A VA home loan is a type of mortgage that is guaranteed by the U.S. Department of Veterans Affairs (VA). Created in 1944, this program has helped more than 24 million veterans, active-duty military members, and their families purchase or refinance homes.
Because VA loans are backed by the government, lenders face less risk, which makes them more willing to offer these loans with favorable terms. In California, eligible borrowers can get a VA loan without a down payment, and often with more lenient credit requirements.
The primary goal of the VA loan program is to help veterans and active-duty military members obtain home financing and purchase properties with no down payment. VA loans are available through qualified lenders in California and across the U.S.
To qualify for a VA home loan in California, you must meet certain service and eligibility requirements. Here are the key criteria:
Service Requirements:
Credit and Income Requirements:
Property Requirements:
Certificate of Eligibility (COE):
These are the basic guidelines to help you qualify for a VA home loan. Ensure that you meet the eligibility criteria and gather necessary documentation, including your COE, before applying.
There are several types of VA home loans available, each offering different benefits for eligible veterans and their families in California. These include:
VA Cash-Out Refinance:
This type of loan allows you to replace your current mortgage with a new loan, while tapping into your home’s equity for purposes like paying off debt or making home improvements.
It can also be used to refinance a non-VA loan into a VA loan.
VA IRRRL (Interest Rate Reduction Refinance Loan):
Commonly called a streamline refinance loan, the VA IRRRL allows you to replace an existing VA loan with a new loan offering a lower interest rate.
It also provides an option to switch from an adjustable-rate mortgage (ARM) to a fixed-rate mortgage.
VA Renovation Loans:
This loan allows California borrowers to purchase or refinance a home and finance the cost of home improvements as part of the mortgage.
It combines the cost of the property and the renovation into a single loan.
VA Supplemental Loans for Home Improvements:
These loans can be added to an existing VA mortgage or included in a VA refinance.
They provide additional funds to make home improvements, helping you enhance your home’s value and functionality.
Each loan type has specific eligibility criteria and can be a useful tool for California homeowners looking to make changes to their mortgage or improve their property.
VA home loans offer several advantages for eligible veterans, active duty service members, and their families in California:
No Down Payment:
You can purchase a home without needing to make a down payment, which is a significant advantage compared to many conventional loans.
No Loan Limit:
There is no set limit on the amount you can borrow through a VA loan. The loan amount is based on your ability to repay and the home’s value.
No Private Mortgage Insurance (PMI):
Since the loan is backed by the government, you won’t have to pay PMI, which is often required for conventional loans with less than a 20% down payment.
Lower Closing Costs:
The VA limits the lender’s origination fee to 1% of the loan amount and prohibits lenders from charging certain other closing costs, helping reduce your upfront expenses.
No Minimum Credit Score Requirement:
While there is no specific minimum credit score set by the VA, most lenders typically require at least a 620 FICO score for approval.
Lower Mortgage Rates:
VA loans typically come with lower interest rates compared to FHA and conventional loans, which can result in lower monthly payments.
Assistance for Struggling Borrowers:
The VA offers assistance to borrowers facing financial difficulties, such as potential foreclosure. VA loan technicians can negotiate with lenders to help struggling homeowners.
No Prepayment Penalty:
You can pay off your loan early without incurring any prepayment penalties, allowing you to save on interest costs.
Repeat Usage:
You don’t have to be a first-time homebuyer to qualify for a VA loan. You can use the benefit multiple times as long as you pay off the loan each time.
Flexible Eligibility After Bankruptcy or Foreclosure:
Even if you’ve experienced bankruptcy or foreclosure, you can still qualify for a VA loan after a two-year waiting period from the date of the event.
VA Loan Funding Fee: You are required to pay a funding fee, which ranges between 1.25% and 3.3% of the loan amount. While this fee can usually be rolled into the loan, it will increase your monthly payment and the total interest you pay over the life of the loan.
Primary Residence Requirement: VA loans can only be used to buy or build a primary residence. You cannot use a VA loan to purchase investment properties or vacation homes, limiting its use to your primary living situation.
Yes, your eligibility is reusable depending on the circumstances. Normally, if you’ve paid off your prior VA loan and disposed of the property, you can have your used eligibility restored. Additionally, on a one-time basis, you may have your eligibility restored if your prior VA loan is paid in full but you still own the property.
No, the children of an eligible veteran are not eligible for the home loan benefit.
You can choose between a traditional fixed payment mortgage, a graduated payment mortgage (GPM), or a growing equity mortgage (GEM). There is no prepayment penalty.
There is no specific maximum VA loan limit, but lenders typically limit the loan amount to $417,000 based on the property’s reasonable value or purchase price.
Yes, a VA loan can also be used to construct a home, refinance, or in conjunction with the Native American Direct Loan program and adapted housing grants.
