6 Mistakes to Avoid When Using a VA Loan in California

The Bridgepoint Funding website has more than a dozen helpful tutorials related to VA loans, written specifically for California home buyers. As a mortgage company that specializes in VA loans, we do our best to educate borrowers on this important benefit.

This guide takes a different approach. Instead of highlighting the things you should do when using a VA loan to buy a home in California, we will examine some of the potentially costly mistakes you should avoid.

6 VA Loan Mistakes to Avoid

A VA loan can help clear the path to homeownership by eliminating the need for a down payment or mortgage insurance. But there’s a right and wrong way to approach this financing option. Here are some mistakes to avoid along the way.

1. Not understanding the full benefits of a VA loan.

Many veterans in California who are eligible for VA loans don’t even realize the full benefits that this program offers. For instance, according to a 2023 report from Realtor.com:

“While many Veterans are aware they have access to Veterans Affairs home loan benefits, which honor their service by making homeownership more accessible, just 3 in 10 know they can use that benefit to buy a home with a zero down payment, according to a new national survey of Veterans and active duty service members.”

Military members earn their VA loan benefits (and other benefits) by honorably serving their nation. So they deserve to be well-informed about those benefits.

Some of this responsibility falls onto your shoulders as well. You owe it to yourself to research and learn about the unique features and advantages offered by the VA loan program.

Here’s a quick summary of those benefits:

• No down payment required for most borrowers
• Lower interest rates compared to conventional loans
• Flexible credit requirements
• No private mortgage insurance (PMI) required
• You can use your VA loan benefit multiple times
• You can refinance with limited paperwork and no appraisal

Learn more about these benefits

2. Not obtaining your Certificate of Eligibility.

Before you spend hours researching the VA loan process, you should make sure you are eligible to use this program.

For starters, check out our guide to VA loan eligibility requirements in California. After that, you’ll want to request your Certificate of Eligibility (COE) from the Department of Veterans Affairs. You cannot apply for a VA loan without this document.

3. Skipping the pre-approval process.

House hunting without a pre-approval letter is like putting the cart ahead of the horse. You might end up wasting valuable time by looking at homes that are far outside of your price range.

It’s usually better to get pre-approved for a California VA loan first, before you even start shopping for home.

Pre-approval is like a financial screening process. The mortgage lender will review your credit score, income, debts and other factors to determine how much you are able to borrow.

You’ll also receive a VA loan pre-approval letter that shows sellers you’ve been checked out by a lender already. This can increase the chance of having your offer accepted, which is exactly what you want.

4. Shopping for a fixer-upper home.

The Department of Veterans Affairs has specific requirements for properties purchased with a VA-backed mortgage loan. They refer to them as Minimum Property Requirements, or MPRs. Many of the MPRs relate to general health and safety issues.

In short, the home has to be habitable for the occupant and move-in ready, in order to qualify for a VA loan. This is the bare minimum when it comes to property condition.

Minor repair issues are generally not a problem, as these can often be corrected prior to closing. But if you’re looking at homes that need serious work, a California VA loan probably isn’t the right financing option for you.

5. Choosing a lender that doesn’t specialize in VA loans.

Overall, VA loans are similar to regular conventional mortgage loans. But they differ in some important ways.

For example, VA loans require a specific type of appraisal that’s different from the ones used for conventional mortgages. The program also requires additional documentation from borrowers, along with a funding fee that helps sustain the program.

If you work with a California mortgage company that’s not familiar with VA loans, you could be in for a bumpy experience with possible delays to your closing date. It’s far better to work with a company that handles VA loans on a daily basis — like Bridgepoint Funding!

6. Not budgeting for closing costs.

A VA loan allows you to buy a home in California with no down payment whatsoever. This is one of the only loan programs that offers 100% financing for eligible borrowers. You can also avoid mortgage insurance, which can result in a lower monthly payment.

But some borrowers fail to budget for closing costs, and therefore have a hard time qualifying for a loan.

In California, VA loan closing costs generally range from around 3% to 5% of the purchase price. On a median-priced home in the Golden State ($765,000), closing costs could easily amount to more than $20,000. So the best time to start saving is right now.