To show our thanks, the United States has implemented numerous benefits for active duty members and qualifying veterans. Healthcare, education assistance, and pensions are just a few ways that we show our appreciation.
Many of these benefits are offered through the federal government, particularly through the Department of Veterans Affairs, commonly known as the “VA.” But many state governments support veterans as well. One of the largest state-backed veteran-assistance groups is the California Department Veterans, which offers many similar benefits as the VA.
Both of these organizations support home loans for veterans. These two loan programs are similar in many regards, but there are a few differences that create a clear separation.
While there are reasons why you may chose a VA loan, there are three specific advantages to using a CalVet over a VA loan.
VA Loans and CalVet Loans: Different Products, Numerous Similarities
This article is all about specific advantages of using a CalVet loan over a VA loan, but let us be clear: a VA loan remains an important financing option for hundreds of thousands of veterans across the country. And let us be even more clear: to the typical home-buying veteran or service member, there is little difference between the two. They both offer relatively easy approval for qualifying veterans and they are both available as zero-down financings. Interest rates are similar, and available product options (such as purchase or renovation loans) are available.
Simply put, a typical homebuyer will see little difference on a day-to-day basis between a VA loan and a CalVet loan.
That said, there are some subtle yet important advantages that could make a CalVet loan the right choice over a a VA loan.
3 Advantages of CalVet over a VA Loan
1. The Main Difference: Purchase Process
The most important difference between these two loan options is the process by which the home is purchased and the resulting legal relationship between you, the VA or CalVet, and the lender.
With a VA loan, you immediately receive legal title, granting you full ownership of the home, including legal possession.
But with a CalVet loan, CalVet purchases the property then sells it to the qualifying veteran using a contract of sale, which is often referred to as a “land contract.” While you take possession of the home, CalVet actually holds legal title of the property. For many buyers, having a separate organization hold legal title does not sound like an advantage. But it is. As the homeowner, you still maintain a variety of ownership rights, including the chance to deduct property taxes and mortgage interest from your federal tax filings. However, because CalVet owns legal title to the property, they are able to purchase more affordable homeowner’s insurance. CalVet can acquire inexpensive group rate insurance, helping you save potentially thousands of dollars over the life of your loan.
2. Potentially Higher Loan Limits
Another advantage to using these loans is the chance to enjoy potentially higher loan limits. The loan limits for a CalVet loan, while not significantly higher than the limits for a VA loan, could make a difference in your purchase.
A “loan limit” is the maximum amount of money that can be borrowed by qualifying homebuyers. Loan limits for a VA loan depend on multiple factors, including the county where you live. VA loan limits are based on conventional loan limits, as established by the FHFA. They vary by country, but the lowest limit in $484,350. In high cost areas, this limit increases, currently going above $720,000 in certain locations. In San Diego, for example, the limit is $690,000.
These are excellent numbers, and allow for the purchase of many fantastic homes, but there is a chance the a CalVet loan could offer higher financing. CalVet loan limits are constantly changing, and they are impacted by many different factors. However, it’s possible that the amounts offered by CalVet will exceed the available amount from a VA loan.
So if you are seeking a high-value home in California, it’s entirely possible that a CalVet loan will be the superior option.
3. Loan Fees May be Lower as Well
Loan fees are an important part for mortgage processing, providing funding for essential services like completing an application or sending documents to specific organizations. These tasks take time and money, so loan fees are issued to support these services. Loan application fees and other costs are often minimal, and in some cases they can be rolled into the entire loan.
In most cases, CalVet loans offer lower fees than what is charged by other government-backed loans, including VA loans. CalVet only collects an up-front funding fee, and there is no monthly charge for mortgage insurance. (Similar to VA loans in this regard.)
The VA loan is certainly not known for high loan fees, but it may be possible for a CalVet loan to deliver lower fees, which means the initial cost of purchasing a home could be much less.
Dedicated Support for Dedicated Veterans
If you want to learn more about the differences between a CalVet loan and a VA loan, or if you want assistance choosing one over the other, contact our helpful staff today. We’ll help you make the right choice for your future by providing the guidance, advice, and support you deserve.
You faithfully served our country; let us show our appreciation by helping with your next home loan!
