At the outset it should be noted that CalVet is mandated by the State of California to make home loans to California veterans. There is no minimum credit score required, no overlays and no inflexible underwriting matrices. In terms of risk assessment, the loan simply has to make sense and benefit the veteran.
Before delving further into the CalVet Home Loan Program, let’s take a moment to explore what CalVet is and what it does.
When many clients hear CalVet they think of Jean-Marie Calvet and the French winery that bears his name. Unfortunately there’s no Merlot served at the institution we’re writing about today. The CalVet we’re discussing is simply California’s version of the United States Department of Veteran Affairs. The agency is tasked with providing the State’s aged or disabled veterans and their families with rehabilitative, residential, and medical care services; providing veterans with direct low‑cost loans to acquire farms and homes; and providing aid and assistance in presenting the veteran’s claims for federal, state, and local veteran related benefits.
CalVet is organized into three divisions: the Veterans Homes division, the CalVet Home Loan program (CalVet program), and the Veterans Services division (Veterans Services). Veterans Services administers programs and activities that are not related to veterans residential care homes or the CalVet program.
Now that you know a little about CalVet, let’s turn to the subject at hand; CalVet Home Loans, also known as the CalVet program.
CalVet loans are designed to provide benefits and features that save money and provide protection for the servicemember’s home. Veterans seeking a CalVet loan will receive a competitive, below market interest rate with as little as no money down. Other features include:
- Liberal loan amounts that are determined by the veteran’s county of residence. For example, the CalVet limit in San Diego County is $776,187, and for San Francisco the limit is $795,187.
- A low, competitive interest rate of 3.75% – 3.875% on a 30 year fixed term.
- Annual percentage rates of 3.95% and 4.07% respectively.
- There’s no monthly mortgage insurance and no prepayment penalty.
- CalVet purchases the home and holds legal title. The home is then sold to the veteran by Contract of Sale (aka Land Contract). The veteran has equitable title.
- The veteran is required to occupy the property for the full term of the loan. Exceptions are made on a case-by-case basis.
- Funds are available for home loans on many types of residencies including Single Family Residences, Planned Unit Developments, Condominiums, and Mobile/Manufactured Homes in Parks (see the separate section below for more on Mobil/Manufactured Homes in Parks).
- The loan limit, down payment and interest rate on mobile/manufactured homes affixed to a permanent foundation is the same as non-mobile/manufactured homes.
- Zero Down Payment Loan Programs are available for VA guaranteed loans (CalVet/VA).
- 3% Down is required with the CalVet97 program.
- CalVet offers excellent insurance benefits for fire, earthquake and flood to protect the veteran’s investment. This is made possible by the group rate CalVet receives by insuring all of its loans with CalVet’s preferred carriers.
- CalVet charges a Funding Fee of 0% – 3.3% of the loan amount. In some instances the Funding Fee can be financed.
- Rehabilitation Loans are also available. This enables the borrower to purchase a home in need of repair and fund the repair costs, with only 5% down, plus closing costs.
- CalVet also offers Construction Loans permitting the veteran to build the home of their dreams, with only 10% down, plus closing costs.
- Farm loans are offered on working, income producing farms. The farm, as a stand alone entity, aside from the owner, must produce sufficient income to service the debt and related ownership costs.
Mobile/Manufactured Homes In A Rental Park
- The loan limit on a Mobile/Manufactured home in a rental park is $175,000.
- The down payment on a Mobile/Manufactured home in a rental park is 15% for a used doublewide, and 15% for a new single wide. For a new doublewide the down payment is 10%.
- CalVet will not fund a Mobile/Manufactured home that’s over 20 years old.
- The interest rate on a Mobile/Manufactured home in a rental park is 6.5% (6.71% APR).
So what’s the takeaway? Sidwell finds that our CalVet loans are the preferable product for clients in need of rehab financing or construction financing. Most clients building a home have to obtain two loans: A construction loan and a permanent loan (this also results in the borrower incurring two sets of loan fees). CalVet allows the veteran to obtain one loan that covers both the construction phase and permanent phase of the financing – an option that’s considerably more attractive.
In terms of a purchasing a home to remodel, CalVet may also be the best deal. Most lenders won’t even consider financing a fixer, and if they do, it’s an expensive loan with a large down payment and additional costs. The veteran is likely to save significantly by purchasing and rehabbing through CalVet. The process is straightforward. CalVet will purchase the home in an “as-is” condition. Funds will then be advanced for approved repairs or refurbishment as the work is completed. A detail description of the repairs or improvements is submitted with the loan application and cost estimates. The additional loan amount will be based on these costs, and again, paid as the work is done. The veteran will have 180 days to complete the refurbishment in most cases.
So there you have it. In Sidwell’s opinion, if you’re a veteran planning to build a home, or purchase a fixer and rehab, it pays to take a close look at what CalVet has to offer.
Until the next post … may health and happiness abound!