The Numbers You Need to Know When Buying a Condo with a VA Loan

Buying a condo with a VA loan can be a stressful experience. Really, buying any property with any type of financing can be a stressful experience. So how do you take as much of the stress out of the home buying process as possible? By educating yourself. Gain a thorough understanding of the steps involved in buying a home and don’t skip a step. The more steps that are skipped, the more stressful your home buying process can be.

When it comes to buying a condo with a VA loan, the first thing to understand is that not all condos qualify for VA financing. Do not go out and look at a bunch of condos that may not even be VA eligible. And make sure you understand all of the numbers. By numbers, we mean you should have a good understanding of the full payment range of each price point you are aiming for and understand how those payment numbers will fit into your budget. And make sure to get a good estimate of how much money will be needed to complete the purchase. As a Veteran using the VA loan program, it is possible to buy ANY priced home with $0 down payment now that there are no VA loan limits for 100% financing. But there are still closing costs to deal with. Find out how much to expect for closing costs and prepaid expenses. If you don’t have enough money to cover the closing costs and prepaid expenses, there are strategies for that. More on this later.

What is the Payment for a $500,000 Orange County VA Approved Condo?

There is a big disconnect in what a first time home buyer thinks a payment will be for a home and what the actual payment will be when all items are included. So what makes up the full mortgage payment, or “PITI”? (and HOA)

P = Principal
I = Interest
T = Taxes on the property
I = the second “I” is for insurance on the property.
HOA Dues = Homeowners Association Dues.

P&I

Everyone knows about P&I, or the Principal and Interest portion of the mortgage payment. A $500,000 30 year fixed VA loan at an interest rate of 3.5% would have a Principal and Interest payment of $2,245. The interest rates move up and down based on many factors. If interest rates were at 4.5% then the P&I would be $2,533. So knowing where interest rates are will help you to know the P&I range you will be looking at for your home.

T=Property Taxes

Property taxes in California are typically estimated using a factor of 1.25% of the purchase price divided by 12. Based on this assumption, a $500,000 condo would have property taxes of $521. ($500,000 x 1.25% / 12 = $521). Property taxes vary from city to city and even from condo project to condo project. For example, a VA approved condo in Ladera Ranch may have a tax rate of 1.7% versus a VA approved condo project in Aliso Viejo with a tax rate of 1.05%. At a $500,000 price, the property taxes in this Ladera Ranch condo would be $708 per month. The same priced condo in Aliso Viejo (using the 1.05% tax rate) would be $437 per month. Be aware of how property taxes can affect your total payment.

I=Homeowners Insurance

Homeowners insurance for a condo is less than it would be on a Single-Family detached home. Condo insurance is only needed to cover that happens “inside the walls” of your condo. The HOA will have insurance that covers what happens outside the walls of your condo. It some cases the HOA may even have insurance that will cover “inside the walls”, although this is rare. The insurance industry calls a condo insurance policy an “HO-6” policy. A good estimate of how much condo insurance will cost is to use .15% of the loan amount divided by 12. But as in all cases, numbers will vary depending on the property and the amount of insurance you may choose to have that is above and beyond the minimum requirements for the loan. In the case of a $500,000 loan amount, we will estimate the monthly insurance to be $62. ($500,000 x .15% / 12 = $62)

HOA=Homeowners Association Dues

HOA, or Home Owners Association dues. When you buy a condo there will be HOA dues. These can vary from condo project to condo project depending on several factors. The HOA dues are affected by the amenities in the condo project. If the condo project has a nice pool, gym, park, etc then the HOA dues may be more expensive than for a condo in a “no-frills” project that has little required upkeep. Typical HOA dues for condos in Orange County can vary from $250 up to as much as $600 or more depending on the property.

Total PITI & HOA

So in the case of our $500,000 condo, the total PITI & HOA would range between $2,994 (using 3.5% rate, 1.05% tax rate and $250 HOA dues) and $3,900 (4.5% rate, 1.7% tax rate and $600 HOA dues). That is a wide range and is a big reason why you should be working with a local Orange County VA lender who can make sure you have the right numbers before you make an offer on a home. Your VA lender should have an intimate knowledge of the local market, know how to quickly verify if a condo is VA approved, and be able to provide a personalized VA Total Cost Analysis that will break down all of the numbers for you, including the full payment and a breakdown of the closing costs.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in the VA Loan program. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation. My direct line is 949-829-1846. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios that will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA Approved Condos in Aliso Viejo, CA

Finding VA approved condos in Aliso Viejo, CA is far easier than Veterans realize. Currently (Nov 22, 2019) there are 36 VA approved condos for sale in Aliso Viejo with prices ranging as low as $336,990 to as high as $795,000. And there are over 78 VA condo projects within the city of Aliso Viejo. The interesting thing about Aliso Viejo is that some condos don’t look at all the way you would think a “condo” would look. Especially with some of the higher-priced condos in Aliso Viejo, they look more like a detached single-family home than a condo. So how do you know if a property is a condo or a Single Family Detached home? Why does it matter? Will this affect your VA loan?

Detached Condos in Aliso Viejo

As an example, the currently highest priced VA approved condo for sale in Aliso Viejo is a free-standing detached property located at 11 Hawaii Drive, Aliso Viejo. The property is within the Islands development and has HOA dues of $208 per month. It is a beautiful development and awesome home. But looking at the home from the street you would never know it is legally a “condo”. And not understanding the difference in a condo and a Single Family home is important because it does affect the financing in many cases.

An Orange County Veteran taking advantage of the VA loan program, which allows for $0 down payment at any purchase price (that’s right, there are no VA loan limits in 2020) needs to make sure when they are searching for properties that any condos they are interested in purchasing are within a VA approved condo development. How do you narrow your Aliso Viejo condo search down to condos that are VA approved? By clicking on the Aliso Viejo VA Approved Condo link on the www.OrangeCountyVeteransHomes.com website. It is still important to verify a condos VA loan eligibility prior to making an offer, but this condo search feature will dramatically speed up the search.

Why Live in Aliso Viejo?

Aliso Viejo is a fairly new development. But it’s old enough that the Mello Roos is mostly gone. Aliso Viejo has one of the lowest property tax rates in Orange County while also being one of the newer and more beautiful cities with great schools, parks, restaurants, and shopping. It is also only minutes from the beach. For how “clean” Aliso Viejo is, it is surprisingly affordable for those Veterans using the VA loan program with No Down Payment.

VA Loan PreApproval Before Making Offer

The first step in your VA approved condo search should be to get PreApproved for a VA Loan. You do not want to get too deep into your condo search unless you have a thorough understanding of the numbers and how they will fit into your budget. All too often a Veteran (and this goes for any new home buyers) will think they have a solid idea of the numbers only to find midway through the process that either payment will be too high or they don’t have enough money to close the transaction. To eliminate stress and disappointment, working with a local Orange County VA Loan Officer will help to make sure you have all the answers to your questions. You will want to see a VA Loan Total Cost Analysis (TCA) based on your goals and budget. The TCA will help answer questions you didn’t even know you had prior to seeing the TCA. Not only the basics, like how much money will be needed to close the purchase ($0 down payment but there are still closing costs) and what is the complete breakdown of the payment but also how will you quickly pay your loan down once you are in the home. And does it make sense to “buy” the interest rate down or use a lender credit to cover the closing costs? And how can the transaction be structured as a “VA No-No” where the Veteran not only has no down payment but also doesn’t have to pay for the closing costs. These are all questions you will want to have answered BEFORE you make an offer.

No VA Loan Limits for Condos in 2020

There will be no VA loan limits in 2020, which is big news for Orange County, where condo prices have often been higher than the VA loan limit.

What does this mean for Orange County Veterans hoping to buy a home with no down payment? It means they will no longer be limited based on the purchase price of the property they want to buy.

Will this really affect Condo Buyers?

The newer areas of Orange County, especially some properties near the coast, sometimes look like single-family detached homes but are legally condos. A quick search of VA approved condos in the city of Irvine finds 8 “condos” currently for sale (as of November 5, 2019) that are priced above the 2019 Orange County VA loan limit. The highest price “condo” in Irvine looks very much like a single-family home and is priced at $970,000. A Veteran buying that property based on 2019 VA loan limits of $726,525 would need a down payment of $60,860. If the Veteran waits to close escrow in 2020 when the VA loan limits are eliminated will need $0 down payment. This eliminates what can be a barrier to entry for some home buyers who have good income but do not wish to deplete their savings.

VA Loan PreApproval BEFORE Making an Offer

Purchasing a home is not easy. Especially with VA financing, it is important to get PreApproved for your VA loan before making an offer on a home. As part of the VA Loan PreApproval process, the lender will pull the Veterans Certificate of Eligibility (COE), which verifies whether the Veteran has enough Entitlement for the home purchase. Quite often the lender can retrieve the COE within minutes. But sometimes it’s not so easy and the last thing anyone wants is to find out there is a hang-up with VA loan eligibility after getting an offer accepted.

As part of the PreApproval process, the lender will also review income documentation, credit and assets before issuing loan approval. The VA Loan Officer will also (or should be able to) go over several different loan scenarios with the Veteran to make sure the numbers will fit in the budget. A home buyer does not want to jump into a purchase without having a thorough understanding of the numbers. The mortgage payment is made up of more than just Principal and Interest. There are also property taxes, homeowners insurance, and in the case of a condo, Homeowners Association Dues. Depending on the price of the home, the “TI” portion of the PITI can add over $1,000 to the monthly payment.

Is it Difficult to Find VA Approved Condos in Orange County?

Now that the Veteran is approved, the fun part begins, right? Searching for a home can be as easy as clicking on properties for sale, looking at photos, and then contacting your Realtor for help viewing the properties and making an offer. But in the case of VA financing and condos, it is important to understand that the condo you buy must be in a VA approved condo complex. And there are not many real estate agents who know how to quickly determine whether a condo complex is VA approved. It is common for the listing agent to have no clue. And even when asked they will defer to the management company of the Homeowners Association, who also does not know in more cases than not. VA condo approvals can be 10 or 20 years old in many cases. If there hasn’t been a recent VA buyer in a complex, then without some research, the assumption may be made that a complex is not approved. This is where it is important to be working with Orange County real estate professionals who specialize in VA buyers and financing.

By limiting the condo search to only those condos that are already VA approved, the condo search for a Veteran will be far easier, faster, and less stressful. This is why using www.OrangeCountyVeteransHomes.com as your home search website, your timeline for finding a VA approved condo will be much shorter than for someone who searches ALL Condos in Orange County and then has to figure out which condos they can purchase with a Zero Down VA loan.

Authored by Tim Storm, an Orange County VA Loan Officer specializing in the VA Loan program. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation. My direct line is 949-829-1846. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

VA Buyers Agent Helps Veterans Buy Homes

VA Buyers Agent Specialists are rare in Orange County, CA. The VA loan program is not widely used in Orange County compared to other areas like San Diego, where Camp Pendleton is located. Because Orange County does not have a large active military base, there are not as many real estate agents who are comfortable working with a buyer using VA financing. However, Orange County does have a large population of retired military Veterans who do want to take advantage of their VA benefit to buy a home for up to $679,650 with No Down Payment. So why should you seek out a VA Buyers Agent?

Why Veterans Should Seek out a VA Buyers Agent

As you may have noticed, 2018 has been an extremely competitive market. Multiple offers are everywhere. Unless real estate agent knows the in’s and out’s of VA financing and understands what it takes to get a VA offer accepted, you may be spinning your wheels making offers on homes only to get rejected for no apparent reason. In many cases, the Listing Agent doesn’t understand the VA loan process or has the “old rules” of VA financing stuck in their head. It used to to be that the buyer could not pay “non-allowable” closing costs. Many Listing Agents believe that their seller will be forced to pay the VA loan buyers closing costs, which is not true anymore.

In many cases, the sellers are concerned about $0 down or low down offers compared to a Conventional loan buyer with 20% down payment or more. They are concerned about the VA appraisal coming in low and don’t understand their options if this does happen. Other common concerns are: Is a rent back allowed, or “can I buy furniture from the seller and pay through escrow?”

There are many questions that come along with a VA purchase that are slightly different than a Conventional loan, which makes the purchase contract and negotiation process different as well. And this is why it is important to use a VA Buyers Agent when you are preparing to purchase a home in Orange County while using a VA loan. Your VA Buyers Agent will have the knowledge to quickly alleviate any concerns the Listing agent and seller may have with the VA loan program.

VA Approved Condos

Orange County is an awesome place to live. With that awesomeness comes fairly high home prices. But this is also the reason that VA allows 100% financing to $679,650, which is a higher limit than most counties. For example, the 100% financing limit in Riverside and San Bernardino counties is $453,100 (in 2018). As you begin your home search you will find that many desirable properties are condos rather than Single Family homes. With some properties the distinction between condo and Single Famly home is slight. Some condos look like single Family detached homes. And some homes that look like condos are actually Single Family, even if they are attached. Figuring out which properties are eligible for VA financing is not easy, especially if you are not working with a VA Buyers Agent.

Single Family homes are always eligible for VA financing. But a condo must be in a VA approved condo complex. And this is where it gets tricky. Determining whether a condo is in a VA approved condo complex is not easy. It takes time and research. A VA Buyers Agent has already spent time researching what properties are VA approved and which are not, which will save their VA buyers time and frustration. There is an easy way to find VA approved condos in Orange County. And there is a hard way. A VA Buyers Agent knows the easy way.

Why is it Difficult to Find VA Approved Condos

The Multiple Listing Service (MLS) is not tied in with the VA website which has the list of VA approved condos in each city and county throughout the country. The Listing Agent “could” make a not on the listing that they will accept VA financing, but they rarely happen because, in many (if not most) cases, the Listing Agent is not even aware if their condo listing is VA eligible. From my experience, in many cases, the HOA management company is not even aware of the answer to this question. To make matters worse, the VA website doesn’t even list most condo projects by their name. Most VA approved condos are listed by their Legal Tract Number. Cross-referencing Legal Tract numbers with project names is not easy. But for a VA Buyers Agent who has already done this research and has the VA approved Tract number lists for each city in Orange County, it is quick.

www.OrangeCountyVeteransHomes.com makes it easy for a home buyer to find VA approved condos for sale in Orange County. Simply click on the link for the city you are interested in and the results will come up. For example, below are the links to a few cities in Orange County.

Aliso Viejo Approved VA Condos for Sale

Laguna Niguel Approved VA Condos for Sale

Mission Viejo Approved VA Condos for Sale

Anaheim Approved VA Condos for Sale

Huntington Beach Approved VA Condos for Sale

Authored by Tim Storm, an Orange County VA Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation. My direct line is 949-829-1846. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.

Find VA Approved Condos in Orange County, CA the Easy Way

Do you know how to find VA approved condos for sale in Orange County, CA? There is a hard method, which is the way the most VA loan buyers and their agents go. But there is an easy method. And the difference between the hard way and the easy way is so drastic that you would think everyone would use the easy method. Why don’t they?

Why is it Important that the Condo be in a VA approved Condo Project?

If you plan to use VA financing to purchase a condo, then VA requires the condo project to be approved prior to closing the loan. The condo approval process is tedious, there is an expense, and takes time. Most sellers are not willing to wait around for anywhere from 30 to 90 days to find out if VA will even allow a loan to close on their home. For that reason, if you are searching for a Condo to buy and you are using VA financing, you will want to limit your search to only those condos that are already in a VA approved condo complex.

If the condo project is approved, it means that VA has already reviewed the associations budget, CCR’s, Articles of Incorporation, insurance, and ownership percentages (investor versus owner-occupants). If it is not approved then either VA reviewed and rejected the condo association, or the project has not been submitted for approval.

The Hard Method for Finding VA Approved Condos

First, here is a quick summary of what most Veterans and their agents do to find condos that are VA approved. The real estate agent or Veteran will look at ALL condos that meet their parameters, sometimes sorting through hundreds of properties. They will carefully view each property and narrow the list down to the 5 or 10 properties they like. Then, the real estate agent will try to determine if any of the properties are eligible for VA financing. Since most condo projects are NOT VA approved, this is a frustrating process and a waste of time. So now let’s show you the easy way.

The Easy Method for Finding VA Approved Condos

First, work with a real estate agent and lender who actually specialize in working with Veterans and understand how to quickly narrow the VA approved condo search to only those condos projects that are already VA approved. An experienced real estate agent will already have a list of the VA approved condo projects and will quickly be able to provide a list of VA approved condos for sale in whatever city the Veteran is interested in. Instead of sending the Veteran a list of 100’s of condos, most of which are not VA approved, the EASY METHOD involves the Veteran receiving a list of VA Approved condos to choose from. This saves the frustration of finding out that 5 of the properties you are interested in are not even eligible for VA financing.

Of course, using www.OrangeCountyVeteransHomes.com is a great way to begin the process of finding what VA approved condos are for sale. Just click on the city you are interested in and check out the results. The results are listed in order of highest prices to lowest price. It is still important to have an experienced VA specialist real estate agent double check to make sure the condo you are interested in is still on the VA approved list because sometimes VA has reason to suspend an approval.

VA Loan Limit for 100% Financing is $679,650

The VA Loan limit for 100% financing in Orange County in 2018 is $679,650. This means that as a VA loan eligible Veteran, you can buy a VA approved condo or Single Family home for $679,650 with no down payment. Still, there are closing costs and prepaid expenses involved in every purchase and having a solid estimate of those costs before you make an offer is a critical step in purchasing a home. The closing costs and prepaid expenses involved in purchasing a $650,000 property can easily be more than $10,000 and cannot be financed into the loan. There are ways to use “Lender Credit” to cover the costs by adjusting your interest rate higher. At times, and depending on if the market is a “sellers” market or a “buyers” market, it is possible to negotiate to have the seller pay some or all of the closing costs. In a seller’s market, which is what Orange County has been in for the first half of 2018 (and since 2012), it is difficult to get a seller to pay closing costs. Think about it. If there are multiple offers on a home, what are the chances of a seller accepting an offer where they have the pay for the buyers closing costs? Know your numbers before you make an offer. Get a solid estimate as part of your VA loan PreApproval before you start looking at homes.

Do you Know What Price You Should Be Searching For?

The biggest disconnect that most home buyers have at the beginning of the home buying process is understanding the connection between payment and purchase price. If your income is $40,000 per year then you shouldn’t be looking at homes in the $650,000 price range.

Understanding the numbers early in the process is critical, and to do that you should be working with a VA loan specialist. A loan officer who specializes in financing will be able to prepare custom loan scenarios based on your qualifications and payment comfort range. You’ll also be able to get PreApproved for your VA loan before you begin making offers. PreApproval for a VA loan is Free, whether you are ready to buy now or need to wait 12 to 24 months.

Authored by Tim Storm, an Orange County VA Branch Manager and Loan Officer specializing in VA Loan. MLO 223456. – Please contact my office at Fairway Independent Mortgage Corporation. My direct line is 949-829-1846. www.OrangeCountyVALoans.com. I will prepare custom VA loan scenarios which will be matched up to your financial goals, both long and short-term. I also prepare a Video Explanation of your scenarios so that you are able to fully understand the numbers BEFORE you have started the loan process.