MIlitary families have access to arguably the most beneficial mortgages in the country.
VA loan rates are incredibly competitive.
More than that, VA loans require zero dollars down and waive PMI, unlocking the potential to own a home for millions of military personnel and veterans.
Since these loans are insured by the government but offered by private lenders, VA loan rates vary from company to company.
Read on to see what impacts VA loan rates and learn how to secure the best rates when you finance your home.
Best VA Loan Rates From Top Lenders
Before diving into the ins and outs of VA loan rates, here’s a quick overview of the best lenders.
Rates change and one company might offer you lower rates than the next, but the following 10 companies consistently offer the best VA loan rates.
|Veterans United||Best Veteran-focused||Get Rates|
|USAA||Best Total Package||Get Rates|
|Navy Federal Credit Union||Largest Credit Union||Get Rates|
|Quicken Loans||Best In-House Loan Servicing||Get Rates|
|JG Wentworth||Best Refinance Reduction||Get Rates|
|loanDepot||“No Steering” Bias Policy||Get Rates|
|Flagstar Bank||Best Full Service||Get Rates|
|Wells Fargo||Best Face-to-Face||Get Rates|
|PrimeLending||Best For VA Jumbo Loans||Get Rates|
|LendingTree||Best For Lender Matching||Get Rates|
What Affects VA Loan Rates?
As with any other mortgage, lenders look at a number of factors to determine your VA loan rates.
When you apply for your loan, you can expect the lenders to consider the following as they set out to determine your rates.
- Credit score: As you might expect, your credit score is the first place the lender will look to establish your VA loan rates. While the VA does not enforce a minimum credit score, some lenders do. A 620 is often required by many lenders. The higher your score is, the better VA loan rates you’ll qualify for.
- DTI: Your lender will use your back-end debt-to-income ratio to establish your ability to make payments, dividing your monthly debt by your gross income. The standard DTI is around 41%, but you might still find a loan with a higher DTI if your other credit factors are in good shape.
- Length of the loan: Whether you opt for a 15 or 30-year mortgage will affect your monthly payments and interest rates, which we’ll discuss in depth below.
- The market: Your VA loan rate will also be determined by the current housing market. Since private lenders issue these loans, they set the rates, which may change daily.
VA loans were created with the individuals who’ve served in the military in mind, with the goal of helping them to become homeowners.
Since these loans are backed by the guarantee of the US government, the requirements are far less stringent than conventional loans.
In addition to the factors above, the type of VA loan you opt for will play a part in determining your rates.
The terms of your mortgage mentioned below are likely to have an effect on your VA loan rates.
Adjustable Rate vs Fixed Rate Mortgages
When it comes to VA loans and other mortgage products, you get to choose whether you want a fixed rate, an adjustable rate, or a hybrid.
Each one approaches interest rates differently.
- Fixed rate: As the name implies, this type of mortgage lets you lock in an interest rate from day one, which will remain unchanged unless you refinance. This option provides you the most security, but may not grant you the best VA loan rates.
- Adjustable rate: An adjustable-rate mortgage, or ARM, is a bit riskier as rates are subject to change with the market. ARMs typically come with a better initial interest rate, though, and give you access to lower rates if the market improves. They also make you susceptible to rate hikes. Fortunately, VA ARMs come with government protection, only permitted to increase 1% at a time with a maximum increase of 5% over the duration of the loan.
- Hybrid adjustable rate: A hybrid ARM provides you with a fixed interest rate for a certain period of time, like 5 years. After that point, the mortgage rates become adjustable. This type of mortgage gives you the potential to secure lower VA loan rates with the temporary security of a fixed-rate mortgage.
15 Year vs 30 Year VA Loan Rates
In addition to the type of VA loan you choose, the length of your mortgage will affect your rates.
Just as there are pros and cons to fixed and adjustable rate mortgages, both 15 and 30-year term lengths come with costs and benefits. The key is deciding which benefits meet your needs best.
If you opt for a 15-year mortgage, you can expect lower interest rates.
While the rates are lower, the length of your mortgage is half the time of a 30-year mortgage, meaning your payments will be higher.
With those high costs, though, comes more equity in your home over a shorter span of time, making it a sound long-term financial strategy.
Conversely, a 30-year mortgage comes with lower monthly payments and higher interest rates.
Though it might seem like the ideal option at the time of signing, the interest that accrues over 30 years at already higher interest rates can cost you tens of thousands of dollars.
On the other hand, the high monthly cost of a 15-year mortgage can be burdensome and send your DTI skyrocketing.
To select the ideal mortgage length, look at your financial goals, income, and needs, weighing the short and long-term consequences of each type of mortgage.
Along with the factors above, you should keep in mind that the cost of your home will include more than just interest and principal.
With their exclusion of PMI and down payments, VA loans come with significant savings.
They do, however, come with a funding fee.
This fee is dependent upon your type of military service, whether or not you make a down payment, and whether or not it is your first use of a VA loan or a subsequent use.
The fee typically ranges anywhere between 1 and 3.3%. While you do have to pay a funding fee, you don’t have to pay it upfront like the fees of conventional mortgages.
You also might not have to pay closing costs. If so, they will be minimal.
How to Qualify for the Best VA Loan Rates
With a fair idea of what factors shape your VA loan rates, you may need to do some work on your finances before applying for a mortgage.
Establishing your military eligibility is only step one in obtaining a VA loan.
Once you’re eligible, you’ll have to find a lender who will approve your application.
While a decent credit score may be enough to get you a VA loan, an excellent score will get you excellent rates.
If you plan to get a VA loan or any other type of mortgage, it is essential that you start working to build a solid credit score.
Here are some surefire steps you can take to get your finances on track for mortgage approval and competitive VA loan rates.
- Track your credit score: A free service like Credit Karma can help. The site provides you with access to your credit score, resources to improve your credit, and alerts to changes in your report.
- Boost your score: Settle any issues that you encounter on your report, make your payments on time, and utilize credit wisely to see improvements to your score. The effort you put into boosting your credit score can save you hundreds, if not thousands, of dollars over the length of your mortgage.
- Pay down debt: The less debt you have, the less it will weigh down your monthly expenses and impact your DTI. Aggressively attacking your debt and paying outstanding bills can improve your finances drastically. It also frees up more of your future income for your mortgage.
- Watch the market trends: VA loan rates are generally lower than those of comparable conventional mortgages, but they tend to follow the same trends. Track the housing market to see if rates are particularly high or low when you shop for your VA loan.
How to Shop for VA Loan Rates
Once your finances are credit-worthy, your military status is confirmed, and you’re ready to purchase a home, it’s time to start shopping.
You can use the list of the top 10 VA lenders to see what kind of rates you’re eligible for.
Once you’ve compared all of your options and chosen a company, you’ll simply need to get a pre-qualification letter from your lender, along with your certificate of eligibility.
That way, when the perfect home comes along, you’ll be able to move on it.
If you implement the advice above, you should have no trouble qualifying for excellent VA loan rates. Get started today!
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.