va loan program | Orange County, California VA Loans

The CalVet loan program or the standard VA loan; which is better? It all depends on when the question is being asked and where you plan to buy a home. There are several distinct advantages the standard VA loan program has as of right now, September 2011, over the CalVet loan program. The biggest factor pushing most Veterans and active duty military personnel into the standard VA loan program is interest rate. But there are differences in loan limits which can sometimes favor the CalVet program depending on the California county the Veteran is purchasing in.

Low Interest Rates Favor the VA Loan Program

2011 has been a banner year for low interest rates. In September 2011, interest rates even hit all time lows. VA 30 year fixed rates are averaging 3.75% (3.98% APR)APR to 4.25% (4.48% APR) this year. VA interest rates have been consistently low for the last several years. CalVet loan program interest rates range from 5.5% (5.9% APR) to 5.95% (6.36% APR), which is a full 1.75% spread over the standard VA loan progam interest rates. To show what that interest rate spread does to the payment, lets compare a $300,000 loan. At 4%, the payment is $1,432. At 5.5%, the payment is $1,703. That is a $271 monthly payment difference, in favor of the standard VA loan program.

VA Loan Limit in Orange County is $700,000 | CalVet is $521,250

The VA loan limit for 2011 in Orange County, CA is $700,000, meaning a Veteran can purchase a home with Zero Down in Orange County (and Los Angeles) up to a $700,000 purchase price. A Veteran can even go with a higher priced home by bringing in a small down payment. The CalVet loan program caps out at $521,250. So for Orange County homebuyers looking at properties above a $521,250 price, who are undeterred by the higher interest rate a CalVet loan has, would still go VA because of the high loan amounts allowed.

VA vs CalVet | Homeowners Insurance

One advantage CalVet does over VA is a comprehensive homeowners insurance policy, which includes guaranteed replacement for your home, even in natural disaster situations like an earthquake or flood. Private insurance companies will charge extra for this type of coverage, and “guaranteed replacement” in California is very difficult to come by.

CalVet Does not offer a Refinance Program

CalVet requires that you apply for the loan before taking title to the property. Translated, this means it is only for a purchase, not a refinance. In contrast, VA offers the IRRRL program, or Interest Rate Reduction Refinance Loan. With this program you can lower your rate (if rates drop) without needing a full appraisal and without needing to qualify. It is a very “streamlined” process. However, it is only for current VA loan borrowers. For those Veterans who wish to refinance into a VA loan from a Conventional or FHA loan, they would need an appraisal and full income documentation. But the good news is they could refinance up to 100% of the properties value.

CalVet offers home Improvement loans up to $150,000 at competitive rates, which is a nice feature. VA does not currently have a home improvement loan program. However, another option is to use the FHA 203K Rehab loan program, which can later be refinanced into a VA loan.

VA Loan Versus CalVet Loan | Which is Better?

It depends. For most Orange County Veterans, the standard VA loan program is the way to go. Lower interest rates and higher loan amounts are two benefits that are hard to ignore. But it is important to keep abreast of changes. Who knows. VA could lower the 100% financing limit in 2012. Or interest rates, which change daily, could go up for the VA program. It is important to consult with an Orange County, CA VA loan expert who can prepare custom loan scenarios based on a Veteran’s qualifications. The VA loan expert can then help the Veteran get a VA Loan PreApproval.

Authored by Tim Storm, an Orange County, CA FHA and VA Loan Officer – Please contact my office at Emery Financial for more information about an Orange County, CA home loan. Direct: 949-829-1846 MLO 223456

www.OCFHALoans.com

Call our office today and see how we can help you and your family.

tstorm (at) ochomebuyerloans.com

Good news for Orange County, CA Veterans as the Department of Veterans Affairs announced that the Funding Fee on VA loans will decrease. VA Circular 26-11-12, released on September 8, 2011, gives the breakdown of the decrease, which could save Orange County homes buyers using the VA loan program throusands of dollars, depending on the purchase price of the home they are buying. The new Funding Fee rates go into effect for all loans closed on or after October 1, 2011, and is in effect for 12 months.

VA Funding Fee Chart for Loan Closed On or After October 1, 2011

Example of Benefit to Orange County, CA VA Loan borrowers

How much will this be a benefit to Orange County home buyers using VA financing? Well, because home prices tend to be on the high end in most parts of Orange County, the lower Funding Fee percentages will save thousands. For example, an Orange County Veteran purchasing a home in Irvine for $500,000 with no down payment, and using their VA eligiblity for the first time, would need have a Funding Fee of $10,750 added to their loan. ($500,000 * 2.15% = $10,750.) Using the new percentage, the Funding Fee would only be $7,000. ($500,000 * 1.4% = $7,000.) That saves this Irvine Veteran$3,750. The Funding Fee is financed into the loan, so the Veteran won’t actually feel the savings immediately, but there will be an effect on the monthly payment, in this case about $35 per month.

VA Loan PreApproval is the First Step

The first step in determining how this change will effect your purchase is to contact a local Orange County VA lender. A VA loan specialist will be able to prepare custom loan scenarios based on your qualifications and payment comfort level. The scenarios will give you a complete breakdown of the purchase price, loan amount, payment, closing costs, and amount needed to close. If you are planning on going with a “VA NO NO“, where you not only don’t come in with a down payment but also have the seller pay your closing costs, the scenarios will let you know how much of a seller credit is required. It is also possible to adjust the interest rate in order receive a lender credit towards closing costs. Your financing should be determined prior to making offers on homes.

CalVet Loan or VA Loan | Which is Better for Orange County Veterans