VA Loans in San Diego – 100% Financing

San Diego VA LoansWhat is a VA Loan? – San Diego

VA loans are one of the few ways in San Diego to be able to buy a house with 100% financing and are offered by most San Diego Mortgage Brokers.  The only other loan program that offers 100% financing is the USDA loan program which I will discuss in a future post.

VA loans in San Diego are available through VA approved lenders and insured by the Department of Veterans Affairs.  The VA loan program allows 30 year fixed, 15 year fixed and even 5/1 and 3/1 ARMs.   VA loans in San Diego do not have mortgage insurance like FHA loans, but they do have an upfront funding fee that can be added to the loan amount.  The funding fee is a percentage of the loan amount and is determined by what type of veteran the borrower is, how much of a down payment they have, and if the veteran has used a VA loan in the past.  Please refer to the table below:

 

VA Loan Funding Fee Table – San Diego

Who is Eligible for a VA Loan? – San Diego

In order to be eligible to use a VA loan for a San Diego Purchase, the borrower must be active duty personnel in the United States military or a Veteran.  Non-veterans are not eligible borrowers on VA loans in San Diego unless they are the spouse of an eligible veteran.  To determine eligibility the veteran would need to obtain a Certificate of Eligibility.  In order to qualify to receive the certificate of eligibility the veteran must meet the guidelines below.

  • Active-duty veterans discharged during WWII or later, without a “dishonorable” discharge.
  • Active-duty veterans with at least 90 consecutive days of service during major conflict.
  • Peacetime veterans and active duty personnel with at least 180 days of consecutive service.
  • Enlisted veterans who entered the military after 1980 or officers who entered the military after 1981 and who have served at least 2 years.

The Certificate of Eligibility lets the lender know that the veteran is eligible for a VA home loan, how many times (if any) the veteran has used that eligibility which will affect the VA funding fee, and up to what amount the VA will insure the loan.

How Are VA loan Amounts Calculated? – San Diego

The 2012 San Diego County VA loan limit is set at $477,000 for a 100% loan to value purchase, but allows loan amounts greater than that with a down payment.  Let’s look at an example of using a VA loan in San Diego to purchase a home priced at $675,000 based on the maximum loan amount and down payment calculations VA loans require.

Purchase price:                    $675,000

Down Payment:                   $53,129

Base Loan Amount:             $621,871

VA Funding Fee:                 $9,328 (based on 1.5% of the loan amount due to the down payment being more than 5% and first time use)

Total VA Loan Amount:    $631,199

Qualifying for a VA loan in San Diego

The VA Loan approval process for a purchase in San Diego includes a review of the veteran’s credit history, employment and other factors that show whether or not the veteran can qualify for a VA insured loan. VA loans are not credit score driven, but a good credit score can help a veteran obtain a better interest rate.  A low credit score is not necessarily a disqualifying factor for a VA Loan in San Diego, but many lenders have a cut off at a 620 FICO score.

San Diego VA Loans have a maximum debt to income ratio of 41%, but if the file is run through an automated underwriting system and receives an approval, then the debt to income ratio can be much higher.

Interest Rates and Closing Costs for VA Loans in San Diego

The VA does not set rates for the VA Loan program.  The interest rates are set by the individual lenders that are offering the VA Loan program.  As stated above, the better credit score a veteran has, the better interest rate they will receive.  Typically, a credit score of 740 is going to give the veteran the best interest rate.  The VA Loaninterest rates are about the same as conventional loans.

The VA does put limitations on what fees the veteran is allowed to pay for a VA purchase loan.  They break up the fees as allowable and non-allowable.  Typically, the non-allowable fees are paid by the seller, real estate agent, or lender.  Here are a few of the most common allowable VA closing cost fees:

  • 1% origination fee
  • Reasonable discount points
  • VA appraisal
  • Recording fees
  • Credit report fees
  • Pre-paid items
  • Insurances (hazard and flood, when required)
  • Flood zone determination
  • Title insurance, title examination, title endorsement, title policy, title search
  • VA funding fee

Some of the non-allowable fees for a VA Loan in San Diego are:

  • Doc prep, underwriting, loan application, admin or processing fees
  • Assignment fees
  • Interest rate lock-in fees
  • E-Mail, fax, copying, postage,
  • Notary fees
  • Escrow fees or charges
  • Tax service fees

One option that many San Diego Mortgage Brokers and Bankers forget to mention to the veteran is that if no origination fee is charged the veteran may pay non-allowable closing costs up to 1% of the purchase price. The veteran may also pay a combination of non-allowable fees and origination fee, provided that the combination does not exceed 1% of the purchase price.

  • There are also some fees the veteran may never pay:
  • Termite inspection fee for a purchase transaction
  • Broker fee
  • Brokerage fees or commissions charged by real estate agents or real estate brokers in connection with a VA loan
  • Any portion of the seller’s lien(s) or short sale fees
  • The cost of required repairs and inspections must be paid by the seller. The VA does not permit the veteran to pay for repairs other than minor termite damage repairs.

The VA Loan program in San Diego allows all closing costs and discount points to be paid by the seller, regardless of the amount. All additional seller contributions are limited to 4% of the lesser of the purchase price or appraised value.

If you are a veteran and have any questions concerning VA Loans in San Diego or would like to receive a free quote from a San Diego Mortgage Broker, please feel free to contact me. 

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