California & VA Loans for Veterans

Homebuyers who are veterans, whether they are active or not, can receive assistance in buying a new home through several mortgage programs created solely for U.S. military veteran borrowers. Both the U.S. Department of Veteran Affairs (VA*) and the California Department of Veterans Affairs (CalVet) offer veteran loan programs to eligible military veterans.

Homebuyers who are U.S. military veterans should speak to a home loan specialist to find out whether they are eligible for either a VA loan* or a CalVet loan.

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CalVet Loan vs VA Loan* – What is the Difference?

The CalVet loan is offered by the California Department of Veteran Affairs, while the VA loan* is provided by the U.S. Department of Veteran Affairs. The main difference between the two programs lies in how the properties are held.

Differences in how the titles of the properties are held

Under the CalVet loan program, CalVet purchases the property the homebuyer desires. They then sell that property to the homebuyer using a contract of sale, which is also referred to as a land contract. This means that CalVet holds the legal title to the house that was bought using the CalVet mortgage and the homebuyer holds the equitable title, which is the right to obtain full ownership of the property.

Under the VA loan program, the homebuyer receives the property’s full legal title and complete ownership right away.

CalVet Home Loans

CalVet loans are given out to eligible veterans through approved lenders by the state of California. The following is a breakdown of all the particulars of a typical CalVet home loan:

A CalVet loan is a loan that is insured by CalVet. This means that borrowers who are eligible for the CalVet loan program are less of a risk for lenders to approve, which in turn makes it easier for eligible borrowers to qualify despite potentially low reserves or poor credit. It also means that eligible borrowers may be able to secure favorable terms compared to other loan options. For example, CalVet loans often do not require a downpayment and are available at low-interest rates.

To be eligible for the CalVet loan program, homebuyers must be veterans of the U.S. military who have served on active duty for at least 90 days, whether during wartime or peacetime. This period of time does not include active duty for training purposes only. Service must have been performed under honorable conditions. Where the borrower entered their service does not matter. National Guard or Reserves veterans are also eligible.

Borrowers will need to meet the federal VA loan’s* standard guidelines as well. This includes having stable income and employment, and having a debt ratio no higher than 41 percent. Although the VA* has no credit score minimum, most lenders require a credit score of at least 600 to qualify.

CalVet loans offer fixed interest rates that vary based on the length of the loan term, the price of the house, and the amount of the down payment paid. Rates, though they are subject to change, are generally lower than current market rates.

There is a limit to how much an eligible homebuyer can borrow using a CalVet loan. Even though the cost of properties fluctuates widely throughout the state, the loan limit in California for a CalVet loan is $521,250 no matter where the property being purchased is located.

CalVet loans are available in 15, 20, 25, and 30-year loan terms* for single, multi-family, manufactured, and condo-style homes. Seller-paid closing costs are limited to 4 percent of the sales price. Some borrowers may not be required to pay a down payment. However, those that are required to pay a down payment (as a result of a low credit score or other factors), will typically pay a small percentage of the home’s price. An origination fee is charged on CalVet loans, as is an upfront funding fee, which can be wrapped into the loan.

VA Loans* in California

VA loans are provided to eligible U.S. veterans (and in some cases, spouses of veterans) through approved lenders by the U.S. Department of Veteran Affairs. The following is a brief look at the details of a standard VA loan in California:

VA loans* are home mortgage options offered by the U.S. Department of Veteran Affairs to veterans, service members, and some military spouses. They do not require down payments, are issued through private lenders, and insured by the VA. Over 22 million VA loans* have been provided since the program was first created in 1944.s here

To be considered eligible as a veteran, borrowers must either have served 90 consecutive days of active service during wartime, 181 days of active service during peacetime, six years in the National Guard or Reserves, or be the spouse of a service member who died in the line of duty.

Although there are no income requirements, borrowers must be able to prove they have secure employment and reliable income. Borrowers must also prove they have enough residual income left over to pay for major expenses. Additionally, borrowers must have a credit score of 620 or above and cannot have a debt ratio higher than 41 percent in order to qualify.

VA loan interest rates tend to be much lower than the interest rates on conventional loans and even FHA loans. They do vary based on the current market as well as on the borrower’s financial history, the duration of the loan term, and the amount being borrowed. Generally, the interest rates fluctuate between 3.75 and 5 percent.*

There are loan limits to how much an eligible borrower can take out using a VA loan*. These limits are based on where the borrower lives in California. Depending on where the borrower is purchasing a house, the loan limit currently ranges from $453,100 to $679,650.

Unlike conventional loans, VA loans do not require a down payment. Even though qualified borrowers may not have to pay a down payment, they also may not be required to pay mortgage insurance, which is typically required. There are funding fees that can be rolled into the overall loan. This funding fee varies. Service members who were disabled during their service do not have to pay a funding fee. Eligible first-time homebuyers are charged a lower funding fee than other eligible borrowers.

Example VA*: Loan amount $300,000, 0% down, APR 4.432% monthly payment without taxes and insurance $1,844.77

Deciding Between a VA* or a CalVet Home Loan

There are a few things to consider when choosing between a VA* and a CalVet home loan. Since CalVet will hold the legal title to the house that was bought using its loan, they will be able to obtain an inexpensive group rate for the homeowner’s insurance that the buyer has to purchase. However, interest rates for CalVet loans tend to be slightly higher than VA loans* since CalVet loans are based on bond funding.

Veteran homebuyers should speak with an expert to determine eligibility and to identify whether a VA loan or a CalVet loan will suit their specific needs best.

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