Homebuyers who are veterans, whether they are active or not, can receive assistance in buying a new home through several mortgage programs created solely for U.S. military veteran borrowers. Both the U.S. Department of Veteran Affairs (VA*) and the California Department of Veterans Affairs (CalVet) offer veteran loan programs to eligible military veterans.
For veterans living in California, two popular home loan programs are available – VA loans and CalVet loans. Both offer special financing and benefits for veterans but there are some significant differences between these programs. This comprehensive guide will compare VA and CalVet loans to help California veterans determine which is the better fit for their home buying needs and goals.
VA Loan Overview
VA loans are mortgage loans guaranteed by the U.S. Department of Veterans Affairs. They feature favorable terms like:
- No down payment required
- No monthly mortgage insurance
- Flexible credit guidelines
- Low interest rates
- Option to roll closing costs into loan amount
VA home loans can be used to purchase or refinance primary residences, second homes or investment properties. Loan amounts are based on the VA county limit for the property’s location.
VA loans are provided by private lenders but backed by the VA, who guarantees a portion of the loan in case of default. This VA guarantee helps veterans qualify more easily.
CalVet Loan Overview
CalVet home loans are a state-level program in California operated by the California Department of Veterans Affairs. Benefits include
- 100% financing with no down payment
- Below market interest rates
- Low fees – only 1% origination fee
- Relaxed underwriting guidelines
CalVet offers several different loan products for purchasing primary residences in California. They also offer loans for farms, mobile homes and home improvements.
CalVet loans are funded by the sale of state bonds approved by voters The state assumes all lending risks
Key Differences Between VA and CalVet Loans
While VA and CalVet loans share similarities, there are some important distinctions:
Interest Rates
- VA rates vary by lender based on market rates. CalVet rates are set by the state.
Fees
- CalVet charges a 1% origination fee. VA allows lenders to offer no-fee options.
Loan Approval
- CalVet approves loans directly. VA loans go through private lenders.
Home Types
- VA finances more property types. CalVet limited to primary residences in California.
Cash-Out Options
- VA allows cash-out refinancing. CalVet does not offer refinancing options.
Title Ownership
- CalVet holds legal title until loan paid off. VA gives full title rights immediately.
Maximum Loan Amount
- VA uses federal limits. CalVet limits based on state bond funding.
These key differences can significantly impact the home buying experience.
Pros and Cons of VA Loans
VA loans offer nice perks, but also have some limitations to be aware of:
Pros
- Available nationwide from many lenders
- No down payment or mortgage insurance required
- Can be used for more property types
- Multiple refinance options available
- Full legal ownership from day one
Cons
- Can’t be used outside U.S. or for second homes/investment properties in other states
- Loan fees can vary widely by lender
- Credit score and income requirements apply
- VA funding fee is required
- Home must meet VA minimum property standards
Pros and Cons of CalVet Loans
Similarly, CalVet loans have unique advantages along with restrictions:
Pros
- Usually lower interest rates than VA loans
- Low 1% origination fee on all loans
- Qualify with lower credit scores than VA
- Can be used to purchase mobile homes
Cons
- Only for properties in California
- Legal title held by CalVet until payoff
- No refinancing allowed
- Limited to primary residences
- Loan amounts constrained by state bond funding
Which Program is Better for California Veterans?
There’s no definitively “better” option. The right loan depends on your specific home buying situation and financial profile.
Here are some key questions to help you choose:
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Are you buying in California? CalVet only works within state.
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What will your down payment be? VA requires none.
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What credit score range are you in? CalVet approves lower scores.
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What loan amount do you need? Compare CalVet and VA county limits.
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Do you need cash-out refinancing later? Only VA allows this.
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Will you keep the home long-term? CalVet title issues don’t matter as much.
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Is a lower interest rate most important? CalVet rates can be lower.
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Do you want flexibility in fees? VA offers wider fee options.
As long as you’re buying a primary residence in California, either program can be an excellent option with perks veterans won’t find with conventional loans.
If you’re focused on getting the absolute lowest rate and you plan on staying put for many years, CalVet may get the edge. But for most borrowers, the flexibility, wider eligibility, larger loan amounts, and full ownership offered by VA loans make them preferable.
Be sure to get quotes from both programs when buying in California. Comparing total costs and loan terms will help identify the best loan choice.
VA Loan Eligibility Requirements
To qualify for a VA home loan, you must meet the following requirements:
- Served at least 90 days of active duty during wartime or 181+ days during peacetime
- Received an honorable or general under honorable conditions discharge
- Have enough income and credit qualify
Your total debt, including the new mortgage, should not exceed 41% of your gross monthly income. Minimum credit scores range from 580-640 for most VA lenders.
If your service was shorter than the minimum time, you may still be eligible if you received a service-related disability. Certain spouses, reservists and National Guard members may also qualify.
The VA will issue you a Certificate of Eligibility confirming your service meets requirements for the loan program.
CalVet Loan Eligibility Requirements
Eligibility for CalVet loans is similar but a bit more lenient:
- 180 days of active duty service unless discharged for disability
- Discharged under conditions other than dishonorable
- California residency
- Sufficient income and credit
Credit score requirements are lower, with minimums as low as 580. Total debt ratios can be higher as well.
Like the VA, CalVet also issues a Certificate of Eligibility. Veterans need both a COE from CalVet and the VA when using the program.
How to Apply for VA and CalVet Loans
Applying for both loan programs involves a few common steps:
Pre-approval
- Get pre-approved to confirm your eligibility, affordability and loan amount.
Shop for Homes
- Work with a real estate agent to find homes in your price range.
Make an Offer
- Submit an offer once you find the perfect property. Avoid agreeing to seller financing or loans outside VA/CalVet.
Underwriting
- During underwriting, the lender will verify your details, income, assets, credit, etc. to approve your loan.
Closing
- Final loan documents are signed at closing, then mortgage payments begin about 30 days later.
CalVet has dedicated loan specialists to assist with applications. VA loans go through regular mortgage lenders. Be sure to ask lenders about their VA loan experience and volume.
The process is very similar for both programs to get you to closing quickly on your dream home!
Finding the Best VA or CalVet Lender
Shopping lenders is crucial to getting the best loan deal. Here are some tips for finding an excellent VA or CalVet loan lender:
- Get at least 3-5 rate quotes to compare.
- Ask about origination fees – VA lenders can offer zero-fee options.
- See if lenders credit bonus points to lower your rate further.
- Look for companies that specialize in VA/CalVet loans. It’s their expertise.
- Check reviews and ask for referrals from other veteran borrowers.
- Verify the lender is well-rated and licensed to originate mortgages in your state.
- Ask about turnaround times – you want a lender that can close fast.
- Make sure they have dedicated VA/CalVet loan specialists on staff.
Taking the time to shop lenders will help you land the very best loan terms.
Next Steps for Potential VA or CalVet Loan Borrowers
If you’re eligible for VA or CalVet financing, here are some recommended next steps:
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Get pre-approved to start viewing homes immediately.
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Attend a home buying class to fully understand the process.
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Search online real estate listings to get to know your market.
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Start meeting with listing agents who are experienced with VA/CalVet buyers.
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Research down payment assistance programs that may supplement VA/CalVet loans
VA Loans* in California
VA loans are provided to eligible U.S. veterans (and in some cases, spouses of veterans) through approved lenders by the U.S. Department of Veteran Affairs.
The following is a brief look at the details of a standard VA loan in California:
VA loans* are home mortgage options offered by the U.S. Department of Veterans Affairs to veterans, service members, and some military spouses. They do not require down payments, are issued through private lenders, and are insured by the VA. Over 22 million VA loans* have been provided since the program was first created in 1944.
To be considered eligible as a veteran, borrowers must either have served 90 consecutive days of active service during wartime, 181 days of active service during peacetime, six years in the National Guard or Reserves, or be the spouse of a service member who died in the line of duty.
Although there are no income requirements, borrowers must be able to prove they have secure employment and reliable income. Borrowers must also prove they have enough residual income left over to pay for major expenses. Additionally, borrowers must have a credit score of 620 or above and cannot have a debt ratio higher than 41 percent in order to qualify.
VA loan interest rates tend to be much lower than the interest rates on conventional loans and even FHA loans. They do vary based on the current market as well as on the borrower’s financial history, the duration of the loan term, and the amount being borrowed. Generally, the interest rates fluctuate between 3.75 and 5 percent.*
There are loan limits to how much an eligible borrower can take out using a VA loan*. These limits are based on where the borrower lives in California. Depending on where the borrower is purchasing a house, the loan limit currently ranges from $453,100 to $679,650.
Unlike conventional loans, VA loans do not require a down payment. Even though qualified borrowers may not have to pay a down payment, they also may not be required to pay mortgage insurance, which is typically required. There are funding fees that can be rolled into the overall loan. This funding fee varies. Service members who were disabled during their service do not have to pay a funding fee. Eligible first-time homebuyers are charged a lower funding fee than other eligible borrowers.
Compare: CalVet vs VA loans
The main difference is in how the titles of the properties are held
CalVet purchases the property the homebuyer desires. They then sell that property to the homebuyer using a contract of sale, which is also referred to as a land contract. This means that CalVet holds the legal title to the house that was bought using the CalVet mortgage and the homebuyer holds the equitable title, which is the right to obtain full ownership of the property.
Under the VA loan program, which is administered by U.S. Department of Veteran Affairs, the homebuyer receives the property’s full legal title and complete ownership right away.
Homebuyers who are U.S. military veterans should speak to one of our home loan specialists to find out whether they are eligible for either a VA loan* or a CalVet loan.
CalVet loans are given out to eligible veterans through approved lenders by the State of California.
The following is a breakdown of some of the commonly asked questions about CalVet home loans:
A CalVet loan is a loan that is insured by CalVet. This means that borrowers who are eligible for the CalVet loan program are less of a risk for lenders to approve, which in turn makes it easier for eligible borrowers to qualify despite potentially low reserves or poor credit. It also means that eligible borrowers may be able to secure favorable terms compared to other loan options. For example, CalVet loans often do not require a downpayment and are available at low-interest rates.
To be eligible for the CalVet loan program, homebuyers must be veterans of the U.S. military who have served on active duty for at least 90 days, whether during wartime or peacetime. This period of time does not include active duty for training purposes only. Service must have been performed under honorable conditions. Where the borrower entered their service does not matter. National Guard or Reserves veterans are also eligible.
Borrowers will need to meet the federal VA loan’s* standard guidelines as well. This includes having stable income and employment, and having a debt ratio no higher than 41 percent. Although the VA* has no credit score minimum, most lenders require a credit score of at least 600 to qualify.
CalVet loans offer fixed interest rates that vary based on the length of the loan term, the price of the house, and the amount of the down payment paid. Rates, though they are subject to change, are generally lower than current market rates.
There are loan limits to how much an eligible borrower can take out using a VA loan*. These limits are based on where the borrower lives in California. Depending on where the borrower is purchasing a house, the loan limit currently ranges from $453,100 to $679,650.
CalVet loans are available in 15, 20, 25, and 30-year loan terms* for single, multi-family, manufactured, and condo-style homes. Seller-paid closing costs are limited to 4 percent of the sales price. Some borrowers may not be required to pay a down payment. However, those that are required to pay a down payment (as a result of a low credit score or other factors), will typically pay a small percentage of the home’s price. An origination fee is charged on CalVet loans, as is an upfront funding fee, which can be wrapped into the loan.
What is the Difference Between a CAL Vet Loan and a VA Loan
FAQ
What is the difference between a CalVet loan and a VA loan?
Is a CalVet home loan worth it?
What is a cal vet loan?
What is the minimum credit score for the Cal Vet?
What is the difference between Calvet & VA loans?
SoCal VA Homes Although the underlying purpose of CalVet and VA loans — to provide Veterans with assistance in purchasing a home — are the same, there are a few key differences. Most notably, CalVet loans are handled using contracts of sale, which means that CalVet actually purchases the property and then sells it to you.
Is Calvet a good home loan program for California veterans?
For most California Veterans, the standard VA loan program will be the best option. But there are times when the CalVet program can get things done that VA cannot. Veterans in California have two great home loan programs to choose from- the CalVet home loan program and the VA loan program.
Will a Calvet loan reduce my VA loan eligibility?
If you’re buying a home using a CalVet loan and the guarantee actually comes from the VA, it may reduce your loan entitlement from the VA. Your CalVet and VA loan eligibility are restored once you’ve paid off or refinanced your CalVet mortgage into a loan from a traditional lender.
What is a VA loan in California?
This loan program is administered by the California Department of Veterans Affairs (CalVet) and aims to provide affordable homeownership opportunities to those who have served our country. What is a VA Loan? A VA loan, on the other hand, is a mortgage loan program that is guaranteed by the U.S. Department of Veterans Affairs.