If you live in California and are eligible for a VA home loan you’re also eligible for a CalVet loan. Both programs are very similar in nature but there are times when the CalVet loan is a better choice than a VA mortgage and other times not so much. The advantage in today’s marketplace is the lower interest rates associated with a CalVet loan.
Are you eligible for a CalVet loan?
To be eligible, you’ll follow the very same eligibility requirements for a traditional VA home loan. If you’re a veteran of the armed forces who served on active duty for at least 90 days, you’re eligible. In addition, for members of the National Guard or reservists who have been ordered to active duty including Active Guard Reserves are eligible. You do not have to be a veteran from California but may be a veteran from any state in order to be eligible. CalVet loans, like VA loans, can only be used to finance a primary residence and cannot be used to buy a rental property.
How it Works
Land Contract. The process is a bit different compared to a VA-backed mortgage. With a CalVet loan, the CA Department of Veteran’s Affairs purchases the home and sells it to the veteran using a contract for sale, most often referred to as a land contract. With a land contract title is held by CalVet until the loan is retired as the veteran holds equitable title. With a VA loan, buyers obtain full legal title upon purchase.
Competitive Rates. Mortgage rates for CalVet loans are established by bonds issued by the California Department of Veteran’s Affairs. Because these interest rates are tied to the bond they will not change until the next bond issuance and are not affected by current market conditions. For example, as interest rates in general rise and the Fed continues to raise rates, the CalVet rate will remain the same. On the other hand, market rates can sometimes be lower than the current CalVet rate.
Farm and Ranch. Farm loans are offered for those who qualify as long as the property is a working farm and provides sufficient income for the veteran to qualify. Experience as a farmer is necessary as CalVet must determine the veteran can operate the farm or ranch on a “sound financial basis.”
The Bottom Line
In California, as in a few other states, there is an alternative to the traditional VA loan. Sometimes the CalVet loan is the better choice. If you are VA eligible you should give me a call and we can compare your options.