California VA Loan Guide: Everything a Home Buyer Needs to Know

July 8, 2024
Last updated:
July 8, 2024
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Each year, thousands of military members and veterans in California use the VA loan program to either purchase or refinance a home.

VA loans in California allow eligible home buyers to finance the entire purchase price without paying mortgage insurance. These features can benefit all home buyers, but they’re especially important in a state like California with higher than average home prices.

Here’s what you need to know about using a VA loan to buy a home in the Golden State.

VA Loan Usage in California

The U.S. Department of Veterans Affairs (VA) home loan program is available to military members, veterans, and certain qualifying spouses. Because of this, it tends to be widely used in states that have a large military population. And that certainly applies to California.

California is one of the top states for VA loan usage, along with Virginia, Texas, Florida, and Georgia. San Diego County, in particular, records a high number of VA loans each year.

During 2023, nearly 20,000 VA loans were processed in the Golden State. Most of those were for purchases made by home buyers, with mortgage refinance making up a smaller portion.

The state of California is home to a number of major military installations, including:

  • Naval Base San Diego: This is the principal homeport of the Pacific Fleet, housing numerous ships, submarines, and aircraft.
  • Marine Corps Base Camp Pendleton: Located between Los Angeles and San Diego, this is one of the largest Marine Corps bases in the US.
  • Fort Irwin National Training Center: Situated in the Mojave Desert, this base is a major training center for the Army.
  • Edwards Air Force Base: This base is known for its role in aerospace research and development.
  • Naval Air Weapons Station China Lake: This is a major center for research, testing, and evaluation of weapons systems for the Navy.

California military home loans can benefit home buyers and homeowners from these and other installations, not to mention all the veterans who served in the past and currently reside in California.

Who Is Eligible for the Program?

As mentioned above, you have to be connected to the military in some way to qualify for a VA-guaranteed mortgage loan. This program rewards military members (and certain spouses) for their service, by facilitating the purchase of a home.

Generally speaking, the following groups are eligible for a VA loan in California:

  • Active-duty military who have served for at least 90 days
  • California National Guard and Reserve members who have completed at least six years of regular service or 90 days of active duty
  • Surviving spouse of a military person who died in the service or due to a service-related disability

You can learn more about the requirements for VA loan eligibility in California and request your Certificate of Eligibility through the website.

Benefits for California Home Buyers

The VA home loan program offers veterans and active-duty service members a chance to buy a home with no down payment, a competitive interest rate, and no private mortgage insurance.

Home buyers all across the country can benefit from this combination of features. But they become even more important in an expensive state like California.

If you use a conventional loan to buy a home in California, you’ll probably have to make a down payment of at least 3%, and maybe 5% or higher. The current median home price in California is around $787,000.

Here’s what a 3% to 5% down payment would be for that price range:

  • At 3% down: $23,610
  • At 5% down: $39,350

If a home buyer chose to put 20% down on a median-priced home (perhaps to avoid paying mortgage insurance), the median down payment would amount to more than $157,000.

So even on the low end, a home buyer in California would need to pay more than $23,000 to cover the down payment on a conventional loan. And a lot of folks would struggle to save that much.

But with a VA-guaranteed home loan, you could buy a house in California with:

  • No down payment
  • No mortgage insurance
  • Less than perfect credit

The U.S. Department of Veterans Affairs website does a good job summarizing these important VA home loan benefits in California. Here’s how they explain it on their website:

“You don’t need a down payment. None whatsoever. Most mortgage programs, such as FHA and conventional loans, require at least 3.5 percent to five percent down … With a VA loan, you also avoid steep mortgage insurance fees. At 5 percent down, private mortgage insurance (PMI) costs $150 per month on a $250,000 home, according to PMI provider MGIC.”

Minimum Requirements for Borrowers

Let’s start with the things you don’t need when using a VA loan in California.

You don’t need to make a down payment. This is a major benefit that bears repeating. The program allows you finance 100% of the home purchase price, with no upfront investment.

But you’ll probably have to pay closing costs, and these can add up to thousands of dollars.

On average, California home buyers who use VA loans tend to pay 2% to 5% of the purchase price in closing costs. So you’ll want to start saving up for these costs as soon as possible, so you can clear this hurdle.

The good news is that the VA loan program allows borrowers to use gift money from an approved donor (like a family member) to help cover their closing costs.

You’ll also need to have a manageable level of debt and sufficient income to cover your monthly mortgage payments and all other recurring expenses. But VA loans in California tend to be more flexible in these areas, when compared to conventional mortgage financing.

Most VA borrowers have to pay a funding fee. Depending on the loan parameters, home buyers typically pay a one-time fee ranging from 1.25% to 3.3% of the borrowed amount. You can pay it up front as part of your closing costs, or roll it into the loan and pay it over time.

If you can check all of these boxes, you’re probably well-qualified for the program.

How to Use a VA Loan to Buy a Home

We’ve talked about the benefits of California VA loans and the types of borrowers who might be eligible for the program.

Next, let’s explore the steps you would need to take to buy a home with a VA loan in California:

  1. Eligibility check: First off, you’ll want to review the eligibility page on the website. It explains the specific requirements for active-duty military, National Guard, Reserve members, and veterans.
  2. COE: Once you’ve reviewed the basic eligibility information, you can apply for your Certificate of Eligibility (COE). You can request this document through the VA’s website or, for a faster approach, have your mortgage lender do it for you.
  3. Pre-approval: When you get pre-approved for a loan, you’ll find out how much you are able to borrow. This allows you to focus your home search within a specific price range.
  4. Making an offer: Once you find a home that meets your needs and falls within your budget, you can submit a standard purchase offer. Your agent will help you with this important step.
  5. Home appraisal: In California, all homes purchased with a VA loan must be appraised to determine the current market value. The appraiser will also make sure the property meets the VA’s minimum standards for safety, structural soundness, and habitability.
  6. Underwriting: A mortgage underwriter will review the property information, paperwork, and borrower credentials to make sure the loan meets all of the VA’s requirements.
  7. Closing: Once you get a green light from the underwriter, you’ll pay your finalized closing costs, sign a bunch of documents, and get the keys to your new house.

It’s important to fully understand the VA loan process in California for 2024 to ensure a successful transaction.

How Sammamish Mortgage Can Help

As a mortgage company that specializes in VA loans in California and serves the entire state, we can help you with many of the steps listed above. This includes everything from the initial COE request to the actual loan funding.

We can also answer any questions you have about using a VA loan in California. The best-case scenario is to enter the mortgage and home buying process with a solid understanding of how it works. Our knowledgeable loan experts can help you accomplish this. Reach out to get a rate quote and get pre-approved for a mortgage to buy a home!

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