VA Home Loans In California

VA Home Loans For California Veterans

Key Topics In This Article: What Is A VA Home Loan? | Benefits | Requirements | VA Funding Fee | Refinance | FAQs

California residents who are veterans of the Armed Forces or National Guard have access to the flexible and affordable VA home loan program (active military personnel also have access).

The VA home loan program offers many benefits, including relaxed underwriting guidelines, lower costs, and competitive mortgage rates. If you meet the VA home loan requirements, I highly suggest you consider it for your next mortgage transaction.

What Is A VA Home Loan?

A VA home loan is a mortgage dedicated to veterans and active military personnel. VA home loans are loans offered by lenders backed by the Department of Veteran Affairs. The VA doesn’t underwrite or fund the loans; they guarantee them for lenders that offer VA home loans.1 These loans provide veterans with an affordable way to become homeowners.

What Is VA Entitlement?

When applying for a VA home loan, you must prove you’re eligible via your VA Entitlement. All eligible veterans get full or partial entitlement. Eligible veterans will receive a Certificate of Eligibility; this certificate proves you meet the basic requirements for a VA home loan.

If you have full entitlement, you can buy a home for any price provided you meet the necessary income requirements. 

If you don’t have full entitlement, you’ll need to make a down payment on any part of the loan that’s not guaranteed. The amount is typically low, but it’s important to understand how it works if a down payment is needed.

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VA Home Loan Benefits For California Veterans

Here are the benefits California veterans receive from the VA home loan program.

  • No mortgage insurance
  • No pre-payment penalty
  • Easy credit score guidelines
  • VA home loans are assumable
  • No down payment (or equity if it’s a refinance)
  • No loan limits for veterans who have full entitlement
  • Lower interest rates (compared to other loan programs)
  • A seller can cover up to 4% of a veteran’s closing costs and fees

California veterans receive numerous benefits under the VA home loan program. No mortgage insurance, no pre-payment, and easy credit score guidelines are just some of the benefits a California veteran will get under the VA home loan program.

VA Home Loan Requirements

Veterans with any discharge except dishonorable and who served at least the minimum required time are eligible for a VA home loan.

You’re eligible after 90 days of consecutive service if you’re actively serving. If you’re separated from the service, your requirements vary from 90 days (the full period you were called for) to 24 consecutive months of service. 

If you served in the National Guard or Reserves, you’d need six years of duty to be eligible.2 If you’re currently serving in the National Guard or Reserves, you need just ninety days of consecutive service. 

If you’re a surviving spouse of a veteran who lost his/her life in the line of duty or because of complications of his/her time in the service, you may also be eligible unless you remarry. 

Down Payment Requirements For a VA Home Loan

The California VA home loan program does not have a down payment requirement if the loan applicant is eligible for full entitlement. That means you can buy a home with 0% down.

However, some applicants may want to consider putting 3% – 10% down if they have risk factors that may exclude them from the program. Putting “skin in the game” makes you less risky since you’re more likely to put in the effort to make your payments on time so you don’t lose the equity in the home. 

VA Home Loan Limits For California Veterans Who Don’t Have Full Entitlement

If you are a California veteran who does not have full entitlement, then you are subject to the VA home loan limits for California veterans. The VA home loan limit has a baseline limit of $766,550; however, in some counties, it is as high as $1,149,825.

Before applying for a California VA home loan, check your county’s limit if you do not have full entitlement.

VA Home Loan Credit Score Requirements

The VA home loan credit score requirement is different than most loan programs. The VA doesn’t have a specific credit score requirement, but lenders do. On average, you’ll need at least a 620 credit score to meet most lender requirements for a VA home loan.

Derogatory Credit History Requirements

Regarding the derogatory credit history requirement, you’ll need to wait two years after a Chapter 7 bankruptcy discharge and one year after a Chapter 13 bankruptcy with trustee approval. 

If you lost a home in foreclosure, you must wait three years after the foreclosure. Also, if the foreclosure was on a VA loan, you’ll lose that portion of your guarantee, which may mean you’ll need a down payment to get VA financing since the guarantee allows you to get a loan with no money down. 

Debt-To-Income Ratio

The VA doesn’t set a specific debt-to-income ratio you must meet. They ask the lender to use common sense when determining if you can afford the loan.

If you need a number to stick to, use the FHA loan guidelines, which allow a debt-to-income ratio of 43%. This means your total monthly debts don’t take up more than 43% of your gross monthly income (income before taxes). 

However, there are times when applicants have obtained an approval with a much higher debt-to-income ratio. That’s because the VA focuses on disposable income, rather than your debt-to-income ratio, to determine if you qualify for the loan. 

Disposable Income Requirements

Disposable income is the money left over at the end of the month after you pay your bills. Under the California VA home loan program, disposable income requirements are as follows: the VA has minimum disposable income amounts each an applicant must have based on their location and family size. 

If you meet the VA home loan disposable income requirements, the underwriter won’t focus on your DTI as much. The disposable income shows that you can afford your bills and will have money left for the daily cost of living. 

General Income And Employment Requirements

The income requirements for California VA home loans are relatively straightforward – the VA doesn’t require a specific amount of income. It just needs to be steady, as does your employment. As for VA employment requirements, ideally, you’ll have two years of continued employment. Underwriters look for rising income and stable employment when evaluating VA home loan applications. 

If you’ve recently left the military or graduated college and don’t have a two-year employment history, you may still be eligible if you can show continuity with your experience and future work. 

Property Eligibility For VA Home Loans

VA home loan property requirements are simple; they are for primary residences only. This means you can only use the financing to buy a home you will live in full-time. There is a one-time exception to this rule, though. 

If you need to move because your job relocated you over 50 miles away or your family outgrew your original home, you may be able to keep the house and buy another with VA home loan financing. You can rent the home that you purchased initially and use your remaining entitlement to buy another home as your primary residence. 

This is on a case-by-case basis and is a one-time exception based on VA approval. 

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Understanding The VA Home Loan Funding Fee

Most veterans pay a VA home loan funding fee. The only time you don’t is if you are determined disabled by the VA and have a disability letter. In this case, you may pay a reduced funding fee or no fee at all. 

If you aren’t disabled, you’ll pay 2.3% of the loan amount upfront the first time you use your benefits and 3.6% for any subsequent uses.3 

If you make a down payment, though, the amount may drop: 

  • 5% down payment – 1.65% funding fee 
  • 10% down payment – 1.4% funding fee 

The VA home loan funding fee is subject to change based on annual Veterans Administration guideline reviews and directives.

VA Loan Refinance Options In California

The VA also offers refinance options for veterans. Like purchase loans, the refinance options are flexible and affordable. 

Rate/Term Refinance

The VA home loan rate/term refinance allows you to refinance your current loan (VA or not) to get a better rate or term. If interest rates drop, this is a great way to lower your interest rate. It’s also helpful if you have an ARM loan and want a fixed rate or you have a 30-year term and want a 15-year term. 

California VA Cash-Out Refinance

A cash-out refinance allows you to tap into the equity of your home. The California VA cash-out refinance allows you to borrow up to 100% of the home’s value, although this varies by lender. 

With a cash-out refinance VA home loan, you pay off your existing mortgage and take out a larger one that covers the original mortgage and the cash you’re taking out of the equity. You can do what you want with the money, including consolidating debt or fixing up your home.

VA Home Loan Streamline Refinance

The VA Streamline Refinance program is one of the best refinance programs in the country. You must have a current VA home loan to apply for the streamlined refinance.

Current VA borrowers can take advantage of lower rates or change a loan’s term with the VA home loan Streamline Refinance program (aka VA IRRRL). You don’t need to verify your income, assets, credit score, or home value (this may vary by lender). 

Instead, the VA tells lenders to rely on your payment history. If you’ve made your mortgage payments on time for the last 12 months, you can prove you benefit from the refinance, and you meet the basic VA home loan requirements – you’re approved for the streamlined refinance program.

VA Home Loan FAQs

Here are some frequently asked questions about VA home loans.

Can sellers pay closing costs for a VA borrower In California? 

Yes, they allow sellers to pay all your loan costs (up to a certain point). This means you could come to the table with $0 and close on your loan. Sellers can pay up to 4% of the purchase price in seller concessions; however, sellers are not obligated to do this.

Can a surviving spouse use a veteran’s VA benefits? 

If the veteran was eligible for VA benefits and the surviving spouse didn’t remarry, then yes, a surviving spouse can use a veteran’s benefits to buy a home to live in. 

Can you own more than one house with a VA loan? 

Typically, you can only own one home with a VA loan, but there are exceptions. You must be able to prove that you have to move, whether due to your job or you outgrew your home. If the VA approves it, you can keep your existing home and use your remaining entitlement to buy another home.

You may need a down payment on the new home if you don’t have enough entitlement to cover the new loan. 

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The Final Word on California VA Home Loans

The California VA home loan program is one of the most flexible and affordable loans for veterans. If you served enough time and have anything except a dishonorable discharge, consider the VA loan in your search for the right mortgage. The benefits are clear, and the requirements are straightforward.

You can qualify with no down payment, and you won’t pay mortgage insurance on the loan. The California VA home loan is one of the most attractive loans available today for veterans.

Citation Sources:

  1. VA Home Loans – Va.gov
  2. Eligibility Requirements – Va.gov
  3. VA Funding Fee And Loan Closing Costs – Va.gov
Loan Officer Kevin O'Connor

About The Author

Loan Officer Kevin O'Connor has over 17 years of experience as a Mortgage Loan Originator and is a trusted resource for mortgage education and information. He's licensed by the state of California and the Nationwide Mortgage Licensing System. He has a top rating with the Better Business Bureau, Google, Yelp, and Zillow. You can contact him at 1-800-550-5538. CA DRE #01499872 / NMLS #247447