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

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.



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

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

residual income flagVA Residual Income is…

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

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

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

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

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

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

How will it influence the loan decision?

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

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

Bottom Line

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

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at the Home Point Financial. My direct line is 949-640-3102. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short term. I also prepare a Video Explanation of the your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Why getting Pre-Approved for a VA Loan should be your first step

hungry dogWhy is VA Loan Pre-Approval an important step in the home buying process?

Markets across the country, and undeniably in Southern California, report that the number of buyers on the hunt for a home largely out number the amount of homes currently for sale. In our highly competitive Orange County real estate market we find ourselves in today, getting pre-approved for a VA loan has become an essential component of making an offer on a home. Buying a home in Orange County is not an unobtainable dream for Veterans, but something special is needed to separate them from other house hunters. Being pre-approved by an Orange County VA lender has the power to separate your offer from any others submitted. It’s important to demonstrate to the seller that you are serious about buying, and have been thoroughly vetted to show that you are a responsible candidate. This is an essential step that must be completed prior to shopping for a home. Pre-Approval not only qualifies you for a VA  mortgage, but approves you for the highest loan amount you can acquire with the lender. This gives you a legitimate handle on what you can reasonably afford while simultaneously instilling the confidence needed to stand out and win in the home buying process.

How does getting Pre-Approved work?

To begin the VA loan pre-approval process you’ll need to select an Orange County Loan Officer who specializes in VA financing that you trust to give you a fair deal. Once you’ve found the right fit, you’ll need to complete their loan application and provide them with what Freddie Mac calls the 4 C’s that will assist in the analysis of your situation:

  1. Capacity: Your current and future ability to make your payments (income, job history, employment verification)
  2. Capital or Cash Reserves: the money, savings and/or investments you have that can be sold quickly for cash (bank statements)
  3. Collateral: The home, or type of home, that you would like to purchase (where you would like to buy, in proportion to what is in your price range)
  4. Credit: Your history of paying bills and other debts on time (credit pulled, debts considered, lates’ recorded, ect.)

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”-Freddie Mac’s “My Home” section of website

Once the information is received and reviewed, your VA Loan pre-approval letter will be issued. The letter will show the highest VA loan amount you have been approved to receive from the lender. Your real estate agent can use this to show you homes at or below the amount then use it further when submitting an offer.

cloudy house poster

Bottom Line

Many potential home buyers who are Veterans overestimate the down payment ($0 down to $679,650) and credit scores needed to qualify for a mortgage today. Getting Pre-Approved will give you peace of mind and a clear path to buy the home of your dreams!


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.


2017 Orange County VA Loan Limit Increase

VA has announced the increase of the 2017 VA loan limits.

2017 VA loan limits increase in Orange County, CA



What is the “VA loan limit“?

The Veterans Administration (VA) sets a limit of what a qualified Veteran buyer, with full entitlement, can borrow within each county without making a down payment. They calculate this limit based on the average price a home is selling for in that county. That means that in places like Orange County, CA the limit will be significantly higher than in a county with lower housing prices like Riverside County. This does not mean that you cannot purchase a home at a higher sales price (that would be a Jumbo VA Loan), just that you as the buyer, will be responsible for coming in with 25% of the difference between the loan limit and the purchase price. And if you think about it, that is a very favorable formula for those Veterans who want to purchase a home for a price higher than $636,150. Jumbo VA loans in Orange County, CA are fairly common.

“VA does not set a cap on how much you can borrow to finance your home. However, there are limits on the amount of liability VA can assume, which usually affects the amount of money an institution will lend you.” -Department of Veterans Affairs website

What the loan limit increase means for Orange County and Los Angeles County VA Buyers

This is an encouraging change for many prospective VA qualified buyers that have the income, satisfactory credit, appropriate debt-to-income ratios but may not have the savings for a conventional or FHA loan program. The VA loan limit for Orange and Los Angeles Counties is now at $636,150. That is up $10,650 from last years limit of $625,500. As housing prices increase in this popular area it is a welcome opportunity.

Let’s look at the highest purchase price for the new loan limit, showing a Veteran using benefits for the first time w/ 100% financing:

Purchase Price: $636,150 (<–Anything higher than this, the buyer will need a down payment equal to 25% of the difference between the loan limit and purchase price = Jumbo VA Loan)

Down Payment 0%

Base Loan Amt: $636,150

VA Funding Fee 2.15%: $13,677   – (assuming this is first time use for Regular Military with no Disability waiver)

Total VA LA: $649,827

We see that with the VA loan limit increase this year buying in Orange County or Los Angeles county now becomes a tangible option for more borrowers that are ready to take the leap into homeownership.

Do I have to have a VA funding fee? If so, what is it?

The VA Funding Fee is a set percentage, traditionally combined into the final loan amount, that will go directly to VA to help cover any losses accrued by loans going into default. The fee amount will change to accommodate the borrower’s unique circumstances. Some common factors to consider when calculating the amount would be purchase price, the nature of the borrower’s service, if they’ve had a previous VA loan, surviving spouse of a soldier, and if they choose to bring in a down payment. There are some Veteran’s that will not have a VA Funding Fee, if they receive service connected disability benefits from VA making them Exempt from the Funding Fee. Refer to the tables below to see which funding fee that would apply to your buying situation:

VA Funding Fee for Regular Military Borrowers
Down Payment 1st Use Funding Fee Subsequent Use Funding Fee
None 2.15% 3.30%
5% – 10% 1.50% 1.50%
10% – Higher 1.25% 1.25%
VA Funding Fee for Reserves & The National Gaurd
Down Payment 1st Use Funding Fee Subsequent Use Funding Fee
None 2.40% 3.30%
5% – 10% 1.75% 1.75%
10% – Higher 1.50% 1.50%


VA ICARE Mission

Bottom Line:

VA is certainly staying true to their “I CARE” values as they work to steadily adjust with the economy, and benefit the Veteran and military service members. They will effectively help many families to realize their dream of owning a home with an Orange County zip code this year.



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.