Orange County FHA, VA & First Time Buyer Loan Information: September 2011

In Orange County, CA Veterans have a few different options when it comes time to purchase a home. They can either go with a $0 down standard VA loan, or the CalVet program, which also has options for $0 down. But which is better? It can depend on several factors, including current interest rates and the purchase price of the home.

CalVet and the Contract of Sale

The CalVet loan program uses a Contract of Sale as the financing instrument, meaning CalVet purchases the property for the veteran at the close of escrow, and the sells the property to the veteran using a Contract of Sale. When the mortgage is paid off, ownership is transferred to the Veteran using a Grant Deed. By doing this, CalVet is able to offer group insurance rates, which for some properties can be beneficial. CalVet will lend on mobile homes in parks, which are typically difficult to get financing on. CalVet also requires that the Veteran remain in the home and not turn it into a rental. Although CalVet will issue a short term waiver on occupancy, this is an important factor to consider.

VA Loan Limits versus CalVet Loan Limits in Orange County, CA

The VA loan limit for 100% financing in Orange County for 2011 is $700,000. This means a Veteran can purchase a home in Irvine for $700,000 with Zero Down payment, and of course, no monthly Mortgage Insurance. It is also possible to purchase a home valued above the 100% financing limit. The Veteran would need a down payment equal to 25% of the difference between the purchase price and the 100% limit. For example, if a Veteran is purchasing a home in Irvine for $800,000, then a down payment of $25,000 would be required. (25% of $800,000 less $700,000 = $25,000).  That works out to a down payment of only 3.1%. CalVet will lend up to a limit of $521,250. In Orange County that will work for some properties, but not all. The $521,250 limit does allow for higher loan amounts in Riverside and San Bernardino counties, where the 100% financing limit is $417,000. So for some Veterans wishing to purchase a $500,000 home in the Inland Empire with $0 down payment, CalVet may be their best option. But in Orange County, at least in 2011 while the VA 100% financing limit is at $700,000, VA will offer the most flexibility.

CalVet Interest Rates vs VA Interest Rates

The CalVet loan program is funded through Bond Financing. Because of this, there are times when the CalVet program offers below market interest rates. But there are also times when CalVet offers above market interest rates. This is one of those times. Over the past three years VA mortgage rates have been very low, while CalVet rates have remained above market. Currently, as of September 28, 2011, CalVet interest rates range from 5.9% APR to 6.36% APR. The spread in interest rates between the CalVet and the standard VA loan program will be the primary reason why most Veterans in Orange County choose the VA program over the CalVet program.

Authored by Tim Storm, an Orange County, CA  VA Loan Loan Officer MLO 223456– Please contact my office at Emery Financial for more information about an Orange County, CA Jumbo Mortgage. 877-786-4243 x 7. www.OCHomeBuyerLoans.com

Contact us for your Orange County VA Loan: VA Loan PreApproval

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

The Department of Vertans Affairs announced on September 8, 2011, via VA Circular 26-11-12, that the Funding Fee will drop lower for VA loans closed on or after October 1, 2011. While we rarely get good news on the lending front these days, it is nice when something comes out that will actually save home buyers money.

New VA Funding Fee Chart

Below is a VA Funding Fee Chart comparing the old (higher) Funding Fee percentages to the new (loan closed on or after October 1, 2011).  

These changes will save thousands for most Veterans using VA financing to purchase homes in Orange County, where prices tend to be on the "high end" compared to most of the country. As an example, lets say Martha is purchasing a home in Irvine, CA for $600,000 using VA financing with zero down payment. If this is Martha's first time using her VA Eligibility, she would have 2.15% of the purchase price added to her loan. $600,000 * 2.15% is a $12,900 Funding Fee, resulting in a total VA loan of $612,900. But with the new lower percentages, Martha would only have 1.4%, or $8,400 added to her VA loan, a savings of $4,500. Considering that VA allows Zero Down financing in Orange County up to $700,000 and has no Monthly Mortgage Insurance like othwer types of "high loan to value" financing, it is somewhat surprising the Funding Fee was actually lowered. But we'll take it.  

Of course the first step with VA financing is always to get PreApproved!

Authored by Tim Storm, an Orange County, CA  VA Loan Loan Officer MLO 223456– Please contact my office at Emery Financial for more information about an Orange County, CA Jumbo Mortgage. 877-786-4243 x 7. www.OCHomeBuyerLoans.com

Contact us for your Orange County VA Loan:

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com

The VA Loan Limit in Orange County will remain at $700,000 on Zero Down purchases until December 2011. This "high balance" 100% financing loan limit is good through December 31, 2011. While the FHA and Conventional (Conforming) loan limits are going lower at the end of September 2011, the VA limits will remain intact for three more months. But if the lower FHA and Conventional limits are any indication, Veterans considering taking advantage of the high limit should get serious about it now!

Maximum VA Loan Limit for Orange County

VA does not actually have a maximum loan limit. However, most lenders will not lend more than $1,500,000 on a VA loan. VA does guaranty 25% of the loan amount, up to a $700,000 purchase price in Orange County. If a buyer wants to purchase a property at a value greater than the 100% limit, then a down payment equal to 25% of the difference between the 100% limit and the purchase price is required. This would be considered a "Jumbo VA Loan".

Example of Jumbo VA Loan

As an example of a Jumbo VA loan, let say Chris Lynch, a Veteran of Desert Storm, wants to purchase a home in Irvine for $800,000. Since this is $100,000 greater than tha $700,000 100% financing limit, Chris would need a down payment of $25,000. The VA loan (not including the financed Funding Fee) would be $775,000. Where else can someone purchase a property for $800,000 with a little more than 3% down payment.

PreApproval is Important Prior to the Home Search

Before getting too deep into the home search, the Veteran should contact a VA Lender who can provide customized VA loan scenarios, which will provide information on the price the Veteran will qualify for, as well as detailed information on the payment and amount needed to close escrow. The VA loan officer can also retrieve the Certificate of Eligibility, as well as provide an underwritten VA Loan PreApproval. Most home sellers will not accept an offer without a PreApproval letter from a direct lender. The PreApproval process only takes a few days, depending on the complexity of the Veterans documentation. The last three months will go by quickly. There is no telling what will happen with the Orange County VA loan 100% financing limit in 2012, so now is the time act for those Veterans looking at high end properties.

Authored by Tim Storm, an Orange County, CA Jumbo Mortgage Loan Officer MLO 223456– Please contact my office at Emery Financial for more information about an Orange County, CA Jumbo Mortgage. 877-786-4243 x 7. www.OCHomeBuyerLoans.com

Contact us for your Orange County Jumbo Mortgage:

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com