VA Purchase Loans | Orange County, California VA Loans - Tim Storm

What FICO Score is Required for a VA Loan?

October 29, 2013 by Tim Storm

A common question by Orange County veterans interested in using VA financing to purchase or refinance a home is “what is the minimum FICO required?” The answer to this question can vary from lender to lender. Many lenders require a minimum of 620. But there are lenders who will allow FICO scores as low as 580 or lower.

Minimum FICO Scoring Tied to Loan Amount and Purpose

VA lenders may adjust the minimum FICO score depending on the loan amount and purpose of the loan. For example, many lenders will allow a minimum FICO of 620 only when it is a purchase loan and the loan amount is $453,100 or less. A loan amount greater than $453,100, which is considered a “high balance” is common in Orange County, may require a minimum FICO of 640. A refinance may have a different set of requirements. A refinance of a Conventional loan to a VA loan where the loan amount is less than $453,100 may require a FICO score of at least 640, while VA loans greater than $453,100 require a minimum FICO of 660. The VA loan limit for 100% financing in Orange County in 2018 is $679,650. Loan amounts above $679,650 are possible but would require some equity or down payment. A VA loan above the county limits for 100% financing is considered a “Jumbo VA Loan.”

Other VA Loan Credit Requirements

Overall, VA is one of the most flexible loan programs when it comes to credit. A Veteran can get a $0 down VA loan in Orange County only two years after a bankruptcy or foreclosure. Most loan programs require at least 4 fours seasoning after a foreclosure, if not closer to 7 years. And more down payment. But with VA, the 2 year requirement makes it a very flexible program. There is no seasoning requirement for a short sale.

How is the FICO Score Determined

FICO, which is the acronym for Fair Isaac Company, is a program which is used by the credit bureaus to determine a borrowers creditworthiness. There are different versions of FICO depending on what a person is financing. The FICO score shown on a credit report at a car dealership will be different than the FICO score pulled by a lender. There are different factors that a home lender deems to be important versus what a car lender will think is important. Also, there are other types of scores that are readily available to consumers, including the Vantage Score. However, the only way to get your actual FICO score that a mortgage lender will see if to go to a mortgage lender.

Get PreApproved for a VA Loan

One of the biggest reasons why it is so important to get PreApproved for a VA loan prior to searching for a home is because of the credit report. Even the best borrowers can sometimes have a surprise on their credit report. Finding this out and clearing any credit report errors prior to finding the home of your dreams is important if the closing is to be a smooth transaction. This is why the first step for a Veteran in Orange County who is thinking of using VA financing to buy a home should always be to call a local Orange County VA lender.

Authored by Tim Storm, a California Mortgage Loan Officer MLO 223456 – Please contact my office at the Home Point Financial (NMLS 7706). Direct line at 949-640-3102. www.OrangeCountyVALoans.com

Filed Under: VA Mortgage, VA Purchase Loans Tagged With: credit score, fico score, orange county va loan, VA Loans

VA Loan Program is not just for first time home buyers

August 27, 2013 by Tim Storm

Many 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

Filed Under: VA Purchase Loans Tagged With: first time buyer, orange county home buyer, VA Loan

Why Get PreApproved for a VA Mortgage?

August 11, 2013 by Tim Storm

The real estate market in Orange County, CA is hotter than its been in years making mortgage PreApproval more important than ever. There are more people looking to purchase a home, and all price ranges, than at any time since before 2008. This has lead to competition for the limited supply of homes on the market. So who is getting their offer accepted?

Mortgage PreApproval is more important than ever!

The more prepared a potential homebuyer is the better chance they have of getting an offer accepted. What does it take to be prepared for a home purchase in Orange County, which is such a competitive market? The first and most important step is to get PreApproved. Homebuyers need to know BEFORE they start searching for a home what they can actually afford. They should have a budget in place and have a good idea of how much total mortgage payment they can afford.

The mortgage payment is made up of more than just the principal and interest. Buying a home also means paying property taxes and home owners insurance. And if the property is in a Planned Unit Development or is a condo, then Home Owners Association dues also need to be factored in. The best way to know these numbers is to consult with a local Orange County mortgage lender.

What your Orange County, CA VA Specialist Loan Officer Can Do for You

A good Orange County loan officer who specializes in VA financing will be able to not only answer questions regarding the loan and home buying process, but also prepare custom loan scenarios that will have the full details of a real estate transaction. The loan scenarios should show the purchase price, loan amount, required down payment, closing costs, and prepaid expenses. The scenarios should also show the full payment breakdown.

The VA specialist loan officer should also be able to show the home buyer scenarios that the buyer actually qualifies for, at least based on the initial verbal consultation. To get PreApproved the lender will need the borrowers income and asset documentation. Items such as recent paystubs, two years W2’s and tax returns, and bank statements. The lender will need a completed loan application and will also run credit.

Not all home buyers are financially ready to buy. But the PreApproval process will give them the road map to getting prepared. Whether they need to work on their credit, save more money for down payment, or adjust to the type of home they are shopping for (or neighborhood), just knowing for they can buy is very important.

Filed Under: VA Purchase Loans Tagged With: va loan preapproval

Who Pays Closing Costs on VA Loan in Orange County, CA

May 15, 2013 by Tim Storm 2 Comments

A common myth with VA loans in Orange County is that the seller is required to pay some or all of the closing costs on behalf of the Veteran buying the home. This is not true. As a matter of fact the seller is not “required” to pay anything for the Veteran. Sadly, this misconception is held by many Orange County real estate agents and can make it difficult for a Veteran to get their offer to buy a home accepted in a multiple offer competitive bidding situation.

What about “Non allowable” Costs?

The reason for the confusion in regards to closing costs stems from the fact that there are costs which the Veteran cannot pay. Certain lender fees, escrow closing fees, and the termite inspection fee cannot be paid by the Veteran. Does this mean the seller has to pay them? No, they do not. As a matter of fact there are situations where the Veteran is allowed to pay these “non allowables”.

When can the Veteran Pay “Non Allowable” Costs?

According to VA guidelines the Veteran can pay a 1% Origination Fee. However many VA lenders do not charge an Origination Fee. In the case that the lender does not charge an Origination Fee, or at least the full 1% Origination Fee, then the Veteran is allowed to pay up to 1% of the loan amount in what would have been “non allowable” costs.

Orange County, which tends to have higher priced homes than other parts of California, has seen wide usage of the VA loan program. An Orange County Veteran can buy a home for a price as high as $668,750 (2013 Orange County VA loan limit) with no down payment. Let’s say that a Veteran buys a home for $500,000 with no down payment. A lender who doesn’t charge an origination fee would allow for the buyer to pay $5,000 towards what would have been “non allowable” closing costs. (1% x $500,000). In most cases the non allowable closing costs will be less than 1% of the loan amount, at least in Orange County where home prices are high.

What if the Veteran Doesn’t Want to Pay Closing Costs?

There are often times situations where the Veteran doesn’t want to pay closing costs and the seller doesn’t want to either. If there are multiple offers on a home it can be difficult for Veteran home buyer to have a seller pay closing costs if competing offers are not asking for costs to be paid. This is where knowing the options available is important. Most lenders have the ability to adjust the rate up slightly and then cover some or all of the closing costs. So yes, a VA NO NO (no down payment and no closing costs) is possible even when the seller and Veteran pay nothing towards closing costs. You just need to be working with a local Orange County VA lender who understands and can provide you with several loan scenarios to choose from.

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

Filed Under: VA Purchase Loans Tagged With: closing costs, non allowable closing costs, VA Loan

What Your Real Estate Agent Needs to Know about VA Financing | Orange County, CA

June 17, 2012 by Tim Storm 1 Comment

(Updated Feb 19, 2018) Although VA financing is a great way to purchase a home in Orange County, CA, it is still used rarely enough that Orange County real estate agents are unfamiliar and even uncomfortable with VA buyers. It is not uncommon for a VA buyer to feel like they are being pushed aside if there are multiple offers on a property. For this reason, it is important that the real estate agents who choose to work with a VA buyer are familiar with certain aspects of VA financing.

VA Financing in Orange County is Easy! Trust Me

VA financing is actually fairly easy compared to other types of financing.

Credit and FICO scoring – VA is very flexible, with most lenders allowing FICO scores as low as 620, and that is for 100% financing. Try getting a Conventional loan with even 5% down and a 640 FICO score. – and no reserves? Also, VA requires less time after a bankruptcy (2 yrs) or foreclosure (2 yrs) than a Conventional loan.
Debt to Income ratio – The guideline for a VA loan is 41%, meaning 41% of the Veterans income can go towards the mortgage payment, car payments, etc. But approvals are common with debt to income ratios over 50%. (even 60% in some circumstances). Conventional financing tends to cap out at 45%. FHA is fairly similar to VA when it comes to debt to income ratios.
Down payment – this is the biggy. In Orange County a Veteran can buy a home with no down payment up to a price of $679,650 (in 2018). FHA requires 3.5% down payment up to a loan of $679,650 (2018). On a Conventional loan under $453,100, 3% down is possible, but 5% down is more probable. When the loan amount is over $453,100 (the Orange County Conforming limit is $679,650) then a 5% down payment is required. And of course, with a Conventional loan with less than 20% down payment, mortgage insurance is required. FHA also has mortgage insurance, both up front and monthly. And FHA’s mortgage insurance premiums are fairly high. VA has no monthly mortgage insurance!
Jumbo Loan Amounts – While Conventional and FHA loans cap out at $667,650 in 2018, VA doesn’t really have a limit. But it is difficult to find a lender that will go higher than $1,500,000. Yes, the $0 down limit in Orange County is $679,650 in 2018, but if a Veteran purchases a home for more than that price, they can still get a “Jumbo VA Loan“. They have to come in with a down payment equal to 25% of the difference between the purchase price and their 100% limit.
Interest rates – VA interest rates (like FHA) tend to be lower than Conventional interest rates. But again, while FHA has mortgage insurance, VA does not. And considering that at the moment it is difficult to get an aggressive Jumbo 30 year fixed rate, VA can be a great option for a $1,000,000 30 year fixed rate for those that are eligible.

So all of this sounds great. What is the issue then? Why is there a misconception of VA financing in Orange County? I think it is a fear of the unknown. Most real estate agents have not been involved in a transaction with a VA buyer. If they have, it was a long time ago. What are the concerns?

Common Concern with VA Financing and the Answers

“I’ve heard is take a long time to close escrow”. Well, it doesn’t if the lender knows what they are doing. As with any type of financing these days, its important that the Veteran be PreApproved before they make an offer on a home. Get all their ducks in a row. But again, this is the case with any type of financing. Closing a VA loan in 30 days is not difficult. One of the hardest things to do in the processing of a loan is to document funds to close. At least with VA there’s not much money needed, if any.
“I’ve heard VA appraisers are very conservative”. Huh? Where does this come from? Most VA appraisers also do FHA and Conventional appraisals. The value analysis is no different than any other type of appraisal. A VA appraiser will look more closely for safety issues than on a Conventional appraisal. If there are broken windows, holes in the floor, or loose wires hanging from the walls, be ready for some repairs. But this is no different than FHA. And if the house really looks that bad, a Conventional appraiser could call out the same things.
“Doesn’t the seller have to pay the buyers costs”. The quick answer is “no”. In the old days (a few years ago), certain expenses, like lender fees, escrow fees, and a few other smaller fees could not be paid by the buyer. But a VA buyer is allowed to pay up to 1% of the loan amount in what would be called “non allowable fees” if there is no Origination Fee. Partly because Orange County tends to have larger loan amounts than other parts of the country, and because after changes a few years ago to the Good Faith Estimate, any Origination Fee is typically just the lender fee anyway. On most deals there is plenty of room to fit the other “non-allowable” fees in the the 1% threshold. Non-Allowable fees have effectively become a non-issue and the seller is not required to pay closing costs for the buyer.
“Is a termite inspection required”. Yes. And this is one big difference between all other types of financing. While other types of financing do not require a termite inspection, or clear termite report, VA does. This is a “regional requirement”. All Section 1 items are required to be cleared on the Report, but it should be noted that at the underwriters discretion, Section II items may also need to be cleared. And since Section II items tend to be relatively minor, it should just be made clear that “All Section I and Section II items need to be clear.” Also, it should be noted that while VA does not allow the Veteran to pay for the actual termite inspection, the Veteran IS allowed to pay for the repairs listed on the report.

Find a Lender AND a Real Estate Agent Knowledgeable with VA Financing in Orange County

Working with real estate professionals who are familiar with VA financing is important. The first step should be to contact a local Orange County VA lending specialist who can walk you through the loan process. Once Preapproved for a VA loan, you will be able to confidently begin the search or a home. While working with a Real Estate agent who is familiar with VA financing is important, a good VA lender can quickly advise your agent on the keys to VA financing.

*updated February 19, 2018

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

Filed Under: VA Purchase Loans