cases. Now, Fannie Mae will not allow ratios over 45%, unless there are strong compensating factors. In ases with strong compensating factors, they will allow a ratio of 50%. This dramatically effected the amount borrowers can qualify for. VA guidelines remain unchanged, with some borrowers getting approval with debt ratios as high as 60%.

FHA Increases the Upfront Mortgage Insurance Premium

FHA increased the Upfront Mortgage Insurance Premium to 2.25%. The UFMIP is similar to the VA Funding Fee, which on a typical transaction is 2.15%. The great thing about VA loans is there is no a Monthly Mortgage Insurance, which FHA has. Fannie Mae also requires Mortggae Insurance if the down payment is less than 20% of the property value. There is talk that FHA may increase the Monthly Mortgage Insurance beyond the current .55%. (versus VA, which is 0%).

So while all of these changes have taken place, the VA loan program has held steady. Orange County mortgage rates on VA loans are also very low, as are interest rates for most programs. Compared to Fannie Mae, VA is actually very competitive. Fannie Mae has “pricing hits” that begin when the loan to value is over 60% and when the FICO is less than 740. The pricing hits can really add up if the FICO score drops under 660, or if the property is a condo over 75% loan to value. If the loan is a cash out refinance, be prepared to pay extra for a high rate. VA does not have pricing hits and will even allow a VA cash out refinance to 90% of the properties value. Imagine the following scenario: cash out to refinance on a condo for a borrower with a 660 FICO score at 80% loan to value. (Fannie Mae won’t even go over 80% on a cash out refi, and FHA won’t allow over 85%.)

The first step an Orange County VA eligible home buyer needs to take is to talk to an Orange County VA lender who can answer questions and prequalify you for a loan before you begin looking at homes.

Authored by Tim Storm, an Orange County, CA Loan Officer MLO 223456– Please contact my office at Emery Financial Group for more information about an Orange County, CA home loan.  877-786-4243 x 7.


Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com