Photo by Luemen Carlson on Unsplash

Almost everyone knows that one very special benefit of serving our country is the mortgage loan available only to active duty and veterans of all branches of military.  These loans are guaranteed by the U.S. Department of Veteran’s Affairs and are available across the United States and commonly referred to as “VA loans.”

Here in California,  however, another special mortgage loan program exists to assist our military friends, called “CalVet.”  Many of its features are the same, but there are important differences and the purpose of this article is to help you understand what those differences are.

Title

The biggest difference between the two loan types is that the CalVet loan purchases the veteran’s home and then sells it back to him or her using a contract for sale.  In essence, the state of California is the owner and the purchaser (the veteran) holds equitable title.  With a VA loan, the veteran holds the deed and the legal title.

Eligibility

With a CalVet loan, only veterans who reside in the state of California are eligible, while VA loans are available to veterans nationwide, regardless of where they reside.

Loan Limits

Photo courtesy of Wikipedia

Loan limits are a little different as well.  CalVet loan limits have traditionally been higher than those for VA loans.  A couple of years ago the CalVet limit was $521,250 regardless of where in California the veteran was attempting to purchase. Statewide, the loan limit is 125% of FannieMae limits.  That means in San Diego, the maximum CalVet loan is currently a little over $800,000. VA loans, on the other hand, feature loan limits based on the location of the property.  In San Diego County the current loan limit is $690,000.  Good news, however.  As of January 1, 2020, VA loan limits go away nationwide.

Interest Rates

Interest rates charged for CalVet loans are typically a little higher than for VA loans.  As of this writing, the interest rates for CalVet loans range from 3.45% to 5.99% depending on loan term and the type of property being financed.  VA loans, on the other hand, are currently hovering around 3.5% for loans over $484,000 … 3.25% for lower loan amounts.

Owner Occupancy Requirements

CalVet requires owner occupancy – period. If occupancy changes, the note is called due and payable.

VA, on the other hand, only requires owner occupancy for one year. After that, the veteran may place a tenant in the property.  However, the veteran’s ability to use VA benefits again may be adversely affected until the property is sold or the VA loan is refinanced into a conventional loan.

There you have the highlights of the two veteran-focused loan programs.  If you have additional questions, contact me or our preferred VA specialist: Petya McLaughlin of Guaranteed Rate.

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