VA loans will be even more popular in 2011 than in 2010 in California. There are several reasons, besides the most obvious reason being that no down payment is required up to a $700,000 purchase price. Up until recently, California Veterans did not realize the benefits that a VA loan program offered them.
Benefits of the VA Loan Program for California Veterans
- 2011 VA Loan Limits are higher. 100% Financing up to $700,000 in Orange and Los Angeles Counties in 2011. This is actually an increase from 2010, when the 100% financing limit was $593,750. Even that was great, but $700,000 is better.
- VA allows “cash out” refinancing up to 90% of the property value. This is much better than Conventional financing, which would have severe pricing “hits” for doing a “cash out” refinance at even 80% of the properties value on a loan amount under $417,000. Most Conventional loan guidelines consider combining a 1st and 2nd to be a “cash out” refinance. With the drop in property values since 2007, many homeowners have not been able to combine their 1st and 2nd mortgages because of the tight Conventional loan guidelines. But California Veterans have the ability to combine their 1st and 2nd up to 90% of the properties value.
- VA guidelines are more flexible when it comes to credit as compared to Conventional guidelines. Even if a Veteran has 20% down payment, a VA loan may be the best option if they’ve had a Short Sale, bankruptcy, or other credit issues in the past few years.
- VA allows for higher “debt to income” ratios than Conventional financing. While Fannie Mae does not allow debt to income ratios above 45% without an exception, and even then will not go over 50%, VA is more interested in “residual income” that the debt to income ratios. On higher loan amounts this allows for quite a bit of flexibility.
Closing a VA Loan in California is Easy
Closing a VA loan is much easier than some think. While the large banks can take 60 days or more to close a Conventional loan, a good California Direct VA lender can close a VA loan in 30 days, maybe less. The key is to work with a California VA loan Expert who knows what items are needed to complete the file, before the VA underwriter reviews the file. The VA loan expert should be able to provide accurate loan scenarios before the loan process starts, allowing the borrower to consider all options before paying for an appraisal.