CalVet vs VA Loans: Which One is Right for Your Purchase?
Many veterans in the Golden State want to compare CalVet vs VA loans.
If you are a veteran or active service member of the United States military, you are entitled to a wide variety of benefits, including VA loans. These mortgage loans are popular for many different reasons, providing access to homeownership for service members all across the country.
But if you are a veteran or active military member who resides in California, you have another option: a mortgage loan provided by the California Department of Veterans Affairs, commonly known as “CalVet.”
Each one has their advantages, so if you are an eligible veteran, live in California, and are ready to purchase a high-quality home, you deserve to understand both. With the right knowledge, you can compare CalVet vs VA loans with confidence.
CalVet vs VA Loans: Comparing these Two Important Benefits
Understanding VA Home Loans
What is the VA?
As one of the largest organization in the U.S. federal government, the VA supports health care, home loans, life insurance, and other benefits for U.S. veterans and service members. They also support national cemeteries and assist with American preparedness.
The VA has an extensive list of eligibility requirements, and they change depending on when you served. For example, if you served between August 2nd, 1990 and the present, you must have served 24 consecutive months or meet specific requirements that would reduce it to 90 days. If you are on active duty now, you must have been in the service for 90 days. However, there are different requirements for National Guard and Reserve members.
The limits for a VA loan are dependent on a few factors, and they will vary by county. The limits are essentially the highest-value loan amounts that the VA will support, and limits match those set by the Federal Housing Finance Agency for conforming loans. As of writing this article (Spring of 2020), the limits for VA loans are $484,350 in most areas, which high-cost areas going as high as $726,525.
This is perhaps the most attractive benefit for many borrowers. When using a VA loan, you can get the financing you need with as little as 0% down. While bringing some downpayment is often beneficial, if you have no savings to contribute towards the loan, you can still take out a mortgage through the VA and realize the benefits of homeownership.
The Department of Veterans Affairs places no specific credit requirement for their supported loans. However, there are credit requirements from the lenders, which are usually around 620, although they can be less depending on which lending organization you are using.
Like credit, the VA does not have a specific requirement for debt-to-income ratios, so this is once again up to the lender. For most lenders and banks, the requirement is between 35% to 50%, although it’s usually around 43%.
Understanding CalVet Home Loans
What is CalVet?
This is a state-sponsored government organization that provides numerous services for veterans living in California. With almost 1.6 million veterans in California, CalVet assist with healthcare, housing, education, and more.
Like the larger VA, CalVet also has detailed requirements for how long you served, how you served, and how your service ended. We could write a full article on the details, but we’ll focus specifically on the residency requirements. To use a CalVet loan, you only have to be a qualifying veteran purchasing a home in California. So a veteran who has never even set foot in California prior to purchasing a home could, if they wanted, use a CalVet home loan to purchase a house in the Golden State.
CalVet also offers 100% financing (zero downpayment) for their home loans. This is a substantial benefit, but it may be more difficult to qualify for this option than the zero-down VA loan. CalVet also offers loans with as little as 2% to 3% downpayments.
While there will be credit requirements for these loans, they are often much lower than other forms of financing. Once again, you’ll need to check the specific requirements of the lender you are using for your purchase.
This is also the same as VA loans. If you are planning on using a CalVet loan for your purchase, you will likely need a debt-to-income ratio no higher than 50%; some lenders may allow ratios down to 35% for select cases.
CalVet vs VA Loan: So…What’s the Difference?
After reading this list of details, you could conclude that these two loans, from a borrower’s perspective, are essentially the same. Other than one requiring a home in California, they have similar downpayment, credit, and ratio requirements. Is there any significant difference?
There is one important detail that might seem trivial to a typical homebuyer but can make a big difference. With a CalVet loan, the property is actually purchased by CalVet, who will then issue a contract of sale, thereby selling the property to you. While CalVet maintains legal title, equitable title is held by the veteran homebuyer.
Why does this matter? Because this process allows the veteran to maintain ownership rights, including property taxes and interest-rate deductions, but since CalVet maintains legal rights, they can purchase group rates for homeowner’s insurance.
However, because CalVet maintains legal title, it can be hard to refinance. If you want to take advantage of better interest rates, or if you want to use equity as liquid capital through cash-out refinancing, CalVet loans make it difficult. (Certainly not impossible, just difficult.)
Another important difference is for buyers of manufactured housing. The VA has strong limits on manufactured housing, especially if the home is on leased land. However, CalVet is much better at servicing these loans, so they are usually the best option for these types of purchases.
Get the Top-Quality Loan You Have Earned
Whether you choose a VA loan or a loan serviced by CalVet, you’ll get the dedication and support you deserve from our team. Contact us today and let us help you find the right financing for your purchase.
Once complete, we can send your application to the FastTrack program for swift approval and processing, resulting in a faster overall buying process.