VA Loans in California
Conforming loans tend to have the best loan terms and the best interest rates, resulting in a lower monthly payment. However, the standards are a bit higher for who qualifies. If you have strong credit and a low debt-to-income, then you may benefit from a conventional conforming coventional loan.
VA loans are specifically designed to help veterans and active-duty service members achieve the dream of home ownership. If you're considering using a VA loan to purchase a home, we have provided some of our most asked questions below.
Here's what you should know about FHA loans:
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What is a VA loan?
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Pros and Cons of a VA Loan
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How many times can you use a VA loan?
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Is a VA loan right for you?
What is a VA loan?
A VA loan is a mortgage loan available through a program established by the U.S. Department of Veterans Affairs (VA) (previously the Veterans Administration). With VA loans, veterans, service members, and their surviving spouses can purchase homes with little to no down payment and no private mortgage insurance and generally get a competitive interest rate.
While the VA determines who qualifies for a VA loan, they don't directly issue the loans. VA loans are considered non-conforming loans because they don't follow the guidelines set by conventional lenders like Fannie Mae and Freddie Mac. However, this flexibility makes it easier for borrowers to qualify, thanks to lower credit score requirements.
Pros and Cons of a VA Loan
Pros of a VA Loan
1. No down payment or mortgage insurance required
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Other loan types require down payments and can include an extra cost for mortgage insurance. FHA loans require mortgage insurance regardless of the down payment amount, and conventional loans usually require mortgage insurance if the down payment is less than 20%.
2. Lower rates
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VA loans usually have lower rates than conventional mortgages.
3. Limited closing costs
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Closing costs are the various fees and expenses you pay to get a mortgage. The Department of Veterans Affairs limits the lender's origination fee to no more than 1% of the loan amount and prohibits lenders from charging some other closing costs.
4. Assumability
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This means that when you’re ready to sell your home, you have the option of allowing the buyer to take over your existing mortgage. This can be a selling point if your rate is lower than the current average mortgage rate.
Cons of a VA Loan
1. VA Loan Funding Fee
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Although VA loans don't require mortgage insurance, they come with an extra cost called a funding fee. The fee is set by the federal government and covers the cost if a borrower defaults. As of 2023, the fee ranges from 1.25% to 3.3% of the loan, depending on your down payment and whether its your first VA loan. You can pay the fee upfront, although most borrowers decide to finance it into the loan.
2. Purchase loans only for primary homes
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You can't use a VA loan to buy an investment property or second home.
3. Not all properties eligible
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A VA-appraiser will evaluate the home you want to buy to estimate the value and make sure it meets minimum property requirements. Some fixer-upp properties may not meet minimum VA standards.
How many times can I use a VA loan?
If you have used a VA Loan before, you are eligible to use it again. This is because the VA does not have a limit on the number of times you can use this benefit. You can use it multiple times to purchase different properties if you meet certain eligibility criteria. The VA has specific rules and regulations that govern their loan programs. One of the essential requirements that you must meet is that you must have paid off your first VA Loan before you can apply for a second one. The VA also requires that you have enough financial stability to cover the proposed loan amount.
Is a VA loan right for you?
VA loans are an EXCELLENT option for veterans and active-duty service members who are looking to purchase a home.