As a veteran, you have a few options to help you purchase a home. Among those choices are the VA Loan and the CalVet Home Loan. The similarity between the two is that you must be a veteran in order to qualify for the program. However, the CalVet program is only available to residents of California whereas the VA loan is a nationwide program and is open to all veterans. There are many other differences between the two programs which you should understand in order to make the right decision for your family.
Type of Financing
The type of financing offered has some similarities and differences between the two programs. For instance, they both offer 100% financing. This means you do not need a down payment for either program. However, there are a few differences regarding the maximum loan amount you may borrow. For example, the CalVet loan cannot exceed $521,250 no matter where you live in California – this is the maximum loan amount anywhere. The VA loan has different maximum loan amounts depending on the county the home resides. For example, the maximum loan amount in Los Angeles is $700,000 for a VA loan. This exceeds the maximum amount for the CalVet loan, which means you would be better off with the VA loan if you need the full loan amount of $700,000.
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How You Own the Home
A major difference between the two loan types is how you own the home. With a VA loan, you take ownership of the home right away, as you would with FHA and conventional loans. You sign a Deed of Trust and the home serves as the collateral for your loan. If you default, the bank takes possession of the home. With the CalVet Home Loan, you do not take ownership of the home right away. CalVet purchases the home and holds title to it. You then sign a Land Contract or Contract of Sale. This works much the same way as rent-to-own. You take ownership of the property when you completely pay the loan off. At this point, the home is transferred via a Grant Deed.
Where You Live
Both VA loans and CalVet loans require the home to be your primary residence. You must intend to live in the home when you purchase it. With a VA loan, however, you are free to move after a few years. You can keep the home and rent it out. You can even refinance the home loan you have on the home with the VA IRRRL program, reducing the interest rate, yet not have to live in the home. The CalVet program requires you to remain in the home as your primary residence for the duration that you hold the loan; there are no exceptions.
Taxes and Insurance
A similarity between both loan programs is the tax benefits you receive. Even though you do not own the home outright with the CalVet loan, you can still write off the property taxes and mortgage interest you pay. The same is true for the VA loan. They both offer you the benefit to lower your tax liability as a homeowner. With the CalVet loan, you might be able to secure a better deal on your homeowner’s insurance because of the group rate CalVet can obtain. Since they purchase many properties, they are able to work out a group discount rate for the insurance. This could serve to save you money in the end, as homeowner’s insurance can get costly.
Comparing the CalVet Home Loan Interest Rates
The one thing most borrowers care about is the interest rate. There is no way to tell ahead of time which loan program will offer the lower interest rate. VA loans have interest rates based on the mortgage-backed securities on the market. As you know, these rates can increase and decrease quickly. CalVet Home Loan interest rates work off the CalVet bond offering. Oftentimes, these rates are much lower than VA loans, but there are times when they increase higher than the standard market rate. You have to compare each loan program at the time you wish to apply for a mortgage to determine which one would offer you the best deal.
Determining which loan is right for you is a personal decision. If you wish to own your home rather than have a land contract for the next 15-30 years, the VA loan is the right choice for you. This is also true if you do not see yourself moving away and keeping the home to rent to others. If, however, your future is uncertain or you wish to own the home rather than have a land contract, the VA loan is a better choice for you.
The best way to make the right choice is to price out both options. At any given time, the VA loans could be much higher than the CalVet loans and vice versa. Knowing which loan program will save you the most money in the long run and provide you with the most secure product is what you should strive to achieve. This way you can make the right decision based on the input from several lenders as you shop around for the best deal. The bottom line is, however, that as a veteran, you are able to obtain a decent loan with no down payment as a thank you for serving our country.
