VA Loans California
If you are a veteran looking for financing in order to purchase a home, then you are likely eligible for a VA loan. VA loans are benefits partially guaranteed by the U.S. Department of Veterans Affairs, which allows lenders like us to reward veterans with far more favorable housing loan terms. In most cases, eligible applicants will be able to receive a mortgage at a low interest rate without having to put forth a down payment.
Over the duration of the loan, there are usually refinancing options available that also allow veterans to cash out some of their equity in the property in order to pay for other, more pressing expenses. If you are a veteran looking to purchase a home, please don’t hesitate to contact our team so that we can help put you on the fast track towards property ownership.
Why people get California VA loans
VA loans are for individuals that have served in the military at some time or another and the BIG advantage to a VA loan versus that of a conventional is there is NO DOWN PAYMENT required. That is correct, 100% of the purchase price can be financed. In addition to the low down payment, another HUGE advantage is you don’t have to have great credit. In addition to that all VA loans are guaranteed by the Veterans Affairs.
No Down Payment – Qualified Veterans can buy a home without having to make a down payment. The no-down-payment benefit allows the Veteran to get into a home without having to spend years saving up to have enough money to put a 3.5% to 5% down payment on a home.
How Do VA Loans Work in California?
California VA home loans are a form of assistance given to veterans who have served active duty in the US military. It’s backed by the Department of Veteran Affairs, which is then offered by a lender accredited to offer VA loans.
Their biggest advantage is that it doesn’t require someone buying the home to put up a down payment, making homeownership much more accessible.
There are also no mortgage insurance premiums with VA loans. California veterans can thus save almost 1% of the loan amount yearly. In addition, these loans typically have low closing costs and interest rates than a conventional financing option.
Lastly, many VA home loan California lenders offer no prepayment penalty with their loans.
Overall, you can expect more flexible purchasing and refinancing options with VA loans. California veterans can fast-track owning a property with it.
Some veterans may also be eligible for tax exemptions on their VA loans. For example, California laws state that veterans whose total property value is less than $5,000 ($10,000 if married) can claim tax exemptions not exceeding $4,000.
Also, if you’re a disabled veteran, you can avail of the Disabled Veteran’s Exemption. This qualifies you for a deduction of up to $100,000 on your property tax. For low-income situations, this can even reach $150,000.
So how do you qualify for VA loans? California veterans who wish to avail need to have served a set period of active duty. This is set at 181 days in times of peace, while it’s at 90 straight days for wartime. Alternatively, you could have also served time in the National Guard or Reserves for at least six years.
But it’s not just the veterans themselves who can qualify for a VA loan in California. Spouses of service members who either died or suffered a disability while on duty can also apply for one.
There’s also no credit score requirement set for veterans’ home loans. California lenders are the ones who specify the minimum score at their discretion. On average, though, this is at the lower end (at around 600 or so in the FICO score).
What are VA Loans’ California Requirements for Down Payment?
To apply for a VA loan, you need to present a VA certificate of eligibility on top of the usual loan application requirements. This document from the Department of Veterans Affairs states that you’re qualified to receive a VA loan. Some lenders can procure this document for you.
For the most part, the application process is roughly the same as that of a conventional loan. Lenders will still check your credit scores, income level, and other factors to decide approval, plus the interest rate you’ll get.
For one, VA lenders often require a debt-to-income ratio of at most 41% to qualify. Although if you have a high ratio, high residual income can offset this.
Now, we’ve already established that VA loans don’t require a down payment. And for most situations, this is true. However, there are some circumstances where borrowers need to pay at least a partial down payment.
One situation is when the price of the house is higher than its appraised value. In this case, the buyer needs to shoulder the price difference.
Sometimes, a down payment is advantageous if you want to outbid a house from other prospective buyers. This happens in a seller’s market, where there are fewer houses on sale, and competition among buyers is especially fierce.
Finally, a down payment is needed if the property’s price exceeds the VA loan limits (if you’re under one) of the county it’s in. We’ll discuss more about VA loan limits in a later section.
What Are VA Loans Property Requirements?
Like most loans, the property you want to purchase with a VA loan should pass certain standards set by the Department of Veteran Affairs. This ensures that the house is safe and sanitary.
To determine this, lenders will usually schedule a VA appraisal on your property conducted by a certified VA appraiser. The criteria checklist is lengthy but isn’t that different from what a typical appraiser would check. Examples of these include:
- Adequate space for key areas (like the bathroom, kitchen, and living room)
- Proper electricity with no visible wires exposed
- Access to safe and continuous water supply
- Safe sewage disposal
- The roof must be in proper condition
- The house exterior should provide adequate protection against rain, snow, and other weather conditions.
- The house needs to have direct access to a public or private road
On average, it takes around 5 to 21 business days for the appraiser to submit their report to the VA lender.
They will also charge an appraisal fee, which either the borrower or lender will shoulder, depending on their agreement. However, the Department of Veteran Affairs limits how much appraisers can charge, which can be up to $825 for standard-sized homes.
What are the VA Loan Limits in California?
Depending on whether you have full or partial entitlement, you might be subject to VA loan limits. California borrowers who haven’t used their VA loan benefit or who’ve already paid a previous VA loan in full are generally granted full entitlement and, therefore, have no loan limits.
However, you’re subject to a loan limit if you have remaining entitlement on your VA home loan. This happens when any of the following applies to you:
- You have a partially paid VA loan that you’re currently paying for
- You have a fully paid VA loan and own the property it was used for
- You refinanced a VA loan into any non-VA loan, and you still own the property it was used for.
- Your previous property financed with a VA loan was foreclosed
- You had a short sale on a VA loan that wasn’t repaid in full
To be clear, loan limits refer to the amount that the Department of Veteran Affairs will guarantee. It doesn’t limit the actual amount that you can borrow from a VA lender. The VA loan limits in California differ by county.
Credit
More relaxed credit parameters allow the Veteran the ability to get a home with limited or no down payment.
Government Guarantee
The VA does not make loans, it just guarantees them to private VA approved lender, of which Capstone is one of them. VA basically offers to repay a portion of the loan should the borrower default. This allows the lender a degree of confidence and allows them to finance a Veteran without the need for the down payment.
No private mortgage insurance
EVEN with no down payment, there is NO mortgage insurance. Typically on a conventional or FHA loan with less than 20% down, there is some type of insurance needed, but with VA loans, there is no mortgage insurance. The Veteran does pay an upfront payment which can be financed into the loan.
It’s not a one-time benefit
One of the most common misconceptions about this program is that eligibility is a it’s a one-time shot. That’s absolutely untrue. Once you earn this benefit, it’s yours for life. You also don’t necessarily need to repay your original loan in full in order to purchase again with a VA loan. What’s possible will depend in part on how much VA loan entitlement you have remaining.
VA loans are booming, now is the time to take advantage of a VA loan.