California VA Loan Update for 2021, With Limits, Rates and More

This year, 2020, was a big one for California VA loans. According to the Department of Veterans Affairs, more VA loans were originated in 2020 than the two previous fiscal years combined — 1.2 million loan, to be exact.

Below, we’ve created a comprehensive update for borrowers who are considering this program. It covers the California VA loan limits for 2021, recent mortgage rate trends, program requirements and more. Let’s start with one of the most recent changes, which has to do with loan limits.

Update on California VA Loan Limits in 2021

For some home buyers, California VA loan limits are now a thing of the past. Historically, this program imposed specific limits for all borrowers across the board. These caps vary by county, because they are based on median home values. The more expensive counties have higher VA limits, while more affordable areas have lower ones.

But all of this changed last year, with the passage of new legislation. The Blue Water Navy Vietnam Veterans Act, which took effect at the start of 2020, eliminated the loan limits for many California borrowers who use this program.

Here’s the short version of those changes:

• Full: If you’ve never used a VA loan before, or if you’ve used on but paid it off with the sale of the home, you probably have “full entitlement” remaining. In this case, there are no longer any government-imposed limits that apply to you. The lender will determine how much you can borrow based on your income, debts, etc.
• Partial: If you have an existing VA loan in place on your current home, or if you paid it off but still own the house, you probably have a remaining or diminished entitlement. In this case, your mortgage amount will be limited to the conforming loan limits for your county (if you want to avoid making a down payment).

So in 2021, California VA loan limits will only apply to those borrowers with partial entitlement remaining. Borrowers with full entitlement no longer have an official borrowing limit.

This subject can be confusing, especially for those who are new to the VA’s mortgage guarantee program. The easiest way to find out where you stand, in terms of borrowing capacity, is to contact a member of our team. We specialized in this program and can answer any questions you have about the California VA loan limits and requirements for 2021.

Mortgage Rates Hovering at Historic Lows

That covers the 2021 VA loan limits for California. (And if you have questions about them, be sure to let us know.) Let’s move on to talk about another important topic for mortgage shoppers — interest rates.

When it comes to VA mortgage rates, there has been nothing but good news lately. Rates declined steadily during 2020, hitting one record low after another. Just when we thought they couldn’t drop any lower, they proved us wrong by shattering another record.

When this article was published, in mid-December, the average rate for a 30-year fixed home loan was hovering around 2.7%. That was the lowest average in more than 50 years, to date. A significant milestone, to say the least.

And there’s even better news for those seeking a VA loan in California in 2021. Recent data revealed that borrowers who use VA loans tend to get slightly lower mortgage rates (on average) than those who use conventional or “regular” mortgage products.

According to an analysis conducted by Polygon Research, borrowers who use the VA program have the lowest interest rates and origination fees of all the major loan types. To determine this, the research firm analyzed data collected under the Home Mortgage Disclosure Act (HMDA).

Granted, mortgage rates can vary from one borrower to the next due to a number of factors. But it’s nice to know that those borrowers who use the VA loan program tend to qualify for competitive rates.

In 2021, California VA loan rates could start to creep upward. It’s hard to imagine them sinking much lower than where they are now, and several forecasters have predicted an uptick going into 2021. So if you’re considering a home purchase, you might do it sooner rather than later.

Other Requirements Will Stay the Same in 2021

Aside from the important change to California VA loan limits (mentioned above), most of the requirements for this program will remain the same in 2021.

If you want to use a VA-backed mortgage loan to buy a house in California, you must first obtain your Certificate of Eligibility, or COE. This document comes from the Department of Veterans Affairs. It shows lenders that you are, in fact, eligible for the program.

Home buyers must also be able to show that they have sufficient income to cover their monthly mortgage payments, along with all other recurring debts. This is true for all types of home loans — FHA, VA and conventional.

Learn more about the loan process

Questions? Bridgepoint Funding specializes in the VA loan program. Our knowledgeable staff can answer any questions you have about buying a home in California through the VA mortgage program. Please contact us to get started.