Are you looking to purchase or refinance a home in California?
Check out the Latest New California Home Mortgage Loans! Valor Lending Group has got you covered!
Valor Lending Group can help you with the ins and outs of today’s new home mortgage loans! We are standing by for your call today!
What you will learn:
- California Home Loans
- Two major categories
- Owner-occupied
- Investment (non-owner occupied)
- Two major categories
- Choosing the suitable home loans for you
- California Home Loan options
- Conventional Home Loans
- Conforming Home Loans
- Non-conforming Home Loans
- What a Jumbo Loan is
- How you qualify for a Jumbo Loan
- Government Loan
- FHA Loans
- VA Loans
- USDA Loans
- Non-Qualified Mortgage (“Non-QM”) Loans
- Bank Statement Loans
- Asset Depletion Loans
- No-Tax-Return Investment Property Loans
- Hard Money Home Loans
- Consumer Hard Money Bridge Loans
- Owner Occupied Business Purpose Hard Money Loans
- Investment Property (Non-owner occupied) Hard Money Loans
- What a Typical Home Loan looks like
- Debt-To-Income (DTI) Calculation
- Underwriting
- Appraisal
- Finding the best California Home Loan Lenders
- FHA Loans | Home Loans
- FHA Construction Loans
- Conforming | High Balance Loans
- Conforming | High Balance Highlights
- Jumbo Loans
- Jumbo California Loan Highlights
- VA Home Loans
- VA Home Loan Highlights
- Recap of Our Products
- Additional programs we offer
California Home Loans
If you’re looking to purchase a home in California using the best home loans, you will probably need to finance that home. Or, if you already own a home, you may want to refinance your current home loan to get a better rate or to pull equity (cash) out of your home to make home improvements.
California home loans fall into two major categories:
(1) Owner-occupied
(2) Investment (non-owner occupied)
There are many similarities, but some key differences are described below.
If you’re looking to purchase or refinance a California home loan for a residential 1-4 unit property, here’s everything you need to know about finding the best home loan options.
Choosing The Right Home Loan For You
When choosing the best home loan option for your situation, the primary question is how best to demonstrate your ability to repay the loan. On owner-occupied, 1-4 unit residential properties, the ability to repay is based on a borrower’s income.
The income of a salary and hourly employee is determined by reviewing tax returns, W-2s, and 30-day pay stubs. Self-employed income can be verified using bank statements and profit & loss statements.
Current liquid assets to make payments over 60-72 months determine a high-net-worth individual’s ability to repay.
To learn more about qualifying for non-owner occupied properties, check out no-tax return investment property loans, hard money loans, and commercial property loans.
What Are My California Home Loan Options?
The first step to finding the best Arizona and California home loans is understanding the available options. Depending on credit, down payment, and income, many excellent home loan programs are available for salaried, hourly borrowers, self-employed, and real estate investors.
Home loans generally fall into three main categories:
- Conventional Home Loans (conforming and non-conforming);
- Government loans
- Non-Qualified Mortgages (Non-QMs).
1) Conventional Home Loans
Conventional home loans are mortgages not insured by the federal government. Within traditional loans, there are two categories: conforming and non-conforming.
(a) Conforming Home Loans
Firstly, conforming loans meet Fannie Mae’s and Freddie Mac’s underwriting guidelines. Those government-sponsored enterprises then buy, repackage and sell the loans as securities in the secondary market.
Conforming loans are often called “agency loans” because they meet the credit and government underwriting matrices Desktop Underwriter (DU) for Fannie Mae or Loan Product Advisor (LP) for Freddie Mac. The maximum conforming loan limits vary by California counties (click the links to check out those loan limits).
Agency loans are not directly backed by the US Government but indirectly through government-sponsored enterprises Fannie Mae and Freddie Mac. Agency loans, sometimes called “vanilla loans,” are the most conservative and have a shallow risk of default.
(b) Non-Conforming Home Loans
Secondly, non-conforming loans have loan amounts higher than the maximum limits established by Fannie Mae and Freddie Mac for conforming loans. The agencies do not guarantee they will buy or re-sell non-conforming loans in the secondary mortgage market. There are specific investors, hedge funds as well as other entities for these types of loans.
If it is a jumbo loan, the loan amount exceeds the conforming loan limits. Jumbo loan terms can vary widely in terms of rate and down payment, but the best jumbo loans have very competitive rates. These are great options for borrowers who purchase or refinance in a high-value area.
(c) What is a jumbo loan?
First, a Jumbo Loan can be used as a mortgage option when properties are too expensive for a conventional conforming loan. The limits are determined by the Federal Housing Finance Agency (FHFA). If you exceed the loan limit for your county, you need a jumbo loan.
Check your county limit here: California Conforming Loan Limits by County.
Furthermore, jumbo loans are called non-conforming conventional mortgages and are considered high-risk loans for lenders because Fannie and Freddie do not guarantee the loan. Meaning the lender is not protected in the event of default by the borrower.
Finally, a fixed interest rate or an adjustable interest rate is typically available.
How do I qualify for a jumbo loan?
- As little as a 10% down payment
- Typically require a minimum of 660 Credit Score.
- Max 50% debt to income ratio. If you have more significant cash reserves, the lender may be more flexible on DTI.
- Cash reserves are typically required in the amount to cover 6 to 12 months of PITI payment.
- More than one appraisal could be required.
2) Government Loans
Government loans are issued or backed by the US federal government, and this protects the lender from risks of default. This, in turn, allows government loans to have some of the best rates available and more relaxed qualification requirements than typical conventional or Non-QM loans.
(a) FHA Loans
These loans are government-backed through the Federal Housing Administration (FHA). They also allow for the smallest down payment of all loans, 3-3.5%, or even no down payment when utilizing a down payment assistance program. The county loan limits will determine how much you can borrow. You can find your county loan limits depending on where in California the property is located here (also required is mortgage insurance, which is around 1% of the loan amount). FHA loans are an incredible option for borrowers with a lower credit score and low down payment.
(b) VA Loans
These are government-backed loans through the US Department of Veteran Affairs (VA) and offer incredible rates and terms to veterans, active duty military, reservists, and unmarried surviving spouses. VA loans offer financing up to 100% of the reasonable value of the property, no mortgage insurance, and no down payment of up to $1,500,000. Not only are there VA financing options the best California home loan for the purchase, but they have a unique refinance program called the Interest Rate Reduction Refinance Loan (IRRRL). These are incredible offerings for the men and women who serve our country.
(c) USDA Loans
These government loans are backed by the US Department of Agriculture (USDA). This loan program has no down payment requirement, competitive rates, or mortgage insurance. This is an excellent option for borrowers in a rural, USDA-approved area.
3) Non-Qualified Mortgage (“Non-QM”) Loans
Non-Qualified Mortgages (“Non-QM Loans”) have different underwriting guidelines than a typical conventional or government-backed loan. Non-QM loans provide self-employed borrowers and real estate investors with an alternative income qualification method.
Qualified Mortgages are prohibited from having “risky” loan features such as interest-only payments, negative amortization, balloon payments, terms beyond 30 years, or excessive points and fees. Thus, anything with one of these features would be a non-QM loan.
Significantly, non-QM loans for owner-occupied properties (i.e., primary residence, second and vacation homes, etc.) must still follow Dodd-Frank’s Ability-to-Repay (ATR) Rule. Using tax returns and financing for non-conforming loans through alternative methods, you can acquire financing for conforming loans.
(a) Bank Statement Loans
Bank statement loans have become the best California home loan option for self-employed borrowers to purchase or refinance a home loan. Bank statement loans are for self-employed and non-salaried persons who make sufficient income to support a mortgage payment but whose tax returns don’t accurately reflect this.
To determine monthly income, traditional mortgage lenders require tax returns, W-2s, and paycheck stubs. For salaried and hourly borrowers, the lenders look at gross income for qualifying purposes. But for self-employed borrowers, traditional mortgage lenders look at net income, the adjusted gross income shown on tax returns. This puts self-employed borrowers at a disadvantage.
With bank statement loans, lenders still want to ensure borrowers can repay their mortgages. They use bank statements to verify income as opposed to tax returns. Self-employed borrowers can document their ability to repay based on business deposits into their personal or business bank accounts, i.e., their actual cash flow.
This is an incredible and expanding area of mortgages that levels the playing field for self-employed borrowers, providing the opportunity to qualify without tax returns.
(b) Asset Depletion Loans
Like bank statement loans, a borrower’s ability to repay must be documented with asset depletion loans. However, the ability to repay is calculated based on a borrower’s net worth and liquid assets, not monthly or yearly income.
If a person has very strong assets but limited income, then an asset depletion loan would be a good fit for them. Instead of looking to annual income to demonstrate the ability to repay, asset depletion lenders will look at a borrower’s total liquid assets and divide them by 60-72 months. If this amount is sufficient to cover the monthly mortgage payment (and all other debts), a borrower can get qualified for the loan.
(c) No-Tax-Return Investment Property Loans
No-tax-return investment property loans are the best Arizona and California home loan option for real estate investors, which allows qualification based entirely on the cash flow of the property being financed. If the rental property is cash flow positive, that will constitute sufficient qualifying income.
Because these loans are for investment properties only (non-owner occupied), lenders are not required to document a borrower’s ability to repay. However, lenders still want to ensure their loan will be repaid, and they do this by looking at the income of the subject property and not the borrower.
Sometimes called “landlord loans” or “rental loans,” no-tax-return investment property loans do not consider a borrower’s income in the traditional sense. Instead, the cash flow of the property is the income factor.
Whereas traditional mortgage lending requires tax returns during the loan approval process, no-tax-return investment property loans do not. With these loans, real estate investors can purchase or refinance a property with no employment required, no personal income considered, and no debt-to-income ratio developed.
4) Hard Money Home Loans
Some homeowners are familiar with hard money consumer bridge loans, aka “bridge money,” in the context of purchasing a home while waiting for their departing residence to sell.
All “bridge” loans are hard money loans. Hard money loans are the best Arizona and California home loan solution for temporary funding needs because they come with a quick close and require minimal documentation.
(a) Consumer Hard Money Bridge Loans
Borrowers can use hard money consumer-purpose bridge loans to purchase a new residence while waiting for a departing residence to sell.
Consumer-purpose hard money loans also allow homeowners to cash out equity in their property to use for consumer purposes such as paying off personal debt or remodeling a primary residence.
(b) Owner-Occupied Business Purpose Hard Money Loans
Business-purpose owner-occupied hard money loans provide borrowers a way to access the equity in their property by cashing out equity available. These loans are a great way to put cash into a borrower’s pocket quickly.
(c) Investment Property (Non-Owner Occupied) Hard Money Loans
These are most often used when time is of the essence. Because of their speed, investment property hard money loans provide same-as-cash purchasing power for acquisitions and quick access to equity (cash) for cash-out refinance transactions.
What Does A Typical Arizona and California Home Loan Look Like?
The typical loan approval process takes 3-4 weeks for conventional, government, and non-QM loans. That said, hard money loans can close faster because this process involves comparing total income to all debts, underwriting and disclosure processes, and property valuation.
1) Debt-to-Income (DTI) Calculation
Loans on owner-occupied residential properties and lenders must document the borrower’s ability to repay. The above methods will determine the ability to repay.
DTI, or The debt-to-income ratio, typically includes a borrower’s monthly debts, such as car payments, student loans, minimum credit card payments, and the like. DTI also includes taxes, insurance, and HOA dues for the property, as well as the new loan’s principal and interest payment.
For example, assuming a monthly income of $10,000 and monthly debts of $5,000, the DTI Ratio = 50% ($5,000/$10,000).
Loan programs have different maximum DTI allowances, as high as 55%.
2) Underwriting
There is an involved process when underwriting real estate financing. All income and debts must be verified, credit and housing history verified and reviewed, and loan disclosures and legal regulations complied with.
Most loan officers employ full-time processors to coordinate with the lenders’ underwriters and third parties for required verification. If conditional approval has been provided and the underwriter has started the due diligence, then the loan is in underwriting. This process is when conditions will be satisfied. This process typically takes 1-2 weeks but sometimes longer for more complicated loan files.
3) Appraisal
Once the underwriting commences, the lender will typically order an appraisal. The appraisal process can also take around 1-2 weeks. The condition of the property and the most recent sales in the area will determine the property’s value. The sales approach involves the review of recently sold and comparable properties to assess value. The sales approach is the most common.
It can take a few days to assign a local appraiser and schedule an inspection. Then, a few days for the inspection and appraisal report to be returned to the lender. Finally, the lender’s quality control department will review the appraisal report because it can have errors. All of this adds up to about 1 to 2 weeks.
Receiving a satisfactory appraisal report with a sufficient home value is a condition of all lenders’ funding decisions.
Finding The Best California Home Loan Lenders
With so many varieties of home loan programs and the many variables and nuances within program categories, it is most often advisable to work with a loan broker who can advise and suggest the available options. Choosing a broker with knowledge of and access to all available loan programs is a good idea. In the end, you have to choose the right mortgage professional.
For example, if you think you might qualify for a bank statement loan but not a conventional jumbo loan. Speak with a loan broker who will narrow your options and set you up for successful loan funding.
Many lenders across all categories of California home loans do not have a retail channel. They prefer working with brokers.
That said, the best brokers spend many hours scouring thousands of loan programs, looking for the best rates and terms. Mortgage rates change often, and borrowers look for the best California home loan options. It is in the broker’s best interest to find the lowest rate and most favorable terms available for them.
Furthermore, watch out for excessive upfront fees. Reputable brokers do not collect origination fees unless the loan is funded. There are upfront fees such as a credit check, appraisal, or placing the funds into a separate performance escrow. That said, any high upfront fees and costs should be a potential red flag. Some lenders will require an application fee deposit because they conduct initial site visits or property evaluations but not often.
A) FHA Loans | Home Loans
FHA loans are government-backed through the Federal Housing Administration (FHA). They also allow for the smallest down payment of all loans, 3-3.5%, or even no down payment when utilizing a down payment assistance program. The county loan limits will determine how much you can borrow. County loan limits may vary depending on where the property is located. You can find the California Loan limits here (also required is mortgage insurance, which is around 1% of the loan amount). FHA loans are an incredible option for borrowers with a lower credit score and low down payment.
FHA Construction Loans
The FHA construction loan is a product that allows qualifying borrowers to use financing funds to purchase a lot, make all of the lot improvements, and construct the house. The best part of this loan is once the construction is completed, the loan rolls right into a 30-year fixed loan without having to qualify again. It is one loan that encompasses all phases into one loan!
B) Conforming | High Balance Loans
We are still funding Arizona and California home loans because we constantly scour for the best rates and terms in the industry.
Conforming | High Balance Highlights:
- Interest Rates are currently starting in the low 3’s w/NO ORIGINATION POINTS.
- Fast Turn Times for Approvals and Appraisals
- Primary Residence, Second Home, Investment Properties
*California SFR Primary Residence Purchase, $500k Loan, 720 FICO, 3.25% APR
C) Jumbo Loans
We have numerous Jumbo Loan Lenders in our portfolio with programs for all types of luxury property financing. Check out some of our best pricing below. We are currently funding up to 95% Max LTV:
Jumbo Loan Highlights:
- Up to 95% LTV with NO MI
- Flexible Guidelines
- Non-Occupant Co-Borrower + Gift Funds
- 15, 20, 25 & 30-year fixed interest rates.
- 3, 5, 7, & 10-year ARMs.
GIVE ME A CALL to get pre-approval for the program that fits your needs.
Whether you are buying your first home or deciding on where to retire, we will help you find the right mortgage for the right home.
D) VA Home Loans
It’s still a GREAT time to purchase or refinance with Valor VA Loans.
Finding the best VA Loans have never been easier. Valor has government-guaranteed VA Loans available to Veterans, active duty military, reservists, and surviving spouses. VA Loans offer financing up to 100% of a property’s value and feature fixed and adjustable rate loans. And there is NO down payment up to $1,500,000.00!
Valor VA Loan Highlights:
- 100% Financing
- Sellers can pay closing costs, up to 2 discount points
- Buyers can add up to $6,000 to their VA loan to install energy-efficient improvements.
- No monthly mortgage insurance
- Less restrictive qualifying terms
- Buyers still eligible even after a short sale
- Jumbo loans available up to $1.5 million
- Buyers can have multiple VA loans under certain circumstances.
- *Valor will reimburse your appraisal fee for loans above $300,000.
- **We give 5% of proceeds to a local Veteran charity on every VALOR VA Loan
**Valor Lending Group is committed to serving our Service Members.**
We look forward to the opportunity to serve you!
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