The loan limits for a VA loan with $0 down in 2009 in Orange County, CA are $737,500.  On October 10, 2008 the President signed into law the Veteran Benefit Improvement Act of 2008. This allowed for expanded $0 down financing limits through December 31, 2009. This is the highest the $0 down financing loan limit for a VA loan in Orange County, CA has ever been.

The timing was good for this law to pass, since financing for loan amounts formerly considered “Jumbo” financing, or loans over $417,000, had all but disappeared.  The previous VA loan limit was not enough to purchase a typical single family home in Orange County. But now, with these high loan limits, Veterans are able to buy in most areas of Orange County with no down payment. $737,500 will purchase a very nice home.

It is important for Orange County Veterans to first determine whether they are eligible for a VA loan.

Orange County, CA VA Loans are Full Income Doc

VA loans, like FHA and Conventional Fannie Mae and Freddie Mac loans, require full income documentation to qualify.  Really, all mortgage loans are full doc these days. This means that to qualify for a VA loan, besides having the property VA Entitlements and supplying a DD214 and then Certificate of Eligibility, the Veteran will need to provide the following items:

1. Paystubs for the most recent 30 days. These need to show a consistent income, whether it be an hourly wage or salary. Overtime will be averaged out over the past 2 years, as long as it is continuing at present.  The lender will be looking at the Gross income, before taxes and other deductions.
2. W2’s for 2007 and 2008, or the most recent 2 years. Again, the lender is looking for some consistency. There are situations where the lender can look at other factors if consistency is not apparent. Compensating factors are important in any loan file. A compensating factor can be any of the following: time on the job, good cash reserves, high FICO scores (over 740), low debt to income ratio’s.
3. 2 months most recent bank statements. Although VA does not require cash reserves, it can help the loan file if other areas are weak. Also, a VA underwriter will look for NSF’s on the bank statements, which would require a letter of explanation.

Some types of income are not taxed. When the lender is calculating debt to income ratios, these types of income can be “grossed up.” For example, on the LES, or Leave and Earnings Statement, BAS and BAH income can be grossed up 15%. BAS is Basic Allowance for Subsistence and BAH is Basic Allowance for Housing. If the lender is not experienced with VA financing, not knowing this could be the difference between qualifying and not qualifying for a loan.  For example, if a borrower gets $3,000 per month combined for BAS and BAH, the lender can qualify the borrower using $3,450 per month rather than $3,000 per month. ($3,000 x 115% = $3,450)

Advantages of a VA Loan versus FHA Loan for Orange County First Time Buyers

FHA is a great program and only requires 3.5% down payment. But for those who are eligible, VA does not require any down payment up to a $737,500 loan amount in Orange County and LA County.  Also, FHA has an aggressive mortgage insurance program as compared to a Fannie Mae or Freddie Mac loan. With a 3.5% down payment, an FHA borrower will have a monthly mortgage insurance payment equal to .55% of the loan amount divided by 12. This is essentially equal to having an interest rate that is .5% higher than the actual Note rate. For example, if an FHA borrower has an interest rate of 5.5%, their payment, including the mortgage insurance, is similar to having a 6% interest rate. VA does not have monthly mortgage insurance. This will save the VA borrower approximately $46 per $100,000 of loan. This means on a $300,000 loan the Veteran will save $137 per month in payment versus a similar FHA loan. Or on a $737,500 loan, the Veteran will save $338 per month.

So for those Orange County or LA County home buyers who are Veterans and thinking of buying a home, this is a great time to take advantage of the the low home prices and high loan limits. The first step is to talk to an Orange County VA loan Expert.

Authored by Tim Storm, an Orange County, CA Loan Officer – Please contact my office at Frost Mortgage Lending Group for more information about an Orange County, CA home loan.  877-786-4243 x 7.

www.OCFHALoans.com

Contact us for your Orange County VA Mortgage:

Call our office today and see how we can help you and your family. Ask for your Free First Time Home Buyer Report.

877.786.4243 x 7 | tstorm (at) ochomebuyerloans.com