With one of the nation’s largest concentrations of active-duty service members and veterans, San Diego is a military town. Many sailors, soldiers, Marines, and Guard members are stationed in our city. A fair portion, seeing how great it is to live in San Diego, decide to stay, which means a VA loan in San Diego could be the best option.
Military members, of course, don’t have to use a VA loan. But here are five reasons why these loans are often the best choice.
5 Reasons To Use a VA Loan in San Diego
1. You Don’t Have a Large Downpayment
Perhaps the most important benefit, or at least the most unique, is that you can secure financing with an extremely small downpayment. In fact, certain borrowers can actually get a loan with absolutely no downpayment whatsoever.
Other than USDA loans, which are limited, and a few non-conforming and unconventional options, a VA loan is the only program that allows borrowers to make a purchase with 0% down.
This makes it perfect for San Diego buyers, as the high price of housing makes a downpayment, already a hurdle, a massive roadblock to buying a home.
The median sale price for a U.S. home in December of 2021 (the most recent available data), according to Redfin, was $382,813. Assuming 5% down, a typical amount, the downpayment would be about $19,140. That’s certainly large enough for most people, but in San Diego, a 5% downpayment can be even greater.
Redfin says that the median sale price in San Diego (Dec. 2021) was $787,500, almost $400,000 more than the U.S. median. A 5% downpayment, at a San Diego median price, would be just shy of $40,000.
The point is simple: because of the high cost of San Diego housing, downpayments are also more expensive. Therefore, a 0%-down or low-downpayment option is extremely attractive, making VA loans one of the best choices for homebuyers in San Diego.
2. Your Credit is Not Exceptional
To use a VA loan, in most cases, you don’t need an exceptional credit score. In fact, the VA loan does not have a specific credit-score requirement; they leave that to the lenders and institutions making the loans. As long as all other factors meet the VA’s requirements, lenders can write VA loans to applicants with low scores and even poor credit.
That does not mean all lenders are issuing VA loans to low-credit buyers. It simply means that lenders have flexibility, as least for credit requirements, when it comes to VA loans. It also means that if you are rejected for a VA loan in San Diego by one lender because of credit, you can always apply to other groups and, perhaps, find one that will approve your mortgage.
3. You Need a Lower Interest Rate
As we have already established, homes in San Diego, while not the most expensive in the country, are costly. Because of the high price, it’s even more important that buyers secure a low-interest loan, which is possible with a VA loan in San Diego.
Let’s look at how interest rates can play out in a high-priced market…
Using a VA loan for a single-family house in San Diego County, you can borrow as much as $879,750, as this is the conforming loan limit for our area. For simplicity, let’s assume a 30-year mortgage of $800,000 with a rate of 3.8%, which is roughly the average rate according for a 30-year fixed according to Zillow.
At 3.8%, the principal and interest (P&I) payment is about $3,728, which translates to $44,736 a year and, over the course of 30 years, a total cost of $1,342,080.
But the average rate for a VA loan is even less. Zillow (among other sources), says the average interest rate for a 30-year VA loan is about 3.2%. This reduces the P&I payment to $3,460 a month, good for $41,520 a year. This means over $3,000 less in mortgage costs over a single year.
But the real benefits are realized over the full life of the loan. Assuming you keep the mortgage to completion, you will have paid a total of $1,245,600. This means you saved over $96,000 by simply reducing the interest rate by just 0.6%. Imagine the savings if you reduce it by a full 1% or more!
Interest rates depend on many factors, including personal factors like credit scores, downpayments, and income. But, in general, a VA loan has a lower interest rate for many (but not all) buyers. Because San Diego homes are so costly, a low interest rate is crucial. This makes a VA loan even more attractive.
4. You Want Easy Refinancing in the Future
Refinancing can be an important option for San Diego homeowners. With the high cost of homes, which means a high balance on the mortgage, taking advantage of lower interest rates, which could occur in the future, is important.
With a VA loan, you can take advantage of a special program called the Interest Rate Reduction Refinance Loan, or IRRRL. It’s sometimes called the “VA streamline,” although this is not the official name. Essentially, it allows borrowers to refinance from one VA loan to another with less documentation and a more convenient and relaxed approval process. If there is no cash-out and the interest will be reduced, a VA-loan borrower can refinance with no income, assets, or credit checks. This makes refinancing in San Diego fast, efficient, and affordable.
5. You Want to Limit Closing Costs
With the cost of homes in San Diego, as well as the overall cost of living, it’s essential that your home purchase be as affordable as possible. With a VA loan, which is already affordable thanks to lower downpayments, you can secure financing while enjoying low closing costs.
The VA limits how much lenders can charge in closing fees. Escrow and attorney fees are also limited, so veteran can enjoy a more affordable purchase.
Get the Affordable VA Loan You Have Earned!
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