One of the decisions that we all make at some point is whether to rent a home or to buy a home. If you decide to buy a home, there is a great program for military veterans. The VA loan program is specifically designed to help you buy a house.
However, it’s important to get the best possible VA loan rate when you apply. Just like other home loans, the rate you end up paying depends on your credit situation and other factors. Getting the best possible rate can mean a savings of thousands of dollars over the life of your home loan.
How Much Could You Save with a Good Interest Rate?
One of the best resources you can use is a mortgage calculator. A good mortgage calculator can help you figure out how much you can afford, as well as provide you with information about what you will pay in interest.
It may not seem like much, but a 1 percent difference in your VA loan interest rate can go a long way over the usual 30-year term of a mortgage. Consider that you borrow $200,000 for 30 years.
If you have an interest rate of 4.37 percent, over the course of 30 years you will pay $159,273.08 in interest. What happens if you pay just 1 percent more, or get an interest rate of 5.37 percent? The result is that your total interest paid is now $202,954.89.
A slightly higher interest rate results in you paying $43,681.81 extra over the course of a 30-year loan. Plus, your monthly payments are higher. With the larger interest rate, you pay $1,119.32 a month in principal and interest, and with the lower 4.37 percent interest rate your monthly payment is $997.98. That’s a difference of $121.34 in your monthly cash flow.
If you take advantage of the VA home loan program, make sure that you do what it takes to improve your credit score ahead of time so that you qualify for the best interest rate. Just think about what a difference more than $43,000 could make in your lifetime finances!
Tips for Improving Your Credit Score
Even if you decide that buying a home is the right move for you, and that you want to use the VA loan program to help you, it’s important that you plan ahead. Your first step is to figure out your credit score, and then take steps to improve it so that you qualify for the best interest rate available.
Some of the basic things you can do to improve your credit score include:
- Pay all of your bills, especially your loans and credit cards, on time and by paying the full amount required.
- Reduce your debt by paying more than the minimum on your credit cards. It’s best if you pay off your credit card purchases at the end of each billing cycle.
- Don’t apply for new credit if you plan to seek approval for a mortgage within a few months.
You can also qualify for the best possible VA loan rate by saving up for a good-sized down payment, and taking steps to show that you have a regular income that matches with the mortgage you want to get. With a little planning and effort, you can get a good deal on your VA loan, and save tens of thousands of dollars over your lifetime.
Equal Housing Opportunity. The Department of Veterans Affairs affirmatively administers the VA Home Loan Program by assuring that all Veterans are given an equal opportunity to buy homes with VA assistance. Federal law requires all VA Home Loan Program participants – builders, brokers and lenders offering housing for sale with VA financing – must comply with Fair Housing Laws and may not discriminate based on the race, color, religion, sex, handicap, familial status, or national origin of the Veteran.